One of the Public Sector Bank is going to write off rupees 30,000 crore loans. IDBI Bank, which is one of the 11 public sector banks restricted by Reserve Bank of India (RBI) from lending due to its messy balance-sheet, has revealed that it has written off close to Rs 30,000 crore of loans in the last three-and-a-half years.
The bank, which has been brought under RBI’s prompt corrective action (PCA) framework, has recently informed the Parliamentary Standing Committee on Finance that the first half of the current fiscal saw a Rs 9,052 crore loan write-off. Coming mostly from the infrastructure and metals space, this has already touched 72.32% of the last fiscal’s record Rs 12,515 crore loan write-off.
IDBI
Bank’s write-off stands at a whopping Rs 29,894 crore during the last three-and-a-half years ended September 2018, a source in the parliamentary committee said. In FY2017, the bank’s write-off dropped to Rs 2,868 crore from Rs 5,459 crore a year ago.IDBI Bank told the House panel that it was after the asset quality review (AQR), introduced by the RBI in 2015-16, that the non-performing asset (NPA) situation deteriorated significantly for the banking sector.
AQR, the bank told the house panel, led to the recognition of several loans as NPAs, which the banks had considered to be standard assets. Banking sector’s NPAs shot up from 7.79% of its gross advances in 20151-16 to 11.8% by March 2018. The rising NPAs in IDBI was also the result of the AQR exercise that led to a decline in the profitability of the bank, IDBI submitted the report to the panel on December 4, 2018. IDBI Bank’s total outstanding NPAs at the end of the second quarter was Rs 60,875 crore, which is 31.78% of its gross advances.
The write-offs are part of the clean-up exercise that the bank has been implementing for many quarters to strengthen its balance sheet. The write-offs help the bank to take off the loans off its balance sheet and also help it to save taxes. The bank has also been referring cases to the National Company Law Tribunal (NCLT). But the NCLT process has also not been fast enough for banks, with many lenders waiting for settlement of many cases, the largest of which is the Essar Steel case that is still stuck in litigations.
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