Banks write off bad loans worth Rs 2.09 lakh crore in 2022-23: RBI

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• Jul 24, 2023 | Dhupali Das

Banks wrote off bad loans worth over Rs 2.09 lakh crore during the financial year (FY) 2022–23, bringing the...

Digital Desk: Banks wrote off bad loans worth over Rs 2.09 lakh crore during the financial year (FY) 2022–23, bringing the overall loan write-off by the banking sector to Rs 10.57 lakh crore in the last five years, the Reserve Bank of India (RBI) said in a Right to Information (RTI) reply to the Indian Express.

This loan write-off helped banks in reducing gross non-performing assets (GNPA), or loans defaulted by borrowers, to a 10-year low of 3.9 percent of advances in March 2023, according to the report.

Banks' gross NPAs have declined from Rs 10.21 lakh crore in FY2018 to Rs 5.55 lakh crore by March 2023, mainly on the back of loan write-offs by banks, the report added.

The report further added that, as per data provided by the RBI, banks have written off Rs 15,31,453 crore since FY 2012–13.

According to the central bank's RTI reply, banks collected only Rs 109,186 crore from Rs 586,891 crore in loan write-offs in the last three years, showing that they could recover only 18.60 percent of the write-offs during this period.

The total defaulted loans that include write-offs but do not include loans recovered through write-offs in three years is Rs 10.32 lakh crore, according to a back-of-the-envelope calculation.

Including write-offs, the total NPA ratio would have become 7.47 percent of advances as against 3.9 percent reported by the banks, the report said.

The RBI's RTI reply to the daily says that loan write-offs by banks increased to Rs 209,144 crore in the fiscal ended March 2023, against Rs 174,966 crore in March 2022 and Rs 202,781 crore in March 2021.

A RBI bulletin on April 21 said that the GNPAs of scheduled commercial banks (SCBs) fell to 4.5 percent in December 2022, from 6.5 percent a year ago.

What exactly is a loan write-off, and what happens when a loan is written off?

A loan write-off is when the bank no longer considers the loan to be an asset. To put it simply, it is the amount of loan that is written off by banks in order to reduce the level of non-performing assets (NPAs) on their books.

The defaulted loan, also known as NPA, is then transferred from the assets side and recorded as a loss.