Banks' written-off loans reach Rs 10 lakh crore in last 5 years, shows data

India's scheduled commercial banks (SCBs) wrote off Rs 10,09,511 crore during the last five financial years, according to data submitted by the government in Parliament today.

A loan is written off when there is no scope of recovery left and banks want to simply take the bad asset off their balance sheets. The banks needs to set aside money in the form of provisions to cover such loans. This affects their profitability.

Replying to a question in Parliament, Union Finance Minister Nirmala Sitharaman said the borrowers of written-off loans continue to be liable for repayment, and the process of recovery of dues from the borrower in written-off loan accounts continues.

"The banks continue to pursue recovery actions initiated in written-off accounts through various recovery mechanisms available," Sitharaman said.

At the same time, public sector banks could recover only Rs 1,03045 crore from written off loans from the last five financial years, Sitharaman said citing RBI data. The aggregate recovery in the last five years amounts to Rs. 4,80,111 crore, the minister said.

Among the banks, county’s largest lender State Bank of India (SBI) wrote off Rs 2 lakh crore in last five financial years, while PNB wrote off Rs 67,214 crore loans in last four fiscal years, followed by IDBI Bank which wrote off Rs 45650 crores of loans. Among private sector banks, ICICI Bank wrote off Rs 50,514 crores of loans while HDFC Bank wrote off Rs 34782 crore loans.

Loan write offs have significantly contributed to the decline in bank NPAs over years. According to the Reserve Bank of India (RBI) financial stability report for June 2022, the gross non-performing asset (NPA) ratio of banks fell to six-year low of 5.9 percent in March 2022. The net non-performing assets (NNPA) ratio fell to 1.7 percent in March 2022.