Write-offs made by 27 banks in FY19 crossed the Rs 2-lakh-crore mark, with 16 public sector banks (PSBs) alone accounting for Rs 1.77 lakh crore worth of written-off loans, according to data put out by banks and compiled by FE.
In FY18, PSBs had written off loans worth Rs 1.28 lakh crore. Had banks not written off loans worth close to Rs 2.06 lakh crore in FY19, the value of non-performing assets (NPAs) in the system at the end of the year would have risen by an equivalent amount.
The amount of loans written off in FY19 by PSBs could turn out to be even higher as the numbers for Dena Bank and Vijaya Bank, which now stand merged with Bank of Baroda (BoB), are unavailable.
According to Reserve Bank of India (RBI) guidelines and policy approved by banks’ boards, non-performing assets (NPAs), including those in respect of which full provisioning has been made on completion of four years, are removed from the balance sheets of banks by way of write-offs. Write-offs are part of a regular exercise by banks to clean up their balance sheets and avail tax benefits. Borrowers of written-off loans continue to be liable for repayment and banks keep up efforts to recover them. If recoveries are made from written-off accounts, they get reflected in banks’ non-interest income.
State Bank of India (SBI) made the largest amount of write-offs — worth Rs 61,663 crore, up 57.5% from FY18. It was followed by Canara Bank, whose written-off loans added up to Rs 14,267 crore, and BoB, which wrote off loans worth Rs 13,102 crore in FY19.
The practice of writing off loans to reduce the value of gross NPAs has been quite prevalent in recent years. Write-offs made by 21 PSBs had risen 57% year-on-year (y-o-y) in FY18 and crossed the Rs 1- lakh-crore mark, according to a reply by minister of state for finance Shiv Pratap Shukla to a Rajya Sabha question last year.
The reduction in non-performing assets (NPAs) due to write-offs stood at Rs 1.28 lakh crore as on March 31, 2018, up from Rs 81,684 crore as on March 31, 2017. The value of write-offs added up to over 14% of the aggregate gross NPAs of the 21 PSBs at the end of March 2018.