Loans Written off by Public Sector Banks

There is a continuous increase in the Banks’ NPA figure since 2015.  The figure reads that the PSU Banks NPA rose by Rs. 6.16 lakh crore since 2015.

1. The NPA figures declined in PSU banks by Rs. 1,28,229 crore in the financial years due to write-offs, including compromise settlements.
2. This is said to form around 60% higher than the previous year.
3. The Finance Ministry report banks have shown reduction in NPA figures of PSU Banks due to write off in 2018. To quote a few:
   • IDBI Bank Rs. 12515 crore against Rs. 2,868 crore in FY 17
   • SBI Rs. 39151 crore against Rs. 20,339 crore in FY 17
   • Corporation Bank Rs. 8,228 crore against Rs. 3,574 crore in FY 17
   • Canara Bank Rs. 8,310 crore against Rs. 5,545 crore in FY 17
   • Oriental Bank of Commerce Rs. 6,357 crore against Rs. 2,308 crore in FY 17
   • Indian Overseas Bank Rs. 6,908 crore against Rs. 3,066 crore in FY 17
4. An Asset Quality Review (AQR) carried out in 2015 for clean and fully provisioned bank balance sheets revealed a high incidence of NPAs.
5. Reclassification of restructured loans as NPAs, which were given flexibility earlier is another cause for the increase. Expected losses were also brought under provisioning with an idea of cleansing up the Balance Sheets.
6. The increase in NPA figures is attributed to the fact that
   • AQR work was undertaken and
   • A transparent policy was followed in the asset recognition process.
7. In line with strict RBI guidelines, stressed assets of previous years, have either been written off or due additional provisioning has been made wherever it was required.

Note:

• Banks write off NPAs as part of their regular exercise
  • To clean up their balance sheet
  • To get Tax Benefits
  • For Capital optimization.
• Borrowers would however, be followed up vigorously to pay off such loans, who are liable to pay them to avoid legal proceedings or securtising the loans or attach the securities through Enforcement Bodies/Debt Recovery Tribunal.
• This precisely, writing off a loan does not mean that the borrower is benefitted in any way.