New Delhi: In a startling revelation to Parliament on Tuesday, it was disclosed that banks have written off loans amounting to Rs 9.90 lakh crore over the past five financial years. The information, shared by Minister of State for Finance Pankaj Chaudhary in a written reply to the Rajya Sabha, sheds light on the massive scale of non-performing assets (NPAs) in the banking sector.
The write-offs, while showing a declining trend, remain substantial. For the fiscal year 2023-24, banks wrote off loans worth Rs 1.70 lakh crore, down from Rs 2.08 lakh crore in the previous year. The highest write-off was recorded in 2019-20 at Rs 2.34 lakh crore, which subsequently decreased to Rs 2.02 lakh crore in 2020-21 and Rs 1.74 lakh crore in 2021-22.
Chaudhary explained that these write-offs are conducted in accordance with Reserve Bank of India (RBI) guidelines and policies approved by bank boards.
“NPAs, including those fully provisioned after four years, are removed from banks’ balance sheets through write-offs. This process is part of banks’ regular efforts to clean up their balance sheets, avail tax benefits, and optimise capital,” he said in a reply to a question asked by Congress member Randeep Singh Surjewala.
However, the minister emphasised that write-offs do not equate to loan waivers. Borrowers remain liable for repayment, and banks continue to pursue recovery actions through various mechanisms. Despite this, the recovery rate remains alarmingly low. Against the Rs 9.9 lakh crore written off, only Rs 1.84 lakh crore, or 18 per cent of the total, has been recovered over the last five years.
On a positive note, the gross NPAs of Scheduled Commercial Banks (SCBs) have shown a declining trend. From Rs 8,96,082 crore (8.21 per cent GNPA ratio) as of March 31, 2020, they have decreased to Rs 4,80,687 crore (2.75 per cent GNPA ratio) as of March 31, 2024, according to provisional data.
The Indian banking sector has demonstrated resilience in the face of global financial challenges. The liquidity coverage ratio of banks during January-June 2024 remained above 130 per cent, surpassing the regulatory threshold of 100 per cent. This indicates a strong ability to withstand liquidity risks. Additionally, bank investment portfolios have largely remained resilient to market risks arising from adverse price movements.
The financial health of SCBs has improved significantly. From incurring losses of Rs 32,437 crore in 2017-18, they have turned the corner to report a net profit of Rs 3,41,672 crore in 2023-24. The capital position (CRAR) of SCBs has also strengthened, rising to 16.84 per cent as of March 31, 2024, from 13.85 per cent on March 31, 2018.
In addressing concerns about counterfeit currency, Chaudhary reported a slight decrease in fake currency cases, from 2,22,639 in FY23 to 2,22,639 in FY24. Since the demonetization of Rs 500 and Rs 1000 notes in 2016, the National Investigation Agency has registered 39 cases related to Fake Indian Currency Notes (FICN), seizing counterfeit currency with a face value of Rs 8,50,62,500.
“The government, in collaboration with various agencies and the RBI, continues to take measures to curb the circulation of fake currency. This includes the periodic introduction of new security features in Indian banknotes to enhance their anti-counterfeiting properties,” he said.