Indian Banks' Decade-Long Struggle with Bad Loans

Indian banks have written off a staggering Rs 16.35 lakh crore in non-performing assets (NPAs) over the past ten years, as revealed in a recent parliamentary session. The peak of this financial cleanup was in FY 2018-19, with Rs 2,36,265 crore written off, while the lowest was in FY 2014-15, at Rs 58,786 crore.

Understanding the Write-Off Mechanism

Finance Minister Nirmala Sitharaman clarified that these write-offs are in line with RBI guidelines and bank board policies, emphasizing that they do not absolve borrowers of their liabilities nor benefit them directly. Despite these measures, banks are actively pursuing recovery through various legal and financial mechanisms.

Current State and Future Measures

As of December 31, 2024, there are 29 unique borrower companies classified as NPAs, each with outstanding loans of Rs 1,000 crore or more, totaling Rs 61,027 crore. In response, banks are engaging in rigorous recovery efforts, including legal actions and the initiation of the corporate insolvency resolution process for significant defaults. Additionally, the establishment of the 8th Central Pay Commission (CPC) has been announced, with its financial implications to be assessed upon the acceptance of its recommendations by the government.