On an average, almost 90 per cent of the NPAs written off by state-owned banks could not be recovered during the four years from 2014-15 to 2017-18, as per latest data of the Reserve Bank of India. And the recovery rate for half of the 21 state-owned banks was lower than this.
In fact, state-owned UCO Bank could not recover a single paisa of the Rs 6,087 crore of bad loans it wrote off in the past four fiscal years.
Indian Overseas Bank could recover only Rs 10 crore of the Rs 10,470 crore of bad loans which were written off, Allahabad Bank recovered just Rs 257 crore out of a total of Rs 9,533 crore of bad loans or non performing assets (NPAs) which were written off in the past four years — a recovery rate of just 2.70 per cent during this period.
The IDBI Bank, which the government is planning to privatise, recovered a meagre Rs 479 crore out of a total of Rs 16,568 crore worth of NPAs written-off — a recovery rate of just 2.89 per cent.
Banks typically write off NPAs after four years for fully provisioned accounts. However, banks continue to pursue various recovery steps to get back whatever portion of their loan outstanding they can from the borrowers.
Such low recovery rates are recent. After peaking at 61.8 per cent in 2009 and remaining well above 40 per cent in the earlier years, the recovery rate for all banks has declined steadily over the years.
In the last four fiscal years — 2014-15, 2015-16, 2016-17 and 2017-18 till December 31 — all 21 public sector banks in aggregate could recover only Rs 29,343 crore out of Rs 2.72 lakh crore of bad loans that were written off by the PSBs, a recovery rate of 10.77 per cent.
The disaggregated data further shows that a total of 10 PSBs had recovery rate of less than 10 per cent during the period, while 11 state-owned lenders posted over 10 per cent recovery rate. The country’s largest lender by assets, State Bank of India, recorded a recovery rate of 10.13 per cent during this four-year period. It recovered Rs 10,396 crore out of a total of Rs 1.02 lakh crore of bad loans that were written off during the same period.
During the same period, Syndicate Bank recorded the highest recovery percentage of 28.62 per cent, recovering Rs 1,535 crore out of Rs 5365 crore which were written off. It was followed by Canara Bank with a recovery rate of 23.34 per cent, Indian Bank with a recovery rate of 22.57 per cent, Punjab National Bank with a recovery rate of 22.54 per cent.
Elevated NPAs and increasing amount of write-offs put pressure on the exchequer to keep infusing capital in the banks to keep them afloat. In January, the government allocated a bigger chunk of capital of Rs 52,311 crore to 11 weak banks to maintain their minimum regulatory capital requirement while nine strong banks were given Rs 35,828 crore.