Sharp Rise in Loan Write-Offs This Fiscal

New Delhi: There has been a sharp rise in loans written off by both public and private sector banks, this fiscal, compared to the previous one.

The Hindu Businessline reports that India's "largest lender, State Bank of India’s (SBI) write-offs rose to Rs 26,542 crore in FY25 as against Rs 17,645 crore in FY24. ICICI Bank’s write-offs rose to Rs 9,271 crore in FY25 from Rs 6,091 crore in FY24, while Axis Bank’s overall write-offs rose to Rs 11,833 crore versus Rs 8,865 crore in FY24.”

It notes that “Similar trends were seen across multiple mid-sized private lenders, while public sector lenders fared better.”

C.S. Shetty, SBI chairman, has been quoted by the newspaper as saying, “Write-offs are mainly for the small-value loans. We regularly take stock. If provision coverage improves to 100%, we normally take them off the books and put them under advances under the collection account and hand the account to the recovery team. That is an ongoing process, broadly write-offs are coming from small value loans in SME and agriculture.”

Another CEO, Puneet Sharma, of Axis Bank has said the bank’s write-off approach is “rule-based” and it “does not exercise any discretion” on write-offs.

It is noteworthy that the RBI’s Financial Stability Report in December had mentioned the sharp rise in write-offs, could be partly reflecting worsening asset quality and dilution in underwriting standards. This is now seen as an area of concern.

Between 2020-25, Rs 7-lakh crores written off

Bank write-offs, especially by public sector banks have been a growing concern over the past few years. A written reply to a question in parliament last year from Minister of State in the Finance Ministry, Pankaj Chaudhary, revealed that nearly Rs 7 lakh crore, (Rs 6.98 lakh crore, to be precise) was written off by 12 public sector banks.

“Banks write-off non-performing assets (NPAs), including those in respect to which full provisioning has been made on completion of four years, as per the Reserve Bank of India guidelines and policy approved by banks’ Boards,” Chaudhary said.

This is public money and there is more concern as large bank write-offs, of loans by big corporates have never been made public, even as small write-offs, involving smaller borrowers, especially farmers, have been.

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