The Indian government revealed on Monday that Scheduled Commercial Banks (SCBs) have written off nearly ₹10.6 lakh crore in the last five years. Out of this, approximately 50% of the write-offs are attributed to large industrial houses. The information was presented by the Minister of State in the Finance Ministry, Bhagwat Karad, in a written response to the Lok Sabha.
Karad also disclosed that nearly 2,300 borrowers, each having loans amounting to ₹5 crore or more, have wilfully defaulted on approximately ₹2 lakh crore. This alarming statistic underscores the significant burden of non-performing assets (NPAs) on the banking system, particularly from high-value borrowers.
According to the Reserve Bank of India (RBI) guidelines, NPAs, including those for which full provisioning has been made after four years, are removed from the bank’s balance sheet through a process known as a write-off. However, Karad emphasized that these write-offs do not absolve the borrowers of their responsibility to repay the loans. “The process of recovery of dues from the borrower in written-off loan accounts continues, and the write-off does not benefit the borrower,” he clarified.
Banks continue to pursue recovery actions on written-off accounts using various mechanisms. These include filing civil suits, initiating actions in Debt Recovery Tribunals, taking steps under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), and filing cases under the Insolvency and Bankruptcy Code (IBC), 2016. Additionally, banks may negotiate settlements or compromise with borrowers, or sell non-performing assets (NPAs) to recover dues. The Minister made it clear that the government does not incur any expenditure on these corporate loan write-offs.
In response to another query, Karad mentioned that SCBs and All India Financial Institutions report credit information of all borrowers with aggregate exposure of ₹5 crore and above to the Central Repository of Information on Large Credits (CRILC). As of March 31, 2023, the CRILC database reported a total of 2,623 unique borrowers classified as wilful defaulters, with an aggregate outstanding of over ₹1.96 lakh crore owed to SCBs.
Karad also discussed the RBI’s Framework for Compromise Settlements and Technical Write-offs, introduced on June 8, 2023. This framework allows lenders to enter into compromise settlements with wilful defaulters without prejudice to ongoing criminal proceedings. The primary regulatory objective of this framework is to provide multiple avenues for lenders to recover defaulted amounts quickly. Karad noted that inordinate delays in recovery efforts not only result in the loss of time value but also lead to asset value deterioration, which hampers ultimate recoveries.
The government’s disclosures highlight the enormous scale of loan write-offs and wilful defaults, particularly by large industrial houses. While the write-off process is essential for cleaning up bank balance sheets, the government and banking sector must continue to strengthen recovery mechanisms to ensure that wilful defaulters are held accountable and that public funds are safeguarded.
