Banks write off over ₹2.09 lakh crore bad loans in FY23, ₹10.57 lakh crore written off in the last five years

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₹2.09 lakh crore during the FY23, according to information obtained through Right to Information (RTI) queries. This brings the total loan write-offs by the banking sector to a significant ₹10.57 lakh crore in the past five years, as per data provided by the Reserve Bank of India (RBI) to The Indian Express. Loan write-offs by banks increased to ₹209,144 crore during FY23, compared to ₹174,966 crore in FY22 and ₹202,781 crore in FY21, as per the RTI data.

Banks have been utilising loan write-offs as a strategy to reduce the burden of non-performing assets on their books.  However, the recoveries from these written-off loans have been quite dismal, with only ₹30,104 crore recovered in FY21, ₹33,534 crore in FY22 and ₹45,548 crore in FY23. The RBI's RTI response reveals that out of the ₹586,891 crore loans written off in the last three years, banks were able to recover only ₹109,186 crore, indicating a meagre recovery rate of 18.60% during this period. 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.

Over the years, gross NPAs of banks have decreased from ₹10.21 lakh crore in FY18 to ₹5.55 lakh crore by March 2023, mainly due to the impact of loan write-offs. Taking this into account, the total defaulted loans (including write-offs but excluding recovered loans) amount to approximately ₹10.32 lakh crore. If the write-offs are included, the total Non-Performing Asset (NPA) ratio would have been 7.47% of advances, higher than the 3.9 percent reported by the banks.