One in five banks sees a rise in loan write-offs in FY24

The rest of the top ten banks bucked this trend, with Union Bank of India registering a 4.8 per cent decrease in the amount of loan write-offs to Rs 18,264 crore in FY24, followed by State Bank of India with a 32.8 per cent decrease in the loan write-off amount to Rs 16,161 crore. The loan write-off amount also decreased for Bank of Baroda to Rs 10,518 crore, down 41.6 per cent from the previous year, while the same for Central Bank of India reduced by 2.5 per cent to Rs 10,001 crore.

The total amount of loan write-offs has been Rs 9.90 lakh crore during the last five financial years 2019-20 to 2023-24. Barring a spike in 2022-23, loan write-offs have shown a declining trend during these five years. The total amount of loan write-offs by SCBs had stood at Rs 2.34 lakh crore in 2019-20, which came down to Rs 2.03 lakh crore in 2020-21 and Rs 1.75 lakh crore in 2021-22. In the following financial year of 2022-23, the amount of loan write-offs increased to Rs 2.08 lakh crore, before coming down to Rs 1.70 lakh crore in FY24.

“Banks write-off non-performing assets, including, inter-alia, those in respect of which full provisioning has been made on completion of four years, as per the Reserve Bank of India (RBI) guidelines and policy approved by banks’ Boards. Such write-off does not result in waiver of liabilities of borrowers and therefore, write-off does not benefit the borrower. The borrowers continue to be liable for repayment and banks continue to pursue recovery actions initiated in these accounts,” Minister of State for Finance Pankaj Chaudhary said in his written response to a question in the Lower House of the Parliament.

A bank writes off a loan after the borrower has defaulted on the loan repayment and there is a very low chance of recovery. Once a loan is written off by a bank, it goes out from the asset book of the bank. A loan becomes an NPA when the principal or interest payment remains overdue for 90 days. The lender then moves the defaulted loan, or the non-performing asset (NPA), out of the assets side and reports the amount as loss.

Separately, data shared by the Ministry for 64 banks showed that gross NPAs stood at Rs 4.81 lakh crore as on March 31, 2024, with the highest amount of gross NPAs reported by State Bank of India at Rs 84,276 crore, followed by Punjab National Bank at Rs 56,343 crore. Gross NPAs had stood at Rs 5.72 lakh crore at the end of March 2023.

The amount recovered by SCBs including recovery from written-off loans stood at a three-year low of Rs 1.23 lakh crore in FY24, down 22.8 per cent from Rs 1.6 lakh crore in FY23. The amount recovered by SCBs during 2019-20 was Rs 1.47 lakh crore, which moderated to Rs 1.14 lakh crore in 2020-21 and had then increased to Rs 1.37 lakh crore in 2021-22.