MC Exclusive | Public sector banks wrote off loans worth Rs 3.66 lakh cr in last 3 years: RTI data

At the same time, these banks recovered just Rs 1.9 lakh crore, data showed.

India’s state-owned banks wrote off loans to the tune of Rs 3.66 lakh crore in the last three financial years, the Reserve Bank of India (RBI) said in response on November 5 to an RTI filed by Moneycontrol on October 5.

At the same time, these banks recovered just Rs 1.9 lakh crore, data showed.

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In other words, loan write-offs by all the public sector banks (PSBs) in the last three financial years were more than the total recoveries.

In the financial year 2022-23, total recoveries jumped to Rs 67,162 crore from Rs 58,494 crore in FY21. During the same period, total loan write-offs stood at Rs 1.31 lakh crore versus Rs 1.18 lakh crore.

In FY23, all the PSBs, except Canara Bank, had more loan write-offs than recoveries, RTI data showed. For example, the country’s largest bank, the State Bank of India (SBI), wrote off loans worth Rs 24,061 crore, compared to recoveries worth Rs 13,024 crore.

Total loan write-offs by Bank of Baroda stood at Rs 17,998 crore and its total recovery stood at Rs 6,294 crore. Canara Bank, on the other hand, made a total loan recovery of Rs 11,919 crore and wrote off loans to the tune of Rs 4,472 crore in FY23.

The central bank had earlier asked banks to work aggressively to recover bad loans.

RBI Deputy Governor Swaminathan J had, in the August 2023 monetary policy committee (MPC) meeting, stressed on the need for banks to redouble their efforts to recover written-off loans. “We would like banks to redouble their efforts and see more recoveries,” Swaminathan said in a post-MPC meeting conference.

Written-offs loans

The Ministry of Finance, on December 4, informed the Lok Sabha that in the last five years, scheduled commercial banks (SCBs) wrote off nearly Rs 10.6 lakh crore. Nearly half of these loans belonged to large industries and services sector, the ministry said.

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“A total of Rs 2.09 lakh crore worth of loans were written off by banks in FY23, out of which 52.3 percent was linked to large industries and services,” Minister of State for Finance Bhagwat Karad said in response to a question in the Lok Sabha.

Recovery process

In India, banks follow several methods to recover loans. They can use their internal mechanism and techniques to recover loans or they can use the Insolvency and Bankruptcy Code (IBC) for the same. IBC was aimed at expediting and simplifying bankruptcy proceedings and to facilitate fairness.

However, even after seven years of its launch, the recovery of loans through insolvency courts remains low even as the number of cases being admitted is on the rise. A September 2023 report by ratings agency CareEdge showed that the number of cases in April-June FY24 jumped to 6,815, compared to 5,250 in the corresponding quarter last year. In the same period, data from some of the top lenders showed that recovery has been following a downtrend on a year-on-year basis.