Banks write off Rs 2.2L cr bad loans |
All scheduled commercial banks (SCBs) in India wrote off Rs 2,25,180 crore cumulatively in the five-year period ended March 2016, the Reserve Bank of India (RBI) said in an RTI reply filed by Times of India. SCBs represent all public sector banks, private sector banks, foreign banks, regional rural banks and some co-operative banks. These represent over 95% of the formal credit given out by all financial institutions in the country. This could be the highest ever write-off in a five-year period in absolute terms as are the total stressed assets in the banking system. Banks and the RBI have often stated that these write-offs are just technical in nature and an exercise to clean up the balance sheets. They have further argued that banks continue to retain the right to recovery from these written-off accounts. Writing off of non-performing assets (NPAs) is a regular exercise conducted by banks to clean up their balance sheets. It is primarily aimed at cleansing the balance sheet and achieving taxation efficiency. In `technically written off` accounts, loans are written off from the books at the head office, without foregoing the right to recovery. Further, write-offs are `generally` carried out against accumulated provisions made for such loans. Once recovered, the provisions made for those loans flow back into the profit and loss account of banks.
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