State-run lenders wrote off almost Rs 2.42 lakh crore of bad loans between April 2014 and September 2017, the government has informed Parliament.
State-run lenders wrote off almost Rs 2.42 lakh crore of bad loans between April 2014 and September 2017, the government has informed Parliament. The amount is higher even than the government’s plan for capital infusion of Rs 2.11 lakh crore into public sector banks (PSBs) over two years through FY19. However, the share of such write-offs in total gross non-performing assets (NPAs) dropped to 13% in March 2017 from 25% in March 2011, a finance ministry official said, quoting the RBI data. Banks usually use write-offs as a tool to reduce bad debt on their books by making full provision for them. However, the liability of repayment isn’t waived for borrowers, who are still required to pay back. The amount of bad debt written off as percentage of gross NPAs rose to 25% in March 2011 from 21% in March 2006. These have been declining since then and touched 18% in March 2015 and 13% in March 2017. Nevertheless, the write-offs and the consequent spurt in the provisioning requirements prompted the government last year to offer massive capital infusion to PSBs to help them shore up their capital base and meet regulatory requirements. In case of relatively strong PSBs, capital was provided to boost lending to spur the economic growth. Minister of state for finance Shiv Pratap Shukla told the Rajya Sabha in a written reply that writing off is a regular exercise undertaken by banks to clean up their balance sheets and achieve taxation efficiency. “As per Reserve Bank of India (RBI) data on global operations, public sector banks have written off (including compromise) an amount of Rs 2,41,911 crore from financial year 2014-15 till September 2017.” He added, “Borrowers of such written-off loans continue to be liable for repayment.” The minister also said recovery of dues is an ongoing activity under the legal mechanism, including the Securitisation and Reconstruction of Financial Assets (SARFAESI) Act and debt recovery tribunals (DRTs). “Therefore, write offs do not benefit borrowers.”