Public sector banks’ write-offs touched ₹7 lakh cr in FY20-FY25

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Public Sector Banks have written off around ₹7 lakh crore between 2019-20 and 2024-25 (till September), the Finance Ministry has informed the Rajya Sabha. The good news is that these banks recovered over ₹5 lakh crore of their NPAs during the same period.

A written reply from Minister of State in the Finance Ministry, Pankaj Chaudhary, showed that over ₹6.98 lakh crore was written off by 12 PSBs. “Banks write-off non-performing assets (NPAs), including those in respect to which full provisioning has been made on completion of four years, as per the Reserve Bank of India guidelines and policy approved by banks’ Boards,” Chaudhary said.

“Borrowers continue to be liable for repayment and banks continue to pursue recovery actions initiated in these accounts,” he said. Various recovery mechanisms include filing of a suit in civil courts or in Debts Recovery Tribunals, action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, filing cases with the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016, through negotiated settlement/compromise, and through sale of NPAs.

However, data showed that recovery record of the written-off accounts has not been very encouraging. Last December, a written reply from the Minister of State in the Finance Ministry, Bhagwat Karad had said, quoting RBI data, PSBs have written-off an aggregate loan amount of ₹10.42 lakh crore and recovered ₹1.61 lakh crore (15.45 per cent of the total written-off amount) from the written-off loans from the fiscals 2014-15 to 2022-23.

Though the government maintains that a write-off does not mean a loan waiver, banking industry sources say considering the haircut ratio after a compromise or long-drawn legal battle, actual recovery from written-off accounts is low and the latest data proves that.

NPA recovery

Meanwhile, data from a written response on Wednesday also showed that recovery from NPA accounts crossed ₹5 lakh crore during 2019-20 to 2024-25 (till September 30). 

The Finance Ministry has maintained that the Government and RBI have taken steps to recover and reduce NPAs. These steps include, change in credit culture with the IBC fundamentally changing the creditor-borrower relationship, taking away control of the defaulting company from promoters/owners, and debarring willful defaulters from the resolution process. To make the process more stringent, personal guarantor to corporate debtor has also been brought under the ambit of IBC.

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act and the Recovery of Debt and Bankruptcy Act have been amended. Also, pecuniary jurisdiction of Debt Recovery Tribunal (DRTs) was increased from ₹10 lakh to ₹20 lakh to enable the DRTs to focus on high-value cases resulting in higher recovery for banks and financial institutions.