PSBs Wrote Off ₹10.42 lakh crores Loans In Last Nine Years: Government

On December 11, 2023, data presented by the Indian government in Parliament revealed that Public Sector Banks (PSBs) have written off a total of ₹10.42 lakh crore in aggregate loan amounts over the past nine years.

Bhagwat Karad, the Minister of State for Finance, presented a written reply in Lok Sabha, stating that, ‘As per Reserve Bank of India data, public sector banks have written off an aggregate loan amount of ₹10.42 lakh crore from the financial year 2014-15 to the financial year 2022-23.’

Furthermore, in response to a query on December 11, 2023, the Minister of State for Finance, Karad, added that Public Sector Banks are capable of recovering only ₹1.61 lakh crore of the aggregate loans from the ₹10.42 lakh crore written-off loans. The entire data presented is from the 2014-15 financial year to the 2022-23 financial year.

About Write-Off – PSBs

A write-off is a procedure followed by banks in India when there is no more scope left for recovery from borrowers. In layman’s terms, in a write-off, a bank maintains both sides of a balanced sheet by using the required amount of money from its profits.

Hence, the balance sheet of a bank becomes balanced on both the credit and debit sides. Thus, banks are required to set aside 100 percent of the entire written-off loan amount as provisions. This also affects the profitability of the bank.

In India, banking institutions use several methods to recover loans partially or fully. Banks have the power to use the Insolvency and Bankruptcy Code (IBC) for loan recovery, employing their unique techniques and internal mechanisms. Recently, the total number of cases has been rising, resulting in low recovery of loans through insolvency courts.

Loan Recovery Trend

According to data presented by CareEdge in September 2023, in FY2023, the number of cases in the April-June quarter was 5,250. However, in the same quarter of FY2024, the number of cases jumped to 6,815. On a year-on-year basis, the recovery has followed a downtrend.

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The Reserve Bank of India has asked banks to make full efforts to recover bad loans. In the monetary policy committee meeting of August 2023, Swaminathan J, RBI Deputy Governor, stated, ‘We would like banks to redouble their efforts and see more recoveries.