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Over 5 years, banks recovered just 13% of ₹10-lakh-cr loan write-off: Finmin data

Scheduled commercial banks have recovered just 13 per cent of the total write-off in the last five years, Finance Ministry data presented in the Rajya Sabha on Tuesday showed.

In response to two separate questions on the issue, the Ministry presented data on write-off and recovery.

“As per inputs received from RBI, SCBs (schedule commercial bank) wrote-off an amount of over ₹10.09 lakh crore during the last five financial years (Fiscal Year 2017-18 to Fiscal Year 2021-22),” Finance Minister Nirmala Sitharaman said in a written reply.

Write-off refers to taking out loan from the book of account.

NPAs (non-performing assets), including those with full provisioning made on completion of four years, are removed from the balance-sheet of the bank as write-off. Banks write off NPAs to clean up their balance-sheet, get tax benefit and optimise capital, in accordance with RBI guidelines and policy approved by their boards.

‘No relief for borrower’

However, write-off does not mean relief to borrower. Sitharaman said that as borrowers of written-off loans continue to be liable for repayment and the process of recovery continues, write-off does not benefit the borrower.

“Banks continue to pursue recovery actions initiated in written-off accounts through various recovery mechanisms available,” she said.

Recovery mechanisms include filing suit in civil courts or in debt recovery tribunals; action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; filing of cases in the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016; through negotiated settlement/compromise; and through sale of NPAs.

“Total recovery of over ₹1.32 lakh crore from written-off loan accounts made during the last five financial years,” she said. This comes to around 13 per cent of the write-off.

The Minister informed the house that, primarily, as a result of transparent recognition of stressed assets as NPAs, as per RBI data on domestic operations, gross NPAs of SCBs rose from over ₹2.51 lakh crore (gross NPA ratio of 4.1 per cent) as on March 31, 2014, and peaked to over ₹9.62 lakh crore (gross NPA ratio of 11.46 per cent) as on March 31, 2018.

Punitive action

However, as a result of the government’s strategy of recognition, resolution, recapitalisation and reforms, NPAs have since declined to over ₹6.97-lakh crore (gross NPA ratio of 5.9 per cent) as on March 31, 2022.

Further, as per RBI data on domestic operations, “stressed assets, including restructured standard assets, as percentage of gross advances in SCBs, has declined from 9.8 per cent as on March 31, 2014, to 7.8 per cent as on March 31, 2022,” she said.

Further, she added that staff accountability in respect of NPA cases has been fixed against 3,312 bank officials (of AGM and above rank) during the last five financial years, and suitable punitive actions have been taken commensurate to their lapses.

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