- Public sector banks (PSBs) in India have written off loans totaling Rs. 10.42 lakh crore between the financial years 2014-15 and 2022-23, according to data disclosed by the government.
- Over the same period, these banks managed to recover an aggregate amount of Rs. 1.61 lakh crore from the loans that were written off.
- Loan write-offs occur when banks determine that there’s little chance of recovering the borrowed amount from the borrowers, significantly affecting the bank’s profitability as they set aside 100 percent of the written-off loan as provisions.
- Banks in India employ various methods for loan recovery, including their internal mechanisms and the utilization of the Insolvency and Bankruptcy Code (IBC) to expedite and simplify bankruptcy proceedings.
- Despite the rise in the number of cases admitted under the Insolvency and Bankruptcy Code (IBC), a September 2023 report by rating agency CareEdge highlighted that loan recovery through insolvency courts remains low, with a downtrend in recovery observed on a year-on-year basis.