In a major development, banks have largely written off a record Rs 1,44,093 crore of bad loans in the financial year ending March 2018. The figure has gone up by 61.8 per cent from Rs 89,048 crore in the previous fiscal, according to an Indian Express report. Of the amount, public sector banks have written off Rs 1,20,165 crore loans. As on March 31, 2018, private and public sector banks (PSBs) have written off a bad loan amounting a whopping Rs 4,80,093 crore since 2009. Notably, 83.4 per cent of this amount, or Rs 400,584 crore, was written off by public sector banks, according to the date obtained by IE from ICRA.
According to the report, this written off policy is nothing new in the banking sector as banks normally do this after apprehending these loans are in the doubtful recovery category. “It is technical in nature. It’s a book adjustment. When a bad loan is written off, it goes out of the books of the bank. The bank will also get tax benefits. However, the bank will continue the recovery measures even after the loan is written off,” said Pradeep Ramnath, former chairman and MD of Corporation Bank was quoted as saying.
Among the PSBs, the State Bank of India wrote off Rs 40,281 crore in 2017-18. Punjab National Bank (PNB), which was hit by Nirav Modi fraud case, wrote off Rs 7,407 crore. Indian Overseas Bank has written off Rs 10,307 crore. Apart these, in last 10 years, SBI alone wrote off Rs 1,23,137 crore. Other banks like Bank of India wrote off Rs 28,068 crore followed by Canara Bank with Rs 25,505 crore and PNB with Rs 25,811 crore, according to ICRA figures.
Private banks wrote off Rs 23,928 crore in the year ended March 2018 against Rs 13,119 crore the previous year. Axis Bank wrote off Rs 11,688 crore and ICICI Bank Rs 9,110 crore. The total write-offs by private banks in the last 10 years amounted to Rs 79,490 crore.
“Banks usually write off loans which are not recoverable. Borrowers are not informed about the write-off. Once a loan is written off, it’s not counted as NPA. When recovery happens, it will add to the profits of the bank,” said the CEO of a public sector bank speaking on condition of anonymity.
However, this practice has drawn a lot scepticism. “There is nothing like technical write-off. It’s non-transparent and without any policy. Generally a write-off is small and used sparingly when there is some crisis. A technical write-off creates non-transparency, destroys the credit risk management system and brings all types of wrongdoings into the system. You must declare how much you are writing off. You are writing off public money. It’s a scandal,” former RBI Deputy Governor K C Chakrabarty was quoted as saying by IE.
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