Recent loan write-off amounts exceeded the funds shortfall to replace old railway tracks and spending on three social sectors.
The compromise settlement mentioned in the Reserve Bank statement means that the outstanding balances of these wilful defaulters may be settled by mutual concession, with dues not being recovered completely. Far from strengthening the means to recover loans from wilful defaulters, the statement speaks of resettlement of the outstanding amount by means of “technical write-offs”.
This has been one of the key ways through which the non-performing assets of public and private sector banks have been shown to be declining in the last few years. It has emerged like a magic wand that makes the bad debt disappear from the balance sheets.
Write-offs by banks, both public and private, over the past 10 years have shown a phenomenal increase. Write-offs by public sector banks increased from Rs 7,187 crore in 2013 to Rs 119,713 crore in 2022. Among these public sector banks, the State Bank of India has in the last 10 years written off the highest total amount, at Rs 297,196 crores.
by Anirban Bhattacharya & Pranay Raj
26/06/2023