In the past year, India has seen cases of loan recovery agents using intimidation against common borrowers and even an incident where a woman was runover by a tractor. But at the same time, bad loans unlikely to be repaid are written off by banks as a regular practice to clean up their account books. According to the Finance Minister, Indian banks have written off bad loans worth Rs 10 lakh in the past five years alone.
Biting the bullet to keep books in order
This assertion comes months after rating agency Crisil predicted that non-performing assets at Indian banks could fall to 4 per cent by 2024. The minister told the Rajya Sabha that provisions had been made for the bad loans at the end of four years. This means that the banks have used their capital to absorb the impact of the NPAs.
Will continue to go after defaulters
Banks write off bad loans to make the most of their capital and also for tax benefits, but the Finance Minister added that the exercise won’t benefit borrowers. She said that the defaulters are still liable for repayment of loans, and banks will continue to file suits in civil courts, among other measures to recover the dues. The lenders will also approach debt recovery tribunals under the insolvency and bankruptcy code, to make defaulting corporations pay up.
Recoveries less than writeoffs
At the same time, of the more than Rs 6 lakh crore recovered in the past five years, only a little over Rs 1 lakh crore came from written off accounts. Staff accountability in case of NPAs has also been initiated against more than 3000 banks in the same period of time. Earlier this year, it was revealed that banks had recovered more than Rs 8 lakh crore worth of bad loans in the past eight fiscal years, thanks to assistance from RBI and the government.
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