In a startling revelation, the Indian government has disclosed that Scheduled Commercial Banks (SCBs) have written off a staggering ₹10.6 lakh crore in bad loans over the past five years. Half of this colossal sum, an estimated ₹5.3 lakh crore, is attributed to large industrial houses. This alarming trend highlights the growing risk of corporate defaults in the Indian financial landscape.
The Reserve Bank of India’s (RBI) guidelines stipulate that non-performing assets (NPAs), including those fully provisioned after four years, be removed from a bank’s balance sheet through a write-off process. However, this write-off does not absolve borrowers of their repayment obligations. The government emphasized that the recovery process for written-off loans continues relentlessly.
Banks employ various recovery mechanisms to reclaim dues from borrowers, including civil suits, Debt Recovery Tribunals, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, insolvency proceedings under the Insolvency and Bankruptcy Code, 2016, negotiated settlements, and sale of non-performing assets.
Addressing concerns about government expenditure on loan write-offs, the Finance Ministry clarified that no public funds are disbursed for this purpose.
Citing the RBI Act, the Minister refrained from divulging the names of individual borrowers with written-off accounts. However, he noted that SCBs have collectively collected ₹5,309.80 crore in penal charges, including those for delayed loan payments, during the financial year 2022-23.
Further, the Minister stated that SCBs and All India Financial Institutions report credit information of borrowers with aggregate exposure of ₹5 crore and above to the Central Repository of Information on Large Credits (CRILC). As of March 31, 2023, CRILC data revealed 2,623 unique borrowers classified as wilful defaulters, with outstanding dues of over ₹1.96 lakh crore.
Banks employ various measures to address wilful defaults, including legal action, settlements, and asset sales. The RBI’s Framework for Compromise Settlements and Technical Write-offs, introduced on June 8, 2023, allows for compromise settlements with wilful defaulters without compromising ongoing criminal proceedings.
The Minister emphasized that compromise settlements aim to expedite recovery efforts and minimize asset value deterioration caused by prolonged delays.
