Mudra Compass

Recently, the data presented in Rajya Sabha has stated that public sector banks have written off an amount around Rs. 91,000 crore in the first 9 months of the current fiscal year.

Another data informed that PSBs managed to recover a little over Rs 1 out of Rs 5 in written-off accounts for the financial year 2022, thus picking up a pace of recovery from around 8 per cent in 2017-18 to a little over 21 per cent in FY22.

Furthermore, Finance Minister Nirmala Sitharaman gave bank wise details in written about the written-off amounts with the State Bank of India on the top, followed by the Union Bank of India and Bank of Baroda with Rs 17,356 crore, Rs 16,497 crore and Rs 13,032 crore respectively. However, details about recovery for the current fiscal year have not been disclosed. 

The FM insisted that RBI guidelines and policy which have been approved by bank Boards, NPAs, including those in respect of which full provisioning has been made on completion of four years, are removed from the balance-sheet of the bank concerned by way of write-off. Banks evaluate/consider the impact of write-offs as part of their regular exercise to clean up their balance-sheet, avail tax benefit and optimize capital, in accordance with RBI guidelines and policy approved by their Boards. “Such write-off does not result in waiver of liabilities of borrowers to repay,” she reiterated. 

She further added, “As borrowers of written-off loans continue to be liable for repayment and the process of recovery of dues from the borrower in written-off loan accounts continues, write-off does not benefit the borrower. Banks continue to pursue recovery actions initiated in written-off accounts through various recovery mechanisms available.”

In response to another question, data provided along with written answer by Minister of State for Finance, Bhagwat Karad, revealed that all the scheduled commercial banks, PSBs, private banks and foreign banks had wrote-off around ₹1.61-lakh crore worth of loan in FY18 while recovery from written off accounts was less than ₹13,000 crore or around 8 percent of bad debts taken off from the book in that year. For the next four fiscal years, the percentage rose to 10.8, 12.8, 14.9 and 19.4 per cent, respectively.

During all these five years, the total amount in written off loan accounts was over ₹10 lakh crore, while recovery was over ₹1.3-lakh crore. This means the net written off amount was around ₹8.7-lakh crore.

Considering bigger share in overall banking business, 12 PSBs have largest share in gross written off amount, recovery from written off loan accounts and net amount. 

However, in December 2022, the government stated that various reforms following which asset quality of public sector banks has improved significantly with gross NPA ratio declining from the peak of 14.6 percent in March 2018 to 5.53 percent in December 2022.

Banks have written off Rs 11.17 lakh crore bad loans from their books in the last six years till financial year 2021-22 informed in Parliament.

Moreover, Minister of State for Finance Bhagwat K Karad said in a written reply to LoK Sabha that all PSBs are in profit with aggregate profit being Rs. 66,543 crore in 2021-2022, and that further increased to Rs. 70, 167 crore in first nine months of current financial year.

He further added, “Major banking reforms undertaken by the government over the last eight years addressed credit discipline, responsible lending and improved governance, beside adoption of technology, amalgamation of banks, and maintaining general confidence of bankers.”

Banks write off NPAs as part of their regular exercise to clean up their balance sheet, avail tax benefit and optimize capital, he said, adding, the write-off is carried out by the banks in accordance with RBI guidelines and policy approved by their boards.

“As per RBI data, public sector banks (PSBs) and scheduled commercial banks (SCBs) wrote off an aggregate amount of Rs 8,16,421 crore and Rs 11,17,883 crore respectively during the last six financial years,” he said.

He further said, “RBI has informed that as on 30.6.2017, there were 8,744 suit-filed willful defaulters and 917 non-suit-filed willful defaulters in public and private sector banks, and as on 30.6.2022, the same stands at 14,485 and 401 respectively.”

The list of suit-filed willful defaulters of Rs 25 lakh and above is available in the public domain on the websites of the Credit Information Companies (CICs) and that of non-suit filed willful defaulters is confidential in nature and are not in public domain.

Replying to another question, Karad said Scheduled Commercial Banks have recovered an aggregate amount of Rs 6,59,596 crore, including the recovery of Rs 1,32,036 crore from written-off loan accounts during the last five financial years as per the RBI data.

(Source – Genuine online source including The Hindu Businessline, business standard and businessworld)