Scheduled commercial banks in India wrote off loans worth nearly Rs 10.6 lakh crore in the past five years, data tabled in Lok Sabha on Monday showed.
More than half of this amount, around Rs 5.5 lakh crore, involved loans given by banks to large industrial houses and services.
The information was tabled by Bhagwad Karad, the minister of state for finance, in response to a question by Lok Sabha MPs Abdul Khaleque, Mahesh Sahoo and M Badruddin Ajmal.
In the financial year 2022-’23, Indian banks wrote off Rs 2.09 lakh crore worth of loans, the data from the finance ministry showed. Of this, Rs 1.09 lakh crore belonged to large industries and services.
The write-offs helped banks reduce their burden of non-performing assets to a 10-year low of 3.9% of all loan advances as of March 2023, Mint reported. A non-performing asset is a loan for which the principal or interest payment has been overdue for 90 days or more. Without the write-offs, the burden on banks would have been around 7.4% of the loan advances.
At the end of fiscal 2017-’18, non-performing assets of Indian banks were worth Rs 10.21 lakh crore. This fell to Rs 5.55 lakh crore by the end of 2022-’23 because of the write-offs.
As per the central bank’s guidelines, a loan is removed from a bank’s balance sheet if it has not been repaid for four years.
However, Karad reiterated that such write-offs “do not result in waiver of liabilities of borrowers to repay”. This means that the banks have not given up their right to recover the loan.
Karad also added that the “government does not spend any amount on write-offs of corporate loans”.
In the financial year 2022-’23, the banks collected Rs 5,309.8 crore in penalties including charges levied for delaying loan payments, the finance ministry said citing figures from the Reserve Bank of India.
In response to another question by Lok Sabha MPs Aparupa Poddar and Natarajan PR, Karad said that more than 2,600 borrowers, having a loan amount of Rs 5 crore or more, have collectively defaulted on borrowings worth around Rs 2 lakh crore.
Responding to a question seeking the reason for allowing wilful defaulters to enter into a compromised settlement with the banks, Karad said that the primary regulatory objective is to “enable multiple avenues to lenders to recover the money”. “Apart from the time value loss, inordinate delays result in asset value deterioration which hampers ultimate recoveries,” Karad added.
In June, the Reserve Bank had introduced a new framework allowing wilful defaulters to reach a compromise settlement with their lenders, paving the way for loan write-offs and reigniting a long-standing political debate.
The new framework means that wilful defaulters, those who refuse to repay their loans despite having the capacity to do so, will be able to reach settlements with the banks and seek fresh loans after a 12-month cooling off period.