The RBI would like to see banks boost efforts to recover written-off loans as this will aid their profitability and financial well-being, said Deputy Governor Swaminathan J in the policy conference on Thursday.

”The very fact that this is covered in the FSR (Financial Stability Report) and was also covered in the Governor’s recent interactions with MD and CEO of banks, is that we would like the banks to redouble their efforts because these are accounts that are packed in a special account,” Swaminathan said.

”We would like to see more and more recoveries because they directly go into aiding the P&L of the banks and then contributes to their financial well-being,” he added.

However, these are NPA (non-performing assets) which are several years old and the realizable value has diminished over a period of time, he said, adding that the percentage of recovery has to be seen in the context of the age of NPA and availability or absence of security thereof.

“We have got to be guarded in terms of passing a judgment over that but what we are focussed on is that we would like the bank managements’ to have a board approved policy for write-off and also have a follow-up on this in terms of maximizing recovery,” he said, adding that the central bank is engaging with the banks on this.

The remarks come after the government, in response to an RTI, said that banks have written-off loans worth ₹14.56-lakh crore between FY15 and FY23, of which, nearly half were related to large industries and services. In comparison, total recoveries during the period were ₹2.05-lakh crore.

Net of recovery, written-off loans for PSU banks were at Rs 1.18 lakh crore in FY18, which declined to ₹0.91-lakh crore in FY22 and to ₹0.84-lakh crore in FY23. Net loans written-off loans by private sector banks stood at ₹73,803 crore in FY23.

Net write-offs accounted for 1.25 per cent of opening gross loans and advances in private sector banks and 2 per cent for PSU banks in FY18. For FY23, this number was 1.57 per cent for private banks and 1.12 per cent for PSU banks.

Banks wrote off NPAs worth over ₹2.09-lakh crore in FY23. In the last five years, total loan write-offs stood at ₹10.57-lakh crore, as per another RTI response from the central bank.

“The key fact that we have to be remembering in this is that the borrowers liability to repay are the banks right to recover is not diminished in any manner this is purely a balance sheet management,” Swaminathan said on Thursday.