Between FY15 and FY24, commercial banks in India wrote off a staggering Rs 12.3 lakh crore in loans, with public sector banks (PSBs) accounting for over half of this amount—Rs 6.5 lakh crore—during the last five years (FY20-24). This data was revealed by the government in response to queries in Parliament. The loan write-offs peaked in FY19, reaching Rs 2.4 lakh crore, which followed an asset quality review initiated in 2015. However, this number dropped to its lowest point in FY24 at Rs 1.7 lakh crore, representing just 1% of the total outstanding bank credit of Rs 165 lakh crore.
Public sector banks have consistently written off large sums of non-performing assets (NPAs), with State Bank of India (SBI), one of the largest public banks, writing off Rs 2 lakh crore during this period. Punjab National Bank (PNB) followed with Rs 94,702 crore in write-offs. As of the end of September 2024, PSBs had written off Rs 42,000 crore for the ongoing fiscal year alone, a sharp contrast to the total of Rs 6.5 lakh crore over the previous five years.
While these write-offs don’t absolve borrowers from their debt obligations, as they don’t result in a waiver of liabilities, PSBs continue to pursue recovery through various channels. These include legal actions such as filing cases in civil courts or debt recovery tribunals, utilizing the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, and leveraging the Insolvency and Bankruptcy Code for resolution.
Despite the substantial write-offs, public sector banks have reported record profits. In FY24, PSBs saw their highest-ever net profit of Rs 1.41 lakh crore, driven by better asset quality and a significant reduction in the gross NPA ratio to 3.12% as of September 2024. This trend highlights the resilience of the Indian banking sector despite challenges in managing non-performing loans.
