Scheduled commercial banks (SCBs) have written off loans amounting to over ₹14 lakh crore from 2014-15 to 2022–23, out of which nearly half were related to large industries and services. However, total recovery was just over ₹2 lakh crore in written-off loans, the Finance Ministry informed the Lok Sabha.
In a written response, Minister of State in the Finance Ministry Dr Bhagwat Karad submitted year-wise data for written-off loans by SCBs, which amounted to a total of ₹14.56 lakh crore between FY15 and FY23. Though he said, “The Reserve Bank of India (RBI) has apprised that information regarding the corporate loan amount written-off is not maintained by it,” he gave data related to written-off Loans (Large Industries and Services), and this summed up to over ₹7.40 lakh crore.
As of date, the list of SCBs comprises 12 public sector banks (PSBs), 22 private banks, 12 small finance banks, four payment banks (which act as agents in loan business), 43 regional rural banks, and 45 foreign banks. As per RBI guidelines and policy approved by the bank’s Boards, NPAs (Non-Performing Assets), including those in respect of which full provisioning has been made on completion of four years, are removed from the balance sheets of the banks concerned by way of write-offs. Banks evaluate the impact of write-offs as part of their regular exercise to clean up their balance sheet, avail tax benefits, and optimise capital in accordance with RBI guidelines and policies approved by their Boards.
Such a write-off does not result in a waiver of the borrower’s liability to repay. As borrowers of written-off loans continue to be liable for repayment and the process of recovering dues continues, write-off does not benefit the borrower. Banks continue to pursue recovery actions initiated on written-off accounts through the various recovery mechanisms available.
Corporate loans
Meanwhile, when asked about the details regarding the corporate loans written off that have been recovered since 2014, Dr. Karad said: “SCBs have recovered an aggregate amount of ₹2,04,668 crore in written-off loans, including corporate loans, since April 2014 and up to March 2023.”
In response to another question, Karad said that comprehensive steps have been taken by the Government and RBI to recover and bring down NPAs, enabling gross NPAs of PSBs to decline to ₹4.28-lakh crore as of March 31, 2023, from ₹8.96 lakh crore as of March 31, 2018. Talking about steps to lower NPA, he cited one that says: “Change in credit culture has been effected, with IBC fundamentally changing the creditor-borrower relationship, taking away control of the defaulting company from promoters and owners, and debarring wilful defaulters from the resolution process. To make the process more stringent, personal guarantors to corporate debtors have also been brought under the ambit of the IBC.”
He also said that under the PSB Reforms Agenda, comprehensive and automated Early Warning Systems (EWS) were instituted in PSBs, with 80 EWS triggers and the use of third-party data for time-bound remedial actions in the borrowing accounts. “Wilful defaulters are not sanctioned any additional facilities by banks or financial institutions, and their unit is debarred from floating new ventures for five years,” he said.