Nineteen large- and mid-sized public sector banks (PSBs) has written off loans worth Rs 41,000 crore in the December quarter of FY19, up 34 percent year-on-year (YoY), according to a report by The Financial Express.
In the September quarter of FY19, these banks had written off loans worth Rs 33,259 crore, up 24 percent YoY, indicating a gathering of pace in the write-off exercise to reduce their non-performing assets (NPAs).
Banks write off NPAs to clean up their balance sheets. If a loan turns bad on the account of the repayment defaults for at least three consecutive quarters, the exposure (loan) can be written off. Borrowers of written-off loans, however, continue to be liable for repayment and banks keep up efforts to recover them. Recoveries made from written-off accounts get reflected in banks’ non-interest income.
According to the report, Vijaya Bank saw the steepest increase — 243 times YoY — in write-offs at Rs 487 crore in Q3FY19. Vijaya Bank was followed by IDBI Bank, which saw a 4,783 percent YoY rise in write-offs to Rs 562 crore for the same quarter.
State Bank of India (SBI) wrote off loans worth around Rs 10,000 crore during Q3FY19, up 7 percent from Rs 9,312 crore a year ago, sources told the paper. However, write-offs in the third quarter were lower than Rs 13,537 crore write-offs in the second quarter of FY19.
Five lenders — Punjab National Bank (PNB), Corporation Bank, UCO Bank, Allahabad Bank and Andhra Bank — recorded a YoY drop in write-offs for the December quarter. PNB's write-offs stood at Rs 3,082 crore during Q3FY19, down 50 percent YoY, while Corporation Bank’s write-offs declined 28 percent YoY to Rs 2,843 crore. For the same quarter, Allahabad Bank wrote off loans worth Rs 712 crore and Andhra Bank worth Rs 55 crore, down 13 percent YoY and 78 percent YoY, respectively. UCO Bank’s write-offs fell 61 percent YoY to Rs 622 crore.
The rise in the pace of the write-off exercise indicates that write-offs may be sizeable in the current year too. In FY18, write-offs made by 21 PSBs rose 57 percent YoY and crossed the Rs 1-lakh-crore mark.