New Delhi: Public sector banks (PSU banks) have written off non-performing assets (NPAs) worth Rs1.20 trillion, an amount that is nearly one-and-a-half times more than their total losses posted in 2017-18, according to official data. This is the first time in a decade that banks have made huge write-offs on bad loans while booking hefty losses.
A write-off means that the bank has made 100% provision from its earning against that account. This NPA is no longer part of the bank’s balance sheet.
Till 2016-17, 21 PSU banks made combined profit while in 2017-18, they posted a staggering loss of Rs 85,370 crore, according to official data. During 2016-17, PSU banks wrote off NPAs worth Rs 81,683 crore as against combined net profit of Rs 473.72 crore.
The country largest lender State Bank of India alone has written off bad loans of Rs40,196 crore, nearly 25% of the total write-offs during 2017-18. This was followed by Canara Bank (Rs 8,310 crore), Punjab National Bank (Rs 7,407 crore) and Bank of Baroda (Rs 4,948 crore).
According to data provided by rating agency ICRA Ltd, Indian Overseas Bank has written of NPAs worth Rs 10,307 crore, followed by Bank of India (Rs 9,093 crore), IDBI Bank (Rs 6,632 crore) and Allahabad Bank (Rs 3,648 crore). These banks, along with seven others, have come under prompt corrective action (PCA) framework of the Reserve Bank of India.
According to government data, PSU banks’ NPA write-offs stood at Rs 34,409 crore in 2013-14. The figure has jumped nearly four-fold in five years. In 2014-15, the banks wrote off Rs 49,018 crore; Rs 57,585 crore in 2015-16, Rs 81,683 crore in 2016-17 and hit a record high of Rs 1.20 trillion (provisional) in 2017-18.
The Indian banking sector is grappling with mounting NPAs and host of bank frauds.
Bank NPAs stood at Rs 8.31 trillion as of December 2017. Weak financials due to mounting bad loans have already put 11 PSU banks, out of 21, under the PCA framework of RBI. The recent tight prudential norms released by RBI on 12 February have added to the NPA woes.
Interim finance minister Piyush Goyal has announced setting up of a committee to give recommendations in two weeks on formation of an asset reconstruction company (ARC) for faster resolution of stressed accounts.
The committee under Sunil Mehta, non-executive chairman of Punjab National Bank, will make recommendations for the same.
Goyal said the committee will consider whether such an arrangement will be good for the banking system and, if any such suggestion is advisable, it will also consider the modalities by which such an ARC should be set up.
