Indian banks write off loans worth Rs 12 lakh crore in 10 years, half of it by PSU banks in last 5 years
Banks wrote off loans worth Rs 12.3 lakh crore between FY 2015 and FY 2024. Of this, 53%, or Rs 6.5 lakh crore, was written off by public sector banks (PSBs) in the last five years alone (FY20-FY24).
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India's banking sector has witnessed an astounding Rs 12.3 lakh crore in loan write-offs between FY15 and FY24, with public sector banks (PSBs) bearing the brunt of this financial strain. A staggering 53% of these write-offs—amounting to Rs 6.5 lakh crore—occurred in the last five years alone (FY20-24), as revealed by government data in response to Parliamentary inquiries.
The loan write-offs peaked in FY19 at a record Rs 2.4 lakh crore, coinciding with an asset quality review that began in 2015. However, FY24 marked a significant decline, with write-offs falling to Rs 1.7 lakh crore—equivalent to just 1% of the total Rs 165 lakh crore in outstanding bank credit at that time. Despite this progress, PSBs, which currently hold a 51% share of incremental credit in the banking sector (down from 54% in FY23), remain under considerable pressure.
Mounting NPAs and Bank-Specific Burdens
The Reserve Bank of India's (RBI) data reveals that as of September 30, 2024, gross non-performing assets (NPAs) for public and private sector banks stood at Rs 3.16 lakh crore and Rs 1.34 lakh crore, respectively. Gross NPAs as a percentage of outstanding loans were 3.01% for PSBs and 1.86% for private banks, underlining the higher stress on public banks.
State Bank of India (SBI), which dominates nearly a fifth of India’s banking activity, led the charge, writing off Rs 2 lakh crore during this period. Punjab National Bank followed with Rs 94,702 crore among nationalised banks. Even in the ongoing fiscal year, PSBs have written off Rs 42,000 crore up to September, indicating that the issue persists despite the sector’s efforts to clean up its books.
Write-Offs are not waivers
Responding to concerns about PSB write-offs, Minister of State for Finance Pankaj Chaudhary clarified, “Banks write off NPAs in respect of which full provisioning has been made on completion of four years, according to RBI guidelines and policy approved by banks' boards. Such write-off does not result in waiver of liabilities of borrowers and therefore, it does not benefit the borrower. Banks continue to pursue recovery actions initiated in these accounts.”
He outlined the extensive recovery measures employed, including legal action in civil courts and debt recovery tribunals, enforcement under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and proceedings under the Insolvency and Bankruptcy Code, 2016. Negotiated settlements, compromises, and sales of NPAs are also part of the recovery toolkit.
Rising Profits Amidst Financial Turmoil
Amid these write-offs, PSBs have managed to turn their financial fortunes around. In FY24, they recorded a historic aggregate net profit of Rs 1.41 lakh crore, buoyed by improved asset quality. The gross NPA ratio for PSBs declined to 3.12% by September 2024, signaling progress in stabilizing the sector. In the first half of FY25, PSBs reported a robust net profit of Rs 85,520 crore, underscoring their resilience in the face of challenges.
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