Public sector banks and private sector banks have written off a total amount of Rs 8,16,421 crore and Rs 3,01,462 crore, respectively, in the last six financial years.
Worried about the low collection rate of written-off accounts, the Ministry of Finance has asked public lenders to increase it to around 40%, sources say
Worried about the low recovery rate of written-off accounts, the finance ministry has asked public lenders to raise it to around 40%, sources said. Currently, the recovery rate for written-off accounts is less than 15%. Public Sector Banks (PSBs) were only able to recover 14% of written off loans worth Rs 7.34 lakh crore in the past five years ending March 2022.
Of the written off loans of Rs 7.34 lakh crore, public lenders recovered Rs 1.03 lakh crore. So, after recovery, the net write-off stood at Rs 6.31 lakh crore at the end of March 2022.
It appears that after the write-off, the banks were content to recover these non-performing assets (NPAs), the sources said, adding that this level of recovery is not acceptable.
In addition, they said, higher collection of written-off accounts directly adds to their bottom line and improves their capital.
To review the situation on the matter, the sources said, the Financial Services Department would soon hold a meeting with senior PSO officials.
The proposed meeting would provide an update on ongoing cases involving these accounts before various tribunals, including the Debt Recovery Tribunal and the Debt Recovery Appeal Tribunal. Banks have been asked to be more proactive about large accounts written off.
Banks have written off Rs 11.17 lakh crore as bad debts from their books over the past six years to FY 2021-22. According to RBI data, public sector banks (PSBs) and private sector banks have written off a total amount of Rs 8,16,421 crore and Rs 3,01,462 crore, respectively, in the last six financial years.
Non-Performing Assets (NPA), including those that have been fully provisioned after four years, are removed from the bank’s balance sheet by way of write-off.
Banks write off NPAs as part of their regular exercise to clean up their balance sheets, take advantage of tax benefits and optimize capital. Delisting is done by banks in accordance with RBI guidelines and policies approved by their boards.
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(This story has not been edited by News18 staff and is published from a syndicated news agency feed)
