Prominent Suva Lawyer Richard Naidu says Economy Minister Aiyaz Sayed-Khaiyum does not seem to understand basic accounting or banking after Sayed-Khaiyum yesterday said that they know banks have made a provisioning of over $100 million which Sayed-Khaiyum said in other words essentially they are writing off debts to a tune of about $100 million.
Naidu says when a bank (or any creditor) provisions for bad or doubtful debts, it is simply preparing for the possibility that debts will not be paid.
He says that doesn’t mean it will write off those debts. Naidu further says provisioning more for bad or doubtful debts reduces profits, so when provisioning is reduced, profits increase and therefore banks, like other companies, will try to improve profits by reducing their provisioning.
He says they can reduce the provisioning if they believe their debts will become more recoverable.
Naidu adds provisioning for bad debts does not mean those debts will be written off.
He also says it is very surprising that the Economy Minister does not understand this.
Meanwhile, Minister for Economy Aiyaz Sayed-Khaiyum had said in his revised budget consultation in Savusavu yesterday that they know banks have made a provisioning of over $100 million which he says in other words essentially they are writing off debts to a tune of about $100 million. Sayed-Khaiyum says this maybe because there are some people for example who worked at the hotel and may have had a personal loan of $2000 and have not worked for the past two years.
Sayed-Khaiyum says the banks know that they can’t get that money back, so they essentially have written off those loans.
When asked for a comment, Association of Banks in Fiji Chairman Rakesh Ram says he is not in a position to comment on this as apparently Sayed-Khaiyum referred to write-offs by all banks.
He has told us to redirect our questions to RBF.
We have sent questions to RBF and Sayed-Khaiyum.
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