Loan write-offs as a percentage of gross non-performing assets (NPAs) declined to 13 per cent as on March 2017 from a high of 25 per cent in March 2011, according to RBI data. Mounting NPA has become a big problem for the banking sector. Lenders use write-offs as one of the tools to bring down bad debt on their books by making 100 per cent provision.
Loans written off as percentage of gross NPA was 21 per cent in March 2006, which rose to 25 per cent in March 2011 and has since then declined to 18 per cent in March 2015. It subsequently moderated to 13 per cent in March 2017, an official said, quoting Reserve Bank of India (RBI) data.
Writing off bad loans is a regular exercise conducted by banks to clean up their balance sheets inter-alia for tax benefits and capital optimisation, as per the RBI regulations.
However, borrowers of such written off loans continue to be liable for repayment. Recovery of such dues takes place on ongoing basis under various laws, including Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, Insolvency and Bankruptcy Code and debt recovery tribunals.
Besides, restructured loans which were refinanced got recognised as NPAs in 2015-16 as part of efforts to bring transparency in the banking system. Banks made provisioning against these stressed assets as well as per the RBI norms.
According to RBI data, public sector banks have written off (including compromise) an amount of Rs 2,41,911 crore from the financial year 2014-15 till September 2017. This includes written off loans worth Rs 516 crore owed by 38 wilful defaulters in the first half of 2017-18.