Between FY15 and FY24, Indian commercial banks waived loans worth Rs 12.3 lakh crore, with public sector banks contributing significantly to the total. This highlights the ongoing efforts by banks to clean up their balance sheets by continuing to recover loans, despite massive write-off challenges.
Public sector banks leading in loan waiver
Public sector banks have contributed Rs 6.5 lakh crore to the total write-off in the last five years. 50% of the amount was written offThis trend is indicative of ongoing efforts by government-owned banks to address non-performing assets (NPAs) and improve their financial health. The highest level of write-offs occurred in FY2019, when commercial banks wrote off Rs 2.4 lakh crore, mainly due to the asset quality review process started in 2015.
Declining write-offs: change in trend
Debt write-offs peaked at Rs 2.4 lakh crore in FY2019, but have declined since then, falling to Rs 1.7 lakh crore in FY24. Write-offs in FY24 represented only 1% of total bank loans of about Rs 165 lakh crore, indicating that although the total amount of write-offs has declined, they are still making a difference in managing the financial challenges faced by banks. Play an important role.
Despite write off, recovery efforts continue
It is important to note that write-off does not erase the borrower’s liabilities. In fact, banks continue to seek recovery through various means, including filing suits in civil courts, taking action under the Securitization and Reconstruction of Financial Assets and Security Interest Enforcement Act (SARFAESI) and using the Insolvency and Bankruptcy Code (IBC). Is included. corporate recovery. Recovery efforts also include negotiated settlements and selling of NPAs to specialized agencies.
Asset quality of public sector banks shows improvement
Despite high loan write-offs, public sector banks (PSBs) have made significant progress in improving their asset quality. By September 2024, gross NPAs of PSBs are expected to decline to 3.01% from a high of 14.6% in 2018. This improvement reflects the performance of banks, with the highest ever net profit at Rs 1.41 lakh crore for FY24. Progress in dealing with NPA challenges.
Looking Ahead: Sustainable Recovery for Banks
As Indian banks are focusing on reducing NPAs and improving credit quality, they are committed to recovery efforts. This strategic approach ensures that write-offs do not negatively impact borrowers, with banks actively pursuing recovery through legal and financial channels.
