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New Delhi: Banks wrote off loans worth Rs 1.7 trillion in the financial year 2023-24 (FY24), a substantial amount, although a reduction from the Rs 2.08-trillion write-off in FY23.
This marks the lowest write-off level in the past five years, according to data disclosed by Pankaj Chaudhary, Union minister of state for finance, in response to a question in the Lok Sabha.
Loan write-offs peaked at Rs 2.34 trillion in FY20, followed by Rs 2.03 trillion in FY21 and Rs 1.75 trillion in FY22, according to a Business Standard report. The declining trend continued into FY24, indicating a potential improvement in asset quality or tighter provisioning measures by banks.
Among public sector banks, Punjab National Bank accounted for the highest write-offs, totalling Rs 18,317 crore, followed by Union Bank of India with Rs 18,264 crore and State Bank of India at Rs 16,161 crore.
Private sector banks also contributed significantly to the write-offs. HDFC Bank led with Rs 11,030 crore in loans written off, followed by Axis Bank with Rs 8,346 crore and ICICI Bank at Rs 6,198 crore.
A related report on Indian Express had it that even as loan write-offs by scheduled commercial banks reduced by 18.2% in FY24, over one-fifth of the banks saw an increase in the amount of the loans written-off in the year that ended in March 2024.
Also read: Companies Bought Over by Adani Group Got Massive ‘Haircut’ on Loans From Public Sector Banks: Cong
A loan write-off means that a lender considers the loan a loss but does not automatically mean that it is not going to be repaid. These write-offs are carried out in accordance with the Reserve Bank of India norms and policies approved by bank boards.
Explaining the process, minister Chaudhary said that these write-offs do not absolve borrowers of their liabilities.
“Such write-offs do not result in the waiver of liabilities of borrowers and therefore, write-offs do not benefit the borrower. The borrowers continue to be liable for repayment, and banks continue to pursue recovery actions initiated in these accounts,” he stated.
Loan write-offs are typically undertaken to clean up bank balance sheets by removing fully-provisioned non-performing assets (NPAs). However, banks retain the right to recover outstanding dues from borrowers through legal and recovery mechanisms.
However, in the last five years, banks have failed to recover 81.30% of the loans written off, despite using several recovery measures, an RTI application revealed in August this year.
