India’s Banks Write Off Rs 2.09 Lakh Crore Bad Loans in FY 2022-23, Total Rs 10.57 Lakh Crore written off in Last Five Years
The Reserve Bank of India (RBI) revealed that India’s banking sector wrote off a substantial amount of Rs 2.09 lakh crore in bad loans during the last financial year 2022-23, which concluded on March 31. This brings the total loan write-offs over the past five years to a staggering Rs 10.57 lakh crore (approximately $129 billion), according to the RBI’s Right to Information (RTI) response.
The significant loan write-offs have contributed to reducing the gross non-performing assets (GNPA) to a 10-year low of 3.9% of advances by March 2023. Indian Express reported that the gross NPAs of banks decreased from Rs 10.21 lakh crore in FY2018 to Rs 5.55 lakh crore by March 2023, largely due to the banks’ efforts to write off bad loans.
Looking back over the last decade, banks have written off a massive Rs 15,31,453 crore (approximately $187 billion) since FY2012-13, based on RBI data.
It is crucial to note that the loans written off by banks will remain on their books as unrecovered loans. The RBI’s RTI response revealed that in the last three years, banks managed to recover only Rs 1,09,186 crore out of the Rs 586,891 crore worth of written-off loans, indicating a mere 18.60% recovery rate during this period.
Taking into account defaulted loans, including write-offs but excluding the loans recovered from write-offs in the last three years, the total amount reaches Rs 10.32 lakh crore, as estimated. This would have resulted in a total NPA ratio of 7.47% of advances, as opposed to the 3.9% reported by the banks, when including the write-offs.
According to the RBI’s RTI response, loan write-offs by banks witnessed a nearly 20% increase, reaching Rs 2,09,144 crore during the fiscal year that ended in March 2023. This is compared to Rs 174,966 crore in March 2022 and Rs 202,781 crore in March 2021. Banks have been resorting to writing off defaulted loans as a measure to reduce the NPAs in their financial records.
However, the banks have encountered poor success in recovering the amounts from the written-off loans. They could only recover Rs 30,104 crore in FY21, Rs 33,534 crore in FY22, and Rs 45,548 crore in FY23.
Notably, public sector banks account for a significant portion of the write-offs, with a substantial Rs 366,380 crore, representing nearly 62.45% of the total exercise in the last three years, as stated by the RBI.
