Corporate Bonanza: Trend of Writing off Bad Loans Continues
Image for representational use only.Image Courtesy : NDTV
Loans written off by a set of 19 public sector banks in the third quarter of the financial year 2018-19 rose 34 per cent year-on-year (y-o-y) to nearly Rs 41,000 crore, it has been reported. While this would help banks to avail tax benefits and clean up their balance sheets, but the exercise is failing in addressing the deplorable situation of the bank’s soured loans, as the write-offs by the banks and their Non Performing Assets (NPAs) have been increasing significantly in the last five years, reveals data collated from several reliable sources.
As per The Financial Express, Vijaya Bank saw the steepest increase in the write-offs (243 times y-o-y) to Rs 487 crore in the December quarter, followed by IDBI Bank, which saw a 4,783 per cent y-o-y rise in write-offs to Rs 562 crore in Q3FY19. Quoting sources, The Financial Express reported that State Bank of India (SBI) wrote off loans worth around Rs 10,000 crore during Q3, up 7 per cent from Rs 9,312 crore a year ago.
According to ICRA rating agency, during the financial year 2017-18, the write-offs amounted to more than Rs 1.44 lakh crore, and to more than Rs 3.57 lakh crore, over the last four financial years.
As per the data from Finance Ministry, PSBs have written off Rs.1,12,089 crore of debt during financial years 2015 and 2016. Whereas, the Gross Non Performing Assets (NPAs) of PSBs were Rs.4.7 lakh crore at the end of March 2016. Of this, the Gross NPAs towards Corporate Lending for PSBs was Rs.3.36 lakh crore.
The Reserve Bank of India (RBI), in July 2015, had mandated banks to disclose their write-offs. While write-offs are essentially aimed at reduction in overall NPAs, it has not been the case despite the amount written off by banks has been on rise.
Consider these figures from RBI, the Gross NPAs of PSBs increased from Rs. 2.16 lakh crore (at the end of March 2014) to Rs. 8.25 lakh crore (September 2018). Similarly, the Gross NPAs of Scheduled Commercial Banks (SCBs) have also been on significant rise. As per the Finance Ministry, the Gross NPAs of the country’s SCBs rose from Rs 3.2 lakh crore (March 2015) to Rs 10.09 lakh crore at the end of 2018. In simple words, NPAs are continuing to rise and now are on all-time high, suggesting the BJP regimes failure in tackling the crisis.
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