From FY15 to September 2017: PSU banks write off Rs 2.4-lakh crore

The recovery rate of banks’ NPAs hit the lowest level of 20.8 per cent in 2016-17, as per the RBI.

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As per the state’s Economic Survey Report for 2017-18, contribution of agriculture to Gross State Domestic Product (GSDP) has declined to 20 per cent over an extended period, but it still supports 50% of the state’s population.

Public sector banks (PSBs) have written off a total of Rs 2.42 lakh crore of bad loans from financial year 2014-15 till September 2017, Minister of State for Finance Shiv Pratap Shukla said. In 2016-17 alone, the PSBs wrote off a record Rs 81,683 crore worth of bad loans, a jump of more than 41 per cent over the previous year’s write-off amount of Rs 57,586 crore.

“Writing-off of non-performing assets is a regular exercise conducted by banks to clean their balance sheet, and achieving taxation efficiency. Writing off of loans is done, inter-alia, for tax benefit and capital optimisation. Borrowers of such written off loans continue to be liable for repayment,” Shukla said in reply to a question in Rajya Sabha on Tuesday.

Banks write off loans when they see limited chances of recovery. While some of the loans written-off are later recovered by the banks, their recovery rate (the amount recovered as a percentage of additional write-offs) has been low at 20 per cent in FY17.

The rate of recovery of banks’ gross NPAs has been steadily declining for the past 12 years and hit the lowest level of 20.8 per cent in 2016-17, according to the latest available data from the Reserve Bank of India. After peaking in 2009 at 61.8 per cent and remaining well above 40 per cent in the earlier years, the recovery rate has declined over the years, the data show. During the 2015-17 period, the average recovery ratio of banks was 26.4 per cent, with recovery by private sector banks at 41 per cent being much higher than by PSBs at 25.1 per cent.

Shukla said recovery of dues takes place on ongoing basis under legal mechanisms, which include the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, Debts Recovery Tribunals and Lok Adalats.

The recovery percentage through these 3 channels fell to 9.8 per cent in 2016-17, down from 10.3 per cent in 2015-16. Out of Rs 2.86-lakh crore NPAs being chased via DRTs, SARFAESI and Lok Adalats, banks were able to recover Rs 28,000 crore worth of loans in 2016-17. In the previous financial year, the banks and financial institutions could recover Rs 22,800 crore worth of bad loans out of total Rs 2.21 lakh crore being chased through these legal channels, the RBI data show.