Finance Ministry on Tuesday informed Rajya Sabha that scheduled commercial banks (SCBs) wrote off over ₹10.5-lakh crore in the five years ending March 31, 2023. The Ministry added that the top 10 wiful defaulters owe over ₹43,000 crore to the banks.

“SCBs have written-off an aggregate amount of ₹10,57,326 crore during the last five financial years,” Minister of State for Finance, Bhagwat Karad, said in written reply quoting the provisional data from RBI. As on date, the list of SCBs comprises of 12 public sector banks (PSB), 22 private banks, 12 small finance banks, four payment banks (which act as agents in loan business), 43 regional rural banks and 45 foreign banks.

As per RBI guidelines and policy approved by the bank’s Boards, NPAs (Non-Performing Assets), including those in respect of which full provisioning has been made on completion of four years, are removed from the balancesheets of the banks concerned by the way of write-offs. Banks evaluate the impact of write-offs as part of their regular exercise to clean up their balancesheet, avail tax benefit and optimise capital, in accordance with RBI guidelines, and policy approved by their Boards. Such write-off does not result in waiver of liabilities of borrowers to repay.

As borrowers of written-off loans continue to be liable for repayment and the process of recovery of dues continues, write-off does not benefit the borrower. Banks continue to pursue recovery actions initiated in written-off accounts through various recovery mechanisms available.

Meanwhile, responding to questions by BJP MP Sushil Kumar Modi, Karad informed that while the top 10 wiliful defaulters owe ₹43,525 crore, top 50 have a liability of ₹87,295. He also said that compromise settlement in respect of borrowers categorised as fraud or wilful defaulter is not a new thing and has been in practice for the last 15 years. Further, it is not a matter of right for the borrower but is a discretion to be exercised by lenders based on their commercial judgements.

“As per  RBI’s circular dated 8.6.2023, regulated entities may undertake compromise settlements or technical write-offs in respect of accounts classified as fraud or wilful defaulter without prejudice to the criminal proceeding underway against such borrowers, and all such proposals needs to be approved by the Board,” the Minister said.

As per inputs received from the RBI, the framework prescribes minimum cooling-off period of 12 months without prejudice to the penal measures. Such measures entail that no additional facilities should be granted by any bank/ financial institution to borrowers listed as wilful defaulters, and that such companies (including their entrepreneurs/promoters) get debarred from institutional finance for floating new ventures for a period of five years from the date of removal of their name from the list of wilful defaulters.