Not even ₹1 out of the written-off amount of ₹5 could be recovered on an average in the last five years by scheduled commercial banks. The total write-off during fiscal year 2019-20 to fiscal year 2023-24 was over ₹9.90 lakh crore. During the same period, just ₹1.84 lakh crore could be recovered, which was just 18.5 per cent of total written-off amounts. Effectively, on an average if the written-off amount was ₹5, not even ₹1 could be recovered.
This data was disclosed by the Finance Ministry in the Rajya Sabha on Tuesday. The good news was that overall write-off amount and non-performing assets (NPA) as a percentage of advances have come down.
In a written reply, Minister of State in the Finance Ministry Pankaj Chaudhary gave details of write-off and recovery for the period between FY20 and FY 24.
Chaudhary said that as per RBI guidelines and policy approved by banks’ boards, NPAs, those in respect of which full provisioning has been made on completion of four years, are removed from the balance-sheet of the banks by way of write-off. Banks evaluate/ consider the impact of write-offs as part of their regular exercise to clean up their balance-sheets, avail tax benefit and optimise capital in accordance with the said guidelines and policies of the respective Boards.
“Such write-off do not result in waiver of liabilities of borrowers to repay and, therefore, write-off does not benefit the borrowers. The borrowers of written-off loans continue to be liable for repayment and banks continue to pursue recovery actions initiated in written-off accounts through various recovery mechanisms available to them,” he said.
Although the answer has not given any specific reason for low recovery from written-off accounts, sources in the banking industry said long running litigations, including insolvency and closure of many defaulting units, have impacted the recovery. Also, in some cases, ‘hair-cut’ was high, which also lowered the recovery amount.
Steps to improve recovery
Chaudhary highlighted measures to improve recovery from NPAs, including written-off loans. “Change in credit culture has been effected, with the Insolvency and Bankruptcy Code, 2016 (IBC) fundamentally changing the creditor-borrower relationship by taking away control of the defaulting company from promoters/ owners. To make the process more stringent, personal guarantor to corporate debtor has also been brought under the ambit of IBC,” he said..
Further, the 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 the banks and financial institutions. National Asset Reconstruction Company Ltd has been set up as an asset reconstruction company for resolution of large NPAs. PSBs have created Stressed Asset Management Verticals for stringent recovery, he added.
Meanwhile, another answer showed that gross NPAs (GNPA) of SCBs was over ₹8.96 lakh crore on March 31, 2020, while on March 31, 2024, it came down to over ₹4.80 lakh crore. As a percentage of advances, it came down to 4.75 per cent from 8.21 per cent.