Public sector banks (PSBs) could recover only Rs 1.61 lakh crore out of the Rs 10.42 lakh crore written off during the nine fiscal years from 2014-15 to 2022-23, data presented in parliament revealed.
This constitutes 15.45% of the total issue amount.
While the government maintains that a write-off does not equal a loan waiver, the actual recovery from written-off accounts is considerably low, especially considering the hair loss rate after settlements or legal battles.
RBI guidelines and bank board-approved policies dictate that Non-Performing Assets (NPAs), including those fully provided for after four years, are written off from the balance sheets of the concerned banks. The government emphasized that write-offs do not absolve borrowers of their repayment obligations. Recovery of deleted accounts involves various mechanisms, such as filing civil lawsuits, actions under financial laws, settlements, settlements and asset sales.
While individual borrowers were not named due to restrictions under the RBI Act, the government noted that Scheduled Commercial Banks collected Rs 5,309.80 crore as penalty charges in the financial year 2022-23, including penalties for late loan payments.
The measures
Banks have the flexibility to negotiate settlements, settlements, and sell non-performing assets, with the RBI’s framework for settlement settlements and technical breaches further facilitating such actions. Allowing willing defaulters to enter into settlement agreements helps provide lenders with multiple avenues to recover unpaid funds without undue delays, preventing asset impairment and facilitating ultimate recoveries.
In addition, state-owned banks implemented internal systems and processes more efficiently than before, contributing to the improved recovery efforts. Various factors, including increased pressure on promoters, an increased focus on pre-insolvency restructuring, and the growth of the private credit market, have collectively led to better recoveries.
With a revival in capital expenditures and the influx of foreign capital, banks are encouraged to recover loans to prepare for a new business credit cycle, especially due to the government’s emphasis on infrastructure development, which will require significant credit support from public sector institutions.