MSN: Mumbai: Friday, 31 January 2025.
Indian banks have written
off rupees 16.6 lakh crore loan beginning from March 2014 to September 2024
reveals a RTI report replied by the Reserve Bank of India (RBI). Recovering 16%
by far in last decade on given 16.6 lakh crore rupees splits in 1.6% recovery
p.a. states RTI sought by civil activist Praful Sarda.
Accordingly, the annual write-offs of all the banks together comprise Rs 1,21,000 crore (PSBs); Rs 44,665 crore (Private); Rs 602 crore (UCBs), totaling to Rs 1,66,267 crore so far – leaving a staggering Rs. 13,92,495 crore still pending recovery. A major part of the write-offs is due to ‘technical/prudential/Advances Under Collection’, but the banks retain the right to recover from the borrowers in all such cases.
From the NPAs write-off (Rs. 16,61,290 crore) the recoveries amounted to an annual average of Rs 21,654 crore (PSBs); and Rs 522 crore (Private), working out to barely 16.17% for the last 10 years. This gives a rough average of a measly 1.6% per year,” Prafful Sarda pointed out.
Write-offs peaked at ₹2.4 lakh crore in FY19 following an asset quality review. They dropped to ₹1.7 lakh crore in FY24, representing 1% of the total outstanding bank credit. Public sector banks hold a 51% share of new loans, down from 54% in FY23.
Recovery methods include legal action, debt recovery tribunals, and negotiated settlements. Despite these write-offs, public sector banks reported record profits of ₹1.41 lakh crore in FY24, and ₹85,520 crore in the first half of FY25. Their gross NPA ratio improved to 3.12% by September 2024.
“The government’s contention is that such write-offs are ‘purely balance sheet management’ strategy. Hence, the borrower’s liability to ‘repay’, or the bank’s right to ‘recover’ is not diminished in any manner. There are specialized teams which follow-up for the recovery processes thereafter,” said Sarda.
However, in the absence of a specific time-frame for the recoveries of the outstanding amounts, lakhs of crores of public funds are lost for all practical purposes, as the banks’ keep issuing rosy balance-sheets each year, the activist argued.
Sarda said as per a 30-year-old policy, all credit-related matters are deregulated with the concerned Banks and their respective Board of Directors, who decide about loan amount and recovery policy.
“In this scenario, will the Finance Minister Nirmala Sitharaman announce stricter norms to pin the accountability on the lenders, right from the managers to the Board of Directors - and in case of NPAs recover the lost amounts from the banks’ own executives for their lapses and poor judgement,” demanded Sarda.
Banking experts urged that the new RBI Governor Sanjay Malhotra should recommend to the government to tweak the relevant laws, make the bank officials or directors and/or external forces who pressurize the banks, responsible and punishable for their actions.
This can prevent defaulters like Nirav Modi, Mehul Choksi, Lalit Modi, Vijay Mallya plus many more who brazenly dupe banks of public monies and sneak out of India with political patronage to enjoy their ill-gotten wealth unhindered.
Against these, the actual recovery notched for the last 10 years was crumbs - just Rs 2,68,795 crore comprising, Rs 2,16,547 crore (of PSBs); Rs 52,248 crore (of Private); though the figures of UCBs is not provided.
Meanwhile, the RBI's Financial Stability Report (FSR) in December 2024 highlighted betterment in the asset quality of banking sector. The gross non-performing assets (GNPA) ratio of banks fell to a 12-year low of 2.6 per cent in September 2024, aided by reduced slippages, higher write-offs, and steady credit demand. The net NPA ratio also dropped to 0.6 per cent.
However, the RBI cautioned that the GNPA ratio could rise under certain risk scenarios, potentially reaching 5.3 per cent by March 2026.
Accordingly, the annual write-offs of all the banks together comprise Rs 1,21,000 crore (PSBs); Rs 44,665 crore (Private); Rs 602 crore (UCBs), totaling to Rs 1,66,267 crore so far – leaving a staggering Rs. 13,92,495 crore still pending recovery. A major part of the write-offs is due to ‘technical/prudential/Advances Under Collection’, but the banks retain the right to recover from the borrowers in all such cases.
From the NPAs write-off (Rs. 16,61,290 crore) the recoveries amounted to an annual average of Rs 21,654 crore (PSBs); and Rs 522 crore (Private), working out to barely 16.17% for the last 10 years. This gives a rough average of a measly 1.6% per year,” Prafful Sarda pointed out.
Write-offs peaked at ₹2.4 lakh crore in FY19 following an asset quality review. They dropped to ₹1.7 lakh crore in FY24, representing 1% of the total outstanding bank credit. Public sector banks hold a 51% share of new loans, down from 54% in FY23.
Recovery methods include legal action, debt recovery tribunals, and negotiated settlements. Despite these write-offs, public sector banks reported record profits of ₹1.41 lakh crore in FY24, and ₹85,520 crore in the first half of FY25. Their gross NPA ratio improved to 3.12% by September 2024.
“The government’s contention is that such write-offs are ‘purely balance sheet management’ strategy. Hence, the borrower’s liability to ‘repay’, or the bank’s right to ‘recover’ is not diminished in any manner. There are specialized teams which follow-up for the recovery processes thereafter,” said Sarda.
However, in the absence of a specific time-frame for the recoveries of the outstanding amounts, lakhs of crores of public funds are lost for all practical purposes, as the banks’ keep issuing rosy balance-sheets each year, the activist argued.
Sarda said as per a 30-year-old policy, all credit-related matters are deregulated with the concerned Banks and their respective Board of Directors, who decide about loan amount and recovery policy.
“In this scenario, will the Finance Minister Nirmala Sitharaman announce stricter norms to pin the accountability on the lenders, right from the managers to the Board of Directors - and in case of NPAs recover the lost amounts from the banks’ own executives for their lapses and poor judgement,” demanded Sarda.
Banking experts urged that the new RBI Governor Sanjay Malhotra should recommend to the government to tweak the relevant laws, make the bank officials or directors and/or external forces who pressurize the banks, responsible and punishable for their actions.
This can prevent defaulters like Nirav Modi, Mehul Choksi, Lalit Modi, Vijay Mallya plus many more who brazenly dupe banks of public monies and sneak out of India with political patronage to enjoy their ill-gotten wealth unhindered.
Against these, the actual recovery notched for the last 10 years was crumbs - just Rs 2,68,795 crore comprising, Rs 2,16,547 crore (of PSBs); Rs 52,248 crore (of Private); though the figures of UCBs is not provided.
Meanwhile, the RBI's Financial Stability Report (FSR) in December 2024 highlighted betterment in the asset quality of banking sector. The gross non-performing assets (GNPA) ratio of banks fell to a 12-year low of 2.6 per cent in September 2024, aided by reduced slippages, higher write-offs, and steady credit demand. The net NPA ratio also dropped to 0.6 per cent.
However, the RBI cautioned that the GNPA ratio could rise under certain risk scenarios, potentially reaching 5.3 per cent by March 2026.
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