Banks recovered only 1.6 lakh crore out of 10 lakh crore NPA in last 9 years 

Public sector banks (PSBs) in India have written off a staggering Rs 10.42 lakh crore in loans since 2014-15, yet they have only managed to recover a meager Rs 1.61 lakh crore, representing a mere 15.45% of the total write-offs.

Minister of State in the Finance Ministry, Dr. Bhagwat Karad, disclosed the information in a written response, citing data from the Reserve Bank of India (RBI). According to the data, PSBs have written off a cumulative loan amount of Rs 10.42 lakh crore, with only Rs 1.61 lakh crore recovered from these written-off loans during the financial years 2014-15 to 2022-23. The recovered amount constitutes only 15.45% of the total written-off sum during this period.

As per RBI guidelines and approved bank board policies, Non-Performing Assets (NPAs), including those for which full provisioning has been completed after four years, are removed from the bank’s balance sheet through a write-off. Dr. Karad emphasized that such write-offs do not absolve borrowers of their repayment liabilities and that the recovery process from borrowers with written-off loans continues.

Dr. Karad clarified that the government does not allocate any funds for the write-off of corporate loans. He did not disclose the names of individual borrowers whose accounts have been written off, citing the RBI Act. Quoting RBI data, he mentioned that Scheduled Commercial Banks (SCBs) collected Rs 5,309.80 crore as penal charges, including penalties for loan payment delays, during the financial year 2022-23.

Key points:

• Low recovery rate: Despite government claims that write-offs don’t equate to loan waivers, the low recovery rate suggests limited success in recovering written-off amounts.
• Write-off process: As per RBI guidelines, NPAs fully provisioned after four years are removed from bank balance sheets through write-off.
• Recovery mechanisms: PSBs employ various methods to recover dues from written-off accounts, including legal action, asset sale, and negotiated settlements.
• No government funding: The government does not financially support write-offs of corporate loans.
• Penal charges: SCBs collected a total of Rs 5,309.80 crore in penalty charges for delayed loan payments during 2022-23.
• Compromise settlements: Banks can negotiate settlements with wilful defaulters, without impacting ongoing criminal proceedings.
• Objective of settlements: The primary goal of allowing compromise settlements is to expedite recovery efforts and minimize asset value deterioration.