Bank loans worth ₹9.9L crore written off in 5 years
What's the story
Indian banks have written off an enormous sum of ₹9.90 lakh crore in loans over the past five fiscal years, as reported by Pankaj Chaudhary, Minister of State for Finance. The financial year 2023-24 witnessed a loan write-off of ₹1.70 lakh crore, marking a decrease from the previous year's figure of ₹2.08 lakh crore. The most significant loan write-off took place in the fiscal year 2019-20, with an amount reaching up to ₹2.34 lakh crore.
Procedure clarification
Loan write-off process and borrower liabilities
Chaudhary clarified the loan write-off procedure in Parliament. He stated that as per RBI guidelines and policies approved by banks' boards, Non-Performing Assets (NPAs) are removed from the balance-sheet of the concerned bank, by way of write-off after full provisioning has been made on completion of four years. He emphasized that such write-offs do not result in waiver of liabilities for the borrowers to repay and therefore, do not benefit them.
Recovery efforts
Banks recover ₹1.84 lakh crore from written-off accounts
The Minister also informed that banks continue to pursue recovery actions initiated in written-off accounts via various recovery mechanisms available to them. Against a total write-off of ₹9.90 lakh crore over the last five years, recovery was to the tune of ₹1.84 lakh crore or just 18%. This highlights the ongoing efforts by banks to recoup losses from non-performing assets despite significant loan write-offs.
NPA reduction
Gross NPAs of commercial banks decline over 5 years
Chaudhary shared RBI data showing a decline in gross NPAs (GNPA) of Scheduled Commercial Banks (SCBs) over the past five years. The GNPA ratio was at its highest at 8.21% as on March 31, 2020, and has since reduced to 2.75% as on March 31, 2024. This indicates an improvement in asset quality within the banking sector during this period.
Sector stability
Resilience amid global crises
Chaudhary highlighted the resilience of the Indian banking sector, which remained largely insulated from recent crises involving other global financial entities. Liquidity coverage ratio (LCR) of Indian banks during January-June 2024, remained above 130% against the regulatory threshold of 100%, indicating resilience to liquidity risks.
Portfolio endurance
Indian banks' investment portfolio remains resilient to market risks
The Minister further noted that the investment portfolio of Indian banks has remained largely resilient to market risks arising due to adverse price movements. He also pointed out that while SCBs incurred losses of ₹32,437 crore during 2017-18, their net profit improved to ₹3,41,672 crore during 2023-24. The capital position (CRAR) of SCBs has also improved to 16.84% as on March 31, 2024 from 13.85% as on March 31, 2018.