Whose Money is Written Off by the Banks to the Corporates?

The Ministry of Finance had in the recent past submitted an important data concerning written-off bank loans in response to a question raised by the opposition members in the Parliament.

Loans written-off by the Banks
Banks in India have written off a whopping amount of Rs. 1.70 lakh crores in the financial year 2024. They have written off loans worth Rs.9.90 lakh crores in the last five financial years, Parliament was informed. The written-off loans stood at Rs.14.56 lakh crores in the last nine financial years says another report. The irony is that a substantial amount of written off loan pertain to large industries and services.

There is another report in the Indian Express dated 14th December 2024 that over Rs.4 lakh crores of Non-Performing Assets (NPAs) till March 2019 belonged to just 100 companies which is over 43% of the total NPAs. It took more than 5 years for the newspaper to access this information through Right to Information Act.  This itself shows how the Corporates are safeguarded by the Government and the Reserve Bank of India.

The government – banker combine is happy that these loans are not waived off but only technically written off and hence the borrowers of written-off loans continue to be liable for repayment and banks are entitled to pursue recovery actions through various recovery mechanisms available to them. On account of these write offs, the banks have reduced their Non-Performing Assets (NPAs). This also helps the banks in cleaning up their balance sheets and show up a robust growth, which may be analogous to window dressing.

Only 18.7% Recovery
The government has also come out with the recovery amount from these bad loans. The recovery from these written-off bad loans remains abysmally low. Banks managed to recover only Rs.46036 crores in financial year 2024. Over the last five years, total recoveries from write-off loans stood at just 18.70%, amounting to Rs.1.85 lakh crores, indicating that 81.30% of written-off loans remains unrecovered. The huge written –off amount at 81.30% is the practically waived off even though technically that would remain in the books of accounts of the banks. Yet, the government boasts that these are only written-off amounts and not waived. This exhibits the mockery of our recovery mechanisms and the appalling attitude of the big corporates who contribute the majority of bad loans.

In FY24, Punjab National Bank wrote off the highest amount of loans worth Rs 18,317 crore, followed by Union Bank of India (Rs 18,264 crore) and State Bank of India (Rs 16,161 crore).

Among private sector banks, HDFC Bank wrote off loans worth Rs 11,030 crore; ICICI Bank’s write-off was Rs 6,198 crore; and Axis Bank’s write-offs amounted to Rs 8,346 crore, the data showed.

Who Bears the Brunt of Corporate Write-off
The government-banker combine says that these NPAs are fully provisioned and thereafter they are written off. It may be noted that this provisioning is done only from the profits earned from the repayment of the loans with interest by the honest borrowers. Thus, the profitability of banks is dented which shall have a telling effect on the health of the bank. Thus the honest borrowers bear the brunt of the huge write-off of the NPAs of the corporates.

Remedy
The lending policy has to undergo a thorough change so that corporate loans are fully secured and the government should bring in place a robust recovery mechanism. Stringent laws should be enacted so that they would serve a deterrent for such wilful defaulters. The limited liability of the company has to be reviewed. The Insolvency and Bankruptcy Code (IBC) has to be abolished so that lawfully huge haircuts are avoided.

[ This article is originally published in bankworkersunity ]