NEW DELHI: Indian banks have written off bad loans worth a staggering Rs16.35 lakh crore over the past decade, according to data presented in the Lok Sabha by Finance Minister Nirmala Sitharaman.
The disclosure, made in response to a query from MP Amra Ram, reignites the debate on bad loans or non-performing assets (NPAs) and the effectiveness of recovery mechanisms.
A breakdown of the data on bad loans reveals that large industries and services accounted for the bulk of these write-offs – Rs9.26 lakh crore – underscoring persistent stress in the corporate lending space.
Write-offs vs waivers: A key distinction
While the figures have sparked criticism, the government clarified that a write-off is not a waiver. A write-off means the bad loan is removed from a bank’s books after full provisioning, but the borrower remains liable.
Banks continue recovery efforts on bad loans through civil courts, Debt Recovery Tribunals (DRTs), and the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC).
When do write-offs happen?
RBI guidelines require banks to fully provision for bad loans within four years, but the actual timing of a write-off varies.
While banks are expected to set aside provisions gradually over this period, they may write off loans earlier or later, depending on recovery prospects and financial strategy.
Data presented in Parliament shows a gradual decline in annual write-offs since 2018-19:
The largest write-off occurred in FY19, reaching Rs2.36 lakh crore, including Rs1.48 lakh crore from large industries.
The lowest write-off in recent years was in FY24, at Rs1.70 lakh crore – the smallest since 2017-18.
As of December 31, 2024, 29 corporate borrowers had NPAs exceeding Rs1,000 crore each, collectively amounting to Rs61,027 crore. However, RBI does not maintain a company-wise list of written-off loans, and borrower-specific disclosures are restricted under Section 45E of the RBI Act, 1934.
The criticism and recovery Question
Opposition leaders have slammed the government, calling the massive write-offs a sign of poor governance and corporate favoritism. Critics argue that while banks claim to pursue recoveries, actual recoveries from written-off accounts remain minimal.
Experts warn that frequent large write-offs without effective recovery mechanisms could encourage financial indiscipline among borrowers. Strengthening corporate governance, due diligence in lending, and stricter accountability for defaulters is crucial to prevent a fresh wave of bad loans.
As the debate continues, the focus now shifts to whether the government’s recovery strategy will yield meaningful results or whether defaulters will continue to escape financial responsibility.
