Banks Write Off ₹14.56 Lakh Crore – Who Pays the Price?

Unmesh Gujarathi

Sprouts News Exclusive

In a startling revelation, the Union government has disclosed that scheduled commercial banks (SCBs) in India have written off bad loans, or non-performing assets (NPAs), totaling a staggering ₹14.56 lakh crore over the past nine financial years, from 2014-15 to 2022-23. This information was presented in the Lok Sabha by Minister of State for Finance, Bhagwat Karad, in response to a question raised by Member of Parliament Amra Ram.

The data presented in the House revealed that a significant portion of these write-offs pertained to large industries and services, which alone accounted for approximately ₹7.40 lakh crore of the total NPAs written off during this period. Sprouts News has analyzed these figures and found that corporate giants continue to benefit from such write-offs while smaller businesses and individual borrowers struggle with repayment pressures.

According to the data tabled in Parliament, the following amounts were written off by SCBs year-wise:

Financial Year | Amount Written Off (₹ in lakh crore)

                                    (Amounts in crore Rs.)

Financial Total NPAs written off

Year         written-     ‘Larg industries

          off                and Services’

2014-15 58,786            31,723

2015-16 70,413             40,416

2016-17 1,08,373         68,308

2017-18 1,61,328          99,132

2018-19 2,36,265        1,48,753

2019-20 2,34,170        1,59,139

2020-21 2,04,272       1,27,050

2021-22 1,75,178          69,532

2022-23 2,16,324        1,14,528

2023-24 1,70,270        68,366

Source: RBI

Note: The total write-off over these nine years sums up to ₹14.56 lakh crore.

Despite these substantial write-offs, banks have been actively pursuing recovery of bad loans. SCBs have recovered an aggregate amount of ₹2.04 lakh crore in written-off loans, including corporate loans, since April 2014 up to March 2023. However, Sprouts News has learned that a significant portion of these recoveries has come from small and medium enterprises (SMEs) and retail borrowers, while big defaulters often escape legal consequences.

The move to write off these NPAs follows the guidelines issued by the Reserve Bank of India (RBI), which mandate the write-off of bad loans that have undergone full provisioning after four years. This practice is part of banks’ regular exercise to clean up their balance sheets, avail tax benefits, and optimize capital, in accordance with RBI guidelines and policies approved by their boards. Sprouts News has investigated how these write-offs impact banking customers, as they ultimately bear the burden of rising banking fees and stricter loan approval processes.

In response to the mounting NPAs, both the government and the RBI have implemented comprehensive steps to recover and reduce bad loans. These measures have enabled gross NPAs of public sector banks (PSBs) to decline to ₹4.28 lakh crore as of March 31, 2023, from a peak of ₹8.96 lakh crore as of March 31, 2018. Steps taken include amendments to recovery laws, the establishment of the National Asset Reconstruction Company Limited (NARCL) to resolve stressed assets above ₹500 crore, and enhancing the effectiveness of debt recovery tribunals. Sprouts News will continue to track how these initiatives impact banking operations and borrowers across the country.

Despite the challenges posed by NPAs and the subsequent write-offs, the banking sector has shown resilience. Public sector banks reported record profits of ₹1.41 lakh crore in the financial year 2023-24, and ₹85,520 crore in the first half of the financial year 2024-25. Their gross NPA ratio improved to 3.12% by September 2024. This improvement indicates a strengthening of the banking sector’s financial health, attributed to the concerted efforts in addressing the NPA crisis.

The revelation of ₹14.56 lakh crore in bad loan write-offs over the past nine years underscores the significant challenges faced by India’s banking sector. However, the proactive measures taken by both the government and the RBI, coupled with ongoing recovery efforts, reflect a committed approach to restoring financial stability and ensuring the robustness of the banking system. Sprouts News will continue to investigate whether these recoveries translate into tangible benefits for the common citizens or if the burden continues to shift onto honest taxpayers and small borrowers.