NPA Crisis

‘SBI wrote off bad loans worth more than Rs. 20,000 crore last fiscal’


Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Writing off bad loans is a part of NPA crisis.


Bad Loans: Wrote off

  1. The SBI wrote off bad loans worth Rs. 20,339 crore in 2016-17, the highest among all public sector banks
  2. The data pertains to the period when the associate banks of State Bank of India (SBI) were not merged with it

Data on ‘writing off’ by other banks

  1. All PSBs had a collective write-off of Rs. 81,683 crore for the fiscal 2016-17
  2. Public sector banks’ (PSBs) write-offs stood at Rs. 27,231 crore in 2012-13, government data showed

The ‘writing off’ figures has jumped almost threefold in five years

  1. In 2013-14, state-owned banks wrote off bad loans worth Rs. 34,409 crore; Rs. 49,018 crore in 2014-15; Rs. 57,585 crore in 2015-16, hitting Rs. 81,683 in the fiscal ended March 2017
  2. In the current financial year, PSBs have written off loans worth Rs. 53,625 crore in the six months to September


What is writing off bad loans?

  1. Banks prefer to never have to write off bad debt since their loan portfolios are their primary assets and source of future revenue
  2. However, toxic loans—loans that cannot be collected or are unreasonably difficult to collect—reflect very poorly on a bank’s financial statements and can divert resources from more productive activity
  3. Banks use write-offs, which are sometimes called “charge-offs,” to remove loans from their balance sheets and reduce their overall tax liability

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