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Banks wrote off NPAs over Rs 10 lakh crore in last 5 years, says Finance Minister Nirmala Sitharaman

Non-performing assets (NPAs), including those for which full provisioning has been made at the end of four years, are written off from the balance sheet of the bank concerned, Nirmala Sitharaman said in reply to Rajya Sabha.

Banks wrote off NPAs over Rs 10 lakh crore in last 5 years, says Finance Minister Nirmala Sitharaman - adt
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First Published Dec 13, 2022, 3:55 PM IST

During the last five fiscal years, banks have written off bad loans worth Rs  10,09,511 crore, finance minister Nirmala Sitharaman told Parliament on Tuesday, December 13, 2022. 

Non-performing assets (NPAs), including those for which full provisioning has been made at the end of four years, are written off from the balance sheet of the bank concerned, Sitharaman said in reply to Rajya Sabha.

Sitharaman said, "Following RBI guidelines and policy approved by their boards, banks write off NPAs as part of their regular exercise to clean up their balance sheets, obtain tax benefits, and optimise capital. According to RBI data, Scheduled Commercial Banks (SCBs) wrote off Rs 10,09,511 crore over the last five fiscal years."

As borrowers of written-off loans remain liable for repayment, and the process of recovering dues from the borrower in written-off loan accounts continues, she claims that write-off does not benefit the borrower.

Banks continue to pursue recovery actions initiated in written-off accounts through various available recovery mechanisms, such as filing a suit in civil courts or Debts Recovery Tribunals, filing cases under the Insolvency and Bankruptcy Code, 2016, and selling non-performing assets.

She added that during the last five fiscal years, SCBs had recovered a total of Rs 6,59,596 crore, including Rs 1,32,036 crore from written-off loan accounts. 

In cases where it's prima facie found that officials are responsible for lapses in non-compliance with the laid down systems and procedures, or misconduct or non-adherence to due-diligence norms, she said, action is taken against the erring officials under the board-approved staff accountability policy.

According to inputs from public sector banks, staff accountability in respect of NPA cases has been assigned to 3,312 bank officials (of AGM and above rank) over the last five fiscal years, and appropriate punitive actions have been taken in proportion to their lapses.

While replying to another question, Sitharaman asserted that few banks are presently using blockchain technology on a small scale. As such, she claimed, the problem with a platform's interoperability between banks is not an issue.

She also said that Indian Banks' Blockchain Infrastructure Company (IBBIC) Private Limited, which was formed to provide a platform for exploring, building, and implementing Distributed Ledger Technology (DLT) solutions for the Indian financial services sector, is currently scoping the implementation of domestic Letter of Credit (LC) issuance as the platform's first use case.

The consortium comprises 18 banks from India's public and private sectors. The Reserve Bank of India (RBI) has been guiding the development of the blockchain-based application through its regulatory sandbox, a mechanism for testing innovative technologies, products, and services.

Blockchain technology has been identified as one of the innovative technologies in this regard, with innovators able to apply it to test their products using this mechanism, according to Sitharaman.

She said there is no proposal to establish guidelines or prescribe a common blockchain technology platform for banks.

(With inputs from PTI)

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