PSBs could not recover even Re 1 as against Rs 5 written-off during nine fiscal years starting 2014-15, data presented in the Lok Sabha on Monday showed.

“Public sector banks have written-off an aggregate loan amount of Rs 10.42 lakh crore and recovered an aggregate amount of Rs 1.61 lakh crore from written off loans, from the financial year 2014-15 to financial year 2022-23,” Minister of State in the Finance Ministry, Dr Bhagwat Karad, said in a written response, quoting Reserve Bank of India (RBI) data,

The recovered amount is 15.45 per cent of the total written-off amount during the said period. Though the government maintains that a write-off does not mean loan waiver, banking industry sources say considering the hair cut ratio after a compromise or long-drawn legal battle, actual recovery from written-off accounts is low and the latest data proves that.

According to RBI guidelines and the policy approved by bank boards, NPAs, including those in respect of which full provisioning has been made on completion of four years, are removed from the balance-sheet of the bank concerned by way of a write-off. Last week, in a written response to a similar question, Dr Karad had said: “Such write-offs do not result in waiver of liabilities of borrowers to repay.” Further, the process of recovery of dues from the borrower in written-off loan accounts continues, write-off does not benefit the borrower, Karad added.

Recovery from written-off accounts are initiated through various mechanisms, including filing of civil suits or in the Debts Recovery Tribunals, action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, filing of cases in the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016, through negotiated settlement/ compromise, and sale of non-performing assets. “Government does not spend any amount on write-offs of corporate loans,” he said.

The Minister did not name individual borrowers whose accounts have been written off citing the RBI Act. Quoting RBI, he said Scheduled Commercial Banks (SCBs) have collected an aggregate amount of Rs 5,309.80 crore as penal charges, including penalty charges against delay in payment of loans, during the financial year 2022- 23.

Banks can also negotiate settlements or compromise or even sell non-performing assets. Further, in line with the RBI’s Framework for Compromise Settlements and Technical Write-offs on June 8, 2023, compromise settlements are undertaken by lenders in respect of wilful defaulters without prejudice to criminal proceedings underway against such debtors, he said.

The Minister also clarified that the primary regulatory objective behind allowing wilful defaulters to enter into compromise settlement is to enable multiple avenues for lenders to recover money in default without delay. Apart from the time value loss, inordinate delays result in asset value deterioration, and hampers ultimate recoveries, he said.