New Delhi: Banks wrote off bad loans worth over Rs 2.09 lakh crore (around $ 25.50 billion) during the year ended March 2023, the Reserve Bank of India (RBI) told the Indian Express in a Right to Information (RTI) reply.This brings the total loan write-offs by the banking sector to a significant Rs 10.57 lakh crore (around $129 billion) in the last five years, the newspaper reported.The write-offs have helped banks to bring down gross non-performing assets (GNPA) – or loans defaulted by borrowers – to a 10-year low of 3.9% of advances in March 2023, the newspaper reported.Gross NPAs of banks had fallen from Rs 10.21 lakh crore in FY2018 to Rs 5.55 lakh crore by March 2023, mainly on the back of loan write-offs by banks.As per the RBI data, banks have written off Rs 15,31,453 crore ($187 billion) since FY2012-13.However, the loans written off by banks will remain in the books of banks as unrecovered loans.RBI’s RTI reply said banks recovered only Rs 109,186 crore from Rs 586,891 crore loans written off in the last three years, adding that they could only recover 18.60% of the write-offs during the three-year period.The total defaulted loans (including write-offs but excluding loans recovered from write-offs in three years) amount to Rs 10.32 lakh crore, the daily reported, citing the back of the envelope calculation.The total NPA ratio, including write-offs, would have become 7.47% of advances as against 3.9% reported by the banks, it said.During the fiscal ended March 2023, loan write-offs by banks rose to Rs 209,144 crore, as against Rs 174,966 crore a year ago in March 2022, and Rs 202,781 crore in March 2021.Abysmal recoveriesBanks write off loans to reduce NPAs in their books, however, it’s important to note that they have reported abysmal recoveries from the written off loans. The newspaper reported that they could recover only Rs 30,104 crore in FY21, Rs 33,534 crore in FY22 and Rs 45,548 crore in FY23.A banking analyst to IE, “After write-off, banks are supposed to continue their efforts to recover the loan using various options. They have to make provisioning also. The tax liability will also come down as the written off amount is reduced from the profit.”A loan is classified as an NPA when the repayment of the principal amount or the interest remains outstanding for a period of 90 days.The identity of these borrowers was never revealed by banks or the RBI.Among individual banks, reduction in NPAs due to write-offs in the case of State Bank of India was Rs 24,061 crore in FY2023, Punjab National Bank Rs 16,578 crore, Union Bank Rs 19,175 crore, Central Bank of India Rs 10,258 crore and Bank of Baroda Rs 17,998 crore.“A substantial portion of this write-off is, however, technical in nature. It is primarily intended at cleansing the balance sheet and achieving taxation efficiency. In ‘Technically Written Off’ ‘ accounts, loans are written off from the books at the Head Office, without foregoing the right to recovery. Further, write-offs are generally carried out against accumulated provisions made for such loans. Once recovered, the provisions made for those loans flow back into the profit and loss account of banks,” the central bank had said in a note.The loan recovery process can take years as most of the loans involved in write-offs belong to wilful defaulters and promoters who generally don’t pay back to the banks.“It’s non-transparent and it’s without any policy. There’s possibility of wrong-doing. Generally, write-off is supposed to be small, used sparingly when there’s some crisis. Technical write-off creates non-transparency, destroys the credit risk management system and brings all types of wrong-doings into the system. You must declare how much you’re writing off. You’re writing off public money. It’s a scandal. You’re writing off public money you’re not acknowledging,” an RBI official told IE.
