Public sector banks (PSBs) have written off aggregate loan amount of Rs. 10.42 lakh crore in the last nine years; according to data provided by the government in Parliament on December 11.
"As per Reserve Bank of India data, public sector banks have written off an aggregate loan amount of Rs. 10.42 lakh crore from the financial year 2014-15 to the financial year 2022-23; said Minister of State Finance Bhagwat Karad in the written reply to Loksabha.
In reply to a question on December 11, Karad further added that PSBs has recovered an aggregate amount of Rs. 1.61 lakh crore from written-off loans, from the financial year 2014-15 to the financial year 2022-23.
Banks write off loans when there is no scope to recover them from borrowers. Typically, banks need to set aside 100 percent of the written-off loan amount as provisions, which impacts their profitability.
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 rating 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.
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 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.
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