This points to a steady improvement in the financial status of public sector banks, which have largely cleared their books in recent years following the asset quality assessment initiated by the central bank in December 2015.
The net written-off loans from state banks involving major borrowers, each owing at least Rs 100 crore, have fallen sharply from Rs 1.17 trillion in FY20 to Rs 63,869 crore in FY21 and only Rs 18,537 crore in the first half of the year. current fiscal, the government has told parliament. This points to a steady improvement in the financial status of public sector banks, which have largely cleared their books in recent years following the asset quality assessment initiated by the central bank in December 2015.
In a written reply in the Rajya Sabha, Finance Minister Bhagwat Karad said that the recovery by PSBs, as a percentage of their gross bad loans at the beginning of the fiscal year, increased from 11.33% in FY18 to 13.52% in FY19 and 14.69% in FY20. However, it fell to 12.28% in FY21 as the pandemic took recovery action. However, this recovery affects all accounts, both small and large, he added.
Karad stressed that borrowers of the debited accounts remain liable for repayment. Banks continue to pursue remedial action against them through mechanisms such as DRT, SARFAESI Act and the Insolvency and Bankruptcy Code (IBC). They also resort to negotiated settlements or sale of NPAs to recover dues from debited accounts. Bankers say the amount recovered will be written back to their balance sheets.
According to the guidelines and policies of the Reserve Bank of India adopted by boards of lenders, non-performing assets older than four years require 100% provisions and banks usually write them off after that. Banks also voluntarily write off NPAs to clean up their balance sheets, enjoy tax benefits and optimize the use of capital.
This post Net amortized loans from public sector banks to large borrowers plummet was original published at “https://www.financialexpress.com/industry/banking-finance/public-sector-banks-net-written-off-loans-to-large-borrowers-plunge/2463247/”