Lok Sabha Question No. 6489 (UNSTARRED), answered on 2018-04-06
Subject: Written Off Loans by PSBs
Ministry: FINANCE
Asked by: YERRAM VENKATA SUBBAREDDY

## GOVERNMENT  OF INDIA MINISTRY  OF FINANCE DEPARTMENT

OF FINANCIAL SERVICES

LOK SABHA

UNSTARRED  QUESTION  NO:

6489

TO BE ANSWERED  ON THE 6 th  APRIL,  2018/CHAITRA  16, 1940 (SAKA)

## QUESTION WRITTEN OFF LOANS BY PSBs

## 6489:   SHRI Y.V.  SUBBA  REDDY:

Will  the Minister  of FINANCE  be pleased to state:

- (a) whether  Public  Sector  Banks (PSBs) have written  off loans of Rs. 55356 crores  in the first  six months  of 2017-18;
- (b) if so, the details  thereof  and the reasons  therefor;
- (c) whether  looking  at the current  trend,  the write  off would  be to the tune  of Rs. 1 lakh crores in  2017-18 fiscal and if so, the details  thereof;  and
- (d) the corrective  measures  taken  by  the Government  in this  regard?

## ANSWER To be answered by THE MINISTER  OF STATE  IN THE  MINISTRY  OF FINANCE

## (SHRI SHIV PRATAP  SHUKLA)

(a) to (c): The Reserve  Bank of India (RBI) initiated  Asset Quality Review,  under which restructured  loans with  performance  issues and potentially weak  loans were  identified  for progressively  enhanced  provisioning  up to March 2017. As per data reported  by  Public Sector  Banks  (PSBs),  due  to  the  Asset  Quality Review   and  transparent   recognition   of restructured  loans as NPAs,  gross NPAs  of PSBs increased  by  over Rs. 4,54,000 crore between   March   2015  and  June 2017.  PSBs  accordingly   made  up-front   provision   for expected loss on such stressed loans,  of a total  amount  of Rs. 3,79,080 crore  between March 2014 and June 2017, which  was nearly  twice  the provision  of Rs. 1,96,937 crore made in  the  preceding   10  years.   As  per  RBI  guidelines   and  policy   approved   by   Bank Boards,  non-performing   loans,   including, inter-alia , those  in  respect  of  which   full provisioning  has been made on completion  of four years  are removed  from the balancesheet of the bank  concerned  by  way  of write-off.  Thus,  the amount  written  off during  the financial   year   2017-18  is  substantially  on  account   of  such  stressed  accounts   of  earlier years,  which  have been fully  provisioned  following  the Asset Quality  Review.

Writing-off  of non-performing  assets is a regular  exercise  conducted  by  banks  to clean  up their  balance  sheet,  and achieving  taxation  efficiency.  Writing  off of loans is done, interalia , for tax benefit  and capital  optimisation. Borrowers  of such written  off loans continue to  be  liable   for  repayment. Recovery   of  dues  takes   place  on  ongoing   basis under legal mechanisms,  which  include, inter-alia, the Securitization and Reconstruction  of Financial Assets and Enforcement  of Security  Interest  Act (SARFAESI  Act),  and Debts Recovery Tribunals  (DRTs).   Therefore,  write-off  does not benefit  borrowers.

(d):  A  number   of  steps  have  been  taken   to  reduce/contain   Non-Performing Assets (NPAs) of banks.  The Insolvency  and Bankruptcy Code,  2016 has been enacted  for timebound resolution  of stressed assets. Further,  the Banking  Regulation  Act,  1949 has been amended to provide  for authorisation by the Government  to RBI, for issuing  directions to  banks   to  initiate   the  insolvency   resolution   process  under  the  Code.   Under   the provisions   of  this   amending   legislation, RBI  has  issued  directions   to  certain   banks   for referring   12  accounts,   with   outstanding   amounts  greater  than  Rs. 5,000 crore  and with 60% or more classified  as non-performing  as of 31.3.2016,  to initiate  insolvency  process under the  Code.   In  accordance   with   these  directions,   banks   have  filed  applications   in respect of these accounts  before the National  Company  Law  Tribunal .Further,  keeping  in view   the  enactment   of  the  Code,   RBI  has  recently   issued  a  revised   framework for resolution   of  stressed  assets,  which   provides   for  time-bound   resolution   of  high-value stressed  accounts.   The  SARFAESI   Act  has  been  amended   to  make   it  more   effective. Further,  six new  DRTs  have been established  to expedite  recovery.  In addition,  under  the PSBs  Reforms   Agenda,   PSBs  have  committed, inter-alia, to  create  Stressed  Asset Management  verticals  for stringent  recovery  and ensure  clean and effective  post-sanction follow-up  for large  credit  exposures  through  specialised  monitoring agencies.

As per RBI data on global  operations  for PSBs, the aggregate written  off amount  in the first  half of the financial  year  2017-18 was Rs. 53,625 crore.  As per RBI data,  the loans written  off as percentage  of gross NPAs  (domestic  operations)  was 25.03% as of March 2011, which  has since declined  to 12.74% as of March  2017. The audited  figures  for the amount  for the full  financial  year  are not  finalised.