FinMin wants PSBs to enhance recovery rate from written-off accounts to 40%

Worried over the low recovery rate from written-off accounts, the Finance Ministry has asked state-owned lenders to increase it to about 40 per cent, sources said.

Currently, the recovery rate from written-off accounts is less than 15 per cent. Public sector banks (PSBs) could recover only 14 per cent of the written-off loans worth Rs 7.34 lakh crore in the last five years ended March 2022.

Of Rs 7.34 lakh crore written-off loans, state-owned lenders recovered Rs 1.03 lakh crore. So after recovery, the net written-off stood at Rs 6.31 lakh crore at the end of March 2022.

It seems that after the write off banks get complacent about recovery from those non-performing assets (NPAs), the sources said, adding, this level of recovery is not acceptable.

Besides, they said, higher recovery from written-off accounts directly adds to their bottomline and improves their capital.

To review the situation on the issue, the sources said, the Department of Financial Services would soon hold a meeting with senior officials of PSBs.

The proposed meeting would take stock of pending cases with regard to such accounts in various courts, including Debt Recovery Tribunal and Debt Recovery Appellate Tribunal.

Banks have been directed to be more proactive with regard to big written-off accounts.

Banks have written off Rs 11.17 lakh crore as bad loans from their books in the last six years till the financial year 2021-22. As per RBI data, public sector banks (PSBs) and private sector banks wrote off an aggregate amount of Rs 8,16,421 crore and Rs 3,01,462 crore, respectively, during the last six financial years.

Non-performing assets (NPAs), including 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 the write-off.

Banks write off NPAs as part of their regular exercise to clean up their balance sheet, avail tax benefits and optimise capital. The write-off is carried out by the banks in accordance with the RBI guidelines and policies approved by their boards.