The Hypocrisy in Public Finance: Welfare Schemes vs. Bank Write-Offs
In India's public discourse, a troubling pattern persists: the poorer the beneficiary, the louder the moral sermon. When Tamil Nadu announces a mixer-grinder scheme, alarms ring from Delhi to Coimbatore about "freebie culture" and fiscal irresponsibility. Yet, when public sector banks write off Rs 1.29 lakh crore in bad loans—enough to fund multiple welfare budgets—the language softens to terms like "prudential norms" and "capital adequacy." This disparity reveals a republic obsessed with kitchen appliances but curiously relaxed about capital erosion.
The Legal Reality of Bank Write-Offs
Contrary to popular belief, a write-off is not a waiver or amnesty. Under the Reserve Bank of India's regulatory framework, banks must classify non-performing assets (NPAs), make provisions, and remove irrecoverable loans from their balance sheets as an accounting exercise. The debt remains legally enforceable under the Indian Contract Act, 1872, with recovery possible through the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or the Insolvency and Bankruptcy Code, 2016.
However, stopping at this technical explanation does a disservice to public accountability. Public sector banks are not private entities; when their balance sheets falter, recapitalization draws from taxpayer funds, making the public the silent guarantor. This is not ideology but fiscal arithmetic, underscored by Article 265 of the Constitution, which mandates that taxation and public money administration require transparency and legal authority.
Transparency and Public Interest
The Supreme Court has reinforced this in cases like CBSE vs Aditya Bandopadhyay and Reserve Bank of India vs Jayantilal N Mistry, ruling that regulators must act as custodians of public interest. Yet, when corporate exposures turn into NPAs and are written off, disclosure often retreats behind claims of "commercial confidence," stifling scrutiny. In contrast, Tamil Nadu's welfare initiatives—such as the Public Distribution System, free bus travel for women, and the Kalaignar Magalir Urimai Thogai Scheme—are debated in the assembly, audited, and defended before voters, offering a transparent footing rooted in constitutional principles.
Constitutional Foundations and Selective Outrage
Articles 38 and 39(b) of the Constitution advocate reducing inequality and distributing resources for the common good, while Article 15(3) permits special provisions for women. In S Subramaniam Balaji vs State of Tamil Nadu, the Supreme Court declined to criminalize electoral generosity, noting that policy lies within legislative competence unless it violates the Constitution. What's striking is not the existence of welfare but the disproportionate moral anxiety it provokes. Each time assistance reaches low-income households, warnings about dependency and incentives emerge, yet these concerns rarely surface when large borrowers restructure debts or banks absorb losses in the name of systemic stability.
The Call for Equal Accountability
Article 14 guarantees equality before the law, with arbitrariness equated to inequality in E P Royappa vs State of Tamil Nadu. If fiscal discipline is our civic mantra, it must apply uniformly without social bias. Accountability cannot be vigorous for ration card holders and discreet for boardrooms. Insolvency laws like the IBC serve a necessary economic purpose by resolving dead assets, but necessity does not demand reverence. The cost of a welfare scheme is visible and its beneficiaries named, while large write-offs are often aggregated in disclosures, with recovery processes distant and hard to track. Both impact public finance, yet only one sparks heated debates.
This is not an argument against insolvency law but against selective indignation. If Rs 5,000 to a poor household warrants moral scrutiny, then Rs 5,000 crore in distressed exposure deserves equal curiosity. We must inquire into credit appraisal failures and corporate defaults with the same rigor applied to welfare critiques. The Constitution does not grade citizens by net worth; it demands equality, transparency, and reasoned administration.
Conclusion: Toward Symmetrical Outrage
The taxpayer funds both welfare schemes and bank recapitalizations, underwriting both the mixer and the million. It would be revolutionary if our outrage reflected this symmetry. Instead, we treat subsidized bus passes as existential threats while discussing massive financial erosion in muted tones. As an old line in the Madras High Court goes: the law may be blind, but it should not squint selectively. Our fiscal morality currently does exactly that, preaching virtue with unequal enthusiasm in boardrooms and ration queues. Until this changes, we perpetuate a double standard that undermines the very principles of justice and equity enshrined in our Constitution.
