Public sector banks' non-performing assets declined by Rs 1,28,229 crore in FY18 due to write-offs, including compromise settlement. This is about 60 per cent higher vis-a-vis the year ago period.

The state-owned banks that saw substantial reduction in NPAs due to a jump in write-offs, including compromise settlement, in FY18 include IDBI Bank (Rs 12,515 crore against Rs 2,868 crore in FY17), State Bank of India (Rs 39,151 crore against Rs 20,339 crore), Corporation Bank (Rs 8,228 crore against Rs 3,574 crore), Canara Bank (Rs 8,310 crore against Rs 5,545 crore), Oriental Bank of Commerce (Rs 6,357 crore against Rs 2,308 crore) and Indian Overseas Bank (Rs 6,908 crore against Rs 3,066 crore), as per Finance Ministry data.

Other banks that reported NPA reduction via this route are: Union Bank of India (Rs 3,477 crore against Rs 1,264 crore), United Bank of India (Rs 1,867 crore against Rs 714 crore), Syndicate Bank (Rs 2,400 crore against Rs 1,271 crore) and Indian Bank (Rs 1,606 crore against Rs 437 crore).

According to a written reply to a question in the Rajya Sabha, Shiv Pratap Shukla, Minister of State for Finance, asset quality review carried out in 2015 for clean and fully provisioned bank balance-sheets revealed high incidence of non-performing assets (NPAs).

Expected losses on stressed loans

Expected losses on stressed loans, not provided for earlier under flexibility given to restructured loans, were reclassified as NPAs and provided for. PSBs initiated cleaning up by recognising NPAs and provided for expected losses.

Primarily as a result of AQR and subsequent transparent recognition, the gross NPAs of PSBs increased by Rs 6,16,586 crore between March 2015 and March 2018 (provisional data), as per the RBI data.

As per RBI guidelines and policy approved by bank boards, non-performing loans, including, inter-alia, 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 write-off.

Thus, the amount written off during recent financial years is substantially on account of such stressed loan accounts of earlier years, which have been transparently recognised following AQR and fully provisioned.

As per the Minister's reply: "Banks write-off NPAs as part of their regular exercise to clean up their balance-sheet, tax benefit and capital optimisation. Borrowers of such written-off loans continue to be liable for repayment.

"Recovery of dues takes place on an ongoing basis under legal mechanisms, which include, inter alia, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, and Debts Recovery Tribunals. Therefore, write-off does not benefit the borrower."

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