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State run banks likely to launch special drive to recover written-off loans
May 02, 2023
After being prodded by the Centre to expedite proceedings against defaulting borrowers, state-run banks are likely to launch a special drive to recover written-off loans, Economic Times reported.
The government has instructed public sector banks (PSBs) to focus on written-off loans and try to recover at least ₹2 trillion in this fiscal year, a senior official told ET.
In the six years leading up to 2021-22, PSBs wrote off bad loans worth ₹8.16 trillion from their books. In the first nine months of 2022-23, PSBs wrote off ₹90,958 crore of bad loans, RBI’s latest data said.
The official further said that after consulting with their respective boards, the banks will determine their individual targets. We have only asked them to focus on this area, he added.
Another senior bank executive stated that while lenders would step up their efforts, some of these cases have been stalled in recovery tribunals and courts for a long time.
Banks only write off loans when recovery appears unlikely to occur soon. A write-off then frees up capital for the bank, allowing it to continue with the recovery process, he added.
Loan write-offs help to clean up and update balance sheets, but the borrower is still obligated to repay the loan. A loan write-off can also be deducted from income, allowing lenders to save tax.
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