Mumbai: Banks in the country wrote off bad loans worth over Rs 2.09 lakh crore during the year ended March 2023. In the last five years, banks wrote off bad loans worth Rs 10.57 lakh crore. The apex bank in the country, the Reserve Bank of India (RBI) informed this as a reply to a Right to Information (RTI) query.
As per data released by RBI, loan write-offs by banks increased to Rs 209,144 crore during FY23. It was at Rs 174,966 crore in FY22 and ? Rs 202,781 crore in FY21. Banks recovered written-off loans worth Rs 30,104 crore in FY21, Rs 33,534 crore in FY22 and Rs 45,548 crore in FY23.
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Banks use loan write-offs as a strategy to reduce the burden of non-performing assets on their books. The loan write-offs have helped banks in reducing their Gross Non-Performing Assets (GNPA) to a 10-year low of 3.9% of advances by March 2023. The gross NPAs of banks have decreased from Rs 10.21 lakh crore in FY18 to Rs 5.55 lakh crore by March 2023.
A bank writes off a loan when it finds no way to recover the money. By doing this the banks take the bad asset or Non Performing Assets (NPA) off its balance sheets. A loan is classified as an NPA when the borrower fails to make the principal or interest payment for a period of 90 days or more. As a result of the write-off, the bank’s tax liability is reduced as the written-off amount is deducted from the profit.
The borrowers of written-off loans continue to be liable for repayment and the process of recovery of dues from the borrower in written-off loan accounts continues. The banks continue to pursue recovery actions initiated in written-off accounts through various recovery mechanisms available.
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