- Loan write-off is when the loan is no longer counted as an asset by the bank, thus reducing the level of non-performing assets.
- Banks wrote off bad loans worth over Rs 2.09 lakh crore during the financial year 2022-23.
- This loan write-off aided banks to bring down gross non-performing assets to a 10-year low of 3.9 percent of advances in March 2023.
- RBI bulletin on April 21 said that the GNPAs of scheduled commercial banks (SCBs) declined to 4.5 percent in December 2022 from 6.5 percent a year ago.
Banks wrote off bad loans worth over Rs 2.09 lakh crore during the financial year (FY)2022-23, taking the total loan write-off by the banking sector to Rs 10.57 lakh crore in the last five years, the Reserve Bank of India (RBI) said in a Right to Information (RTI) reply to the Indian Express.
This loan write-off aided banks to bring down gross non-performing assets (GNPA) or loans defaulted by borrowers to a 10-year low of 3.9 percent of advances in March 2023, according to the report.
Gross NPAs of banks had fallen from Rs 10.21 lakh crore in FY2018 to Rs 5.55 lakh crore by March 2023, mainly on the back of loan write-offs by banks, the report further stated.
The report further states that as per the data provided by the RBI, banks have written off Rs 15,31,453 crore since FY2012-13.
The central bank’s RTI reply says that banks recovered only Rs 109,186 crore from Rs 586,891 crore loans written off in the last three years, revealing that they could recover only 18.60 percent of the write-offs during this period.
The total defaulted loans that include write-offs but exclude loans recovered from write-offs in three years are Rs 10.32 lakh crore, according to back-of-the-envelope calculation.
Including write-offs, the total NPA ratio would have become 7.47 percent of advances as against 3.9 percent reported by the banks, the report said.
The RBI’s RTI reply to the daily says that loan write-offs by banks rose to Rs 209,144 crore during the fiscal ended March 2023 as against Rs 174,966 crore a year ago in March 2022 and Rs 202,781 crore in March 2021.
RBI bulletin on April 21 said that the GNPAs of scheduled commercial banks (SCBs) declined to 4.5 percent in December 2022 from 6.5 percent a year ago,
A loan write-off is when the loan is no longer counted as an asset by the bank. To put it simply, it is the amount of loan that is written off by the banks, thus reducing the level of non-performing assets (NPAs) on its books.
The defaulted loan, also known as NPA, is then transferred from the assets side and recorded as a loss.
(With inputs from agencies)
