New Delhi: Banks have written off bad loans worth Rs 14.56 lakh crore in the last nine financial years starting 2014-15, parliament was informed on Monday, August 8.
According to PTI, out of the total Rs 14,56,226 crore, written off loans of large industries and services stood at Rs 7,40,968 crore.
Scheduled Commercial Banks have recovered an aggregate amount of Rs 2,04,668 crore in written-off loans, including corporate loans, since April 2014 and up to March, 2023, Minister of State for Finance Bhagwat Karad said in a written reply to Lok Sabha.
According to another reply by the minister, the net of recovery in written-off loans during the financial year (net write-off) in public sector banks (PSBs) was Rs 1.18 lakh crore in the FY18, which declined to Rs 0.91 lakh crore in FY22 and to Rs 0.84 lakh crore (RBI provisional data) in FY23.
Net write-off loans by private sector banks stood at Rs 73,803 crore (RBI provisional data) in FY23, he said.
Net write-off as percentage of opening gross loans and advances in private sector banks was 1.25% and 1.57% in FY18 and FY23, respectively. It was 2% and 1.12% for PSBs during the same period.
According to the Reserve Bank of India (RBI), banks wrote off non-performing assets (NPAs), or bad loans, worth over Rs 2.09 lakh crore (around $ 25.50 billion) during the year ended March 2023.
In the last five years, the total loan write-offs by the banking sector stood at Rs 10.57 lakh crore, the Indian Express reported, citing an RTI response from the central bank.
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 measures taken to bring down bad loans
To support asset growth, the board of State Bank of India in its meeting held on June 9 had approved raising capital through bonds, including Rs 20,000 crore via Basel III compliant AT-1 bonds, Rs 10,000 crore via Tier-2 bonds, and Rs 20,000 crore via infrastructure bonds during FY24.
According to Karad, banks are exempted from maintaining cash reserve ratio and statutory liquidity ratio on long-term bonds for lending to the infrastructure sector. The raising of long-term infrastructure bonds helps the bank in better asset liability management, he said.
Among other steps to bring down NPAs, the minister said that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, has been amended to make it more effective.
Additionally, the monetary limit for filing cases in debt recovery tribunals (DRTs) was increased from Rs 10 lakh to Rs 20 lakh. This enables the DRTs to focus on high-value cases, resulting in higher recovery for the banks and financial institutions, the minister said.
He further said that the National Asset Reconstruction Company Limited (NARCL) has been set up as an asset reconstruction company with an aim to resolve stressed assets above Rs 500 crore each.
NARCL is bad bank, which buys NPAs, or bad loans, from banks.
NARCL acquired three borrower entities, including Jaypee Infratech, with an aggregate debt exposure of Rs 21,349 crore in the fourth quarter of FY23, the Financial Express reported in July.
However, the newspaper reported, “this a far cry from the targets set for transfer of toxic assets to the NARCL.”
In October 2021, the NARCL got a licence from the Reserve Bank of India to start operations, and as per the initial target, it was to acquire a batch of toxic assets worth about Rs 90,000 crore by January 2022.