Public sector banks in India have written off a massive Rs 12.08 lakh crore in loans since the financial year 2015-16, a recent government disclosure reveals.
Understanding Loan Write-Offs
It’s important to clarify what a “loan write-off” truly means. This action, taken by banks, does not absolve borrowers of their responsibility to repay the debt.
Instead, a write-off is primarily an accounting measure. According to Reserve Bank of India (RBI) guidelines and policies approved by bank boards, loans are written off when they become Non-Performing Assets (NPAs) and full provisions have been made, typically after four years.
The Staggering Sum Revealed
The total amount of loans written off by Public Sector Banks (PSBs) stands at a colossal Rs 12,08,828 crore. This figure covers the period from the financial year 2015-16 up to the provisional data for FY 2024-25.
This significant statistic was shared by the Minister of State for Finance, Pankaj Chaudhary. He provided this data in a written reply to a query raised by TMC MP Ritabrata Banerjee in the Rajya Sabha on July 22.
No Waiver: Borrowers Still Accountable
A crucial point underscored by the Minister is that writing off a loan does not translate into a waiver of the borrower’s liabilities. The legal obligation to repay the debt remains firmly with the borrower.
Consequently, banks continue to actively pursue recovery actions against these accounts. This ensures that despite the accounting adjustment, the effort to reclaim funds from defaulting borrowers persists.
Multiple Avenues for Recovery
The process of recovering written-off loans is ongoing and multi-faceted. Banks employ various legal and financial mechanisms to chase down the outstanding amounts.
These recovery methods include filing suits in civil courts, approaching Debts Recovery Tribunals, and initiating actions under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act. Furthermore, banks also file cases in the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC).
- Public Sector Banks wrote off Rs 12.08 lakh crore in loans since FY2015-16.
- This is an accounting measure and does not waive borrower liabilities.
- Banks continue vigorous recovery efforts through various legal channels.
This ongoing pursuit of recoveries highlights the persistent efforts by India’s public banking sector to manage and mitigate the impact of non-performing assets on their balance sheets.
