**Executive Summary**
This document is a response to Lok Sabha Unstarred Question No. 456 regarding the write-off of loans by public and private sector commercial banks. It provides information on the reasons for loan write-offs, government and RBI's measures to improve recovery mechanisms, the rationale behind write-offs by Public Sector Banks (PSBs), and steps taken to minimize future write-offs. The response references RBI guidelines (Resolution of Stressed Assets Directions 2025) and provides data up to September 2025.
**Key Points / Main Content**
* **Loan Write-Offs:**
* Write-off is an accounting procedure to cleanse balance sheets of bad debts considered unrecoverable or where recovery is likely to consume disproportionate resources.
* Write-offs do not waive borrower liabilities; recovery actions continue.
* Banks write-off NPAs, including those fully provisioned after four years, per RBI guidelines and bank board policies.
* Banks actively pursue recovery actions through various mechanisms (civil suits, Debt Recovery Tribunals, Securitization Act, etc.).
* **Measures to Enhance Recovery Mechanisms:**
* The Insolvency and Bankruptcy Code (IBC) changed the creditor-borrower relationship.
* The Securitisation Act and the Recovery of Debt and Bankruptcy Act have been amended.
* The Pecuniary jurisdiction of Debt Recovery Tribunal (DRTs) was increased from Rs. 10 lakhs to Rs. 20 lakhs.
* Public Sector Banks have set-up specialized stressed assets management verticals and branches for effective monitoring.
* RBI issued the Prudential Framework for resolution of stressed assets to provide a framework for early recognition, reporting and time bound resolution of stressed assets.
* **Public Sector Banks Write-Offs:**
* Public Sector Banks wrote off an aggregate loan amount of Rs. 35,096 crore, in the first half of financial year 2025 (provisional data).
* NPAs are a normal business corollary.
* Gross Non-Performing Assets have decreased from a high of 14.58% as on March 2018 to 2.30% as on September 2025.
* **Steps to Minimize Future Write-Offs:**
* RBI initiatives focus on resolving stressed assets and timely identifying stress.
* Banks' Boards are responsible for oversight to reduce NPAs.
* Credit matters are largely deregulated and governed by Board-approved loan policies.
* Banks implement credit risk management systems.
* Staff accountability exercises are conducted.
**Impact Analysis**
* **Commercial Banks:**
* **Impact:** Required to follow RBI's Resolution of Stressed Assets Directions 2025 for loan write-offs and recovery actions. Must implement robust credit risk management systems.
* **Action Required:** Adhere to RBI guidelines and their own board-approved policies on loan write-offs and recovery, ensuring continued pursuit of recovery actions.
* **RBI (Reserve Bank of India):**
* **Impact:** Responsible for setting guidelines and oversight of commercial banks.
* **Action Required:** Continue to monitor and refine policies to address stressed assets, recovery mechanisms, and regulatory compliance.
* **Borrowers:**
* **Impact:** Continue to be liable for repayment even after loan write-offs. Subject to continued recovery efforts by banks.
* **Action Required:** Engage with banks to address outstanding debts and explore resolution options.
* **Bank Staff (Officials):**
* **Impact:** Subject to accountability for non-compliance with procedures and due diligence.
* **Action Required:** Adhere to the laid down systems and procedures or misconduct or non-adherence to the due-diligence norms.
Key Entities Referenced
Reserve Bank of India (RBI): The central bank of India, playing a key role in regulating commercial banks and issuing guidelines on stressed asset resolution and write-offs.
Insolvency and Bankruptcy Code (IBC): A key law for insolvency resolution, fundamentally changing the creditor-borrower relationship.
Public Sector Banks (PSBs): Major players affected by write-off policies and required to set up stressed asset management units.
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: A law amended to improve the recovery of debts and bankruptcy.
Debt Recovery Tribunal (DRTs): Tribunals with increased pecuniary jurisdiction to handle high-value cases related to debt recovery.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF FINANCIAL SERVICES
LOK SABHA
UNSTARRED QUESTION NO- 456
ANSWERED ON MONDAY, FEBRUARY 02, 2026/MAGHA 13, 1947 (SAKA)
Write-Off of Loans
†456. SHRI BABU SINGH KUSHWAHA:
SHRI DEVESH SHAKYA:
SHRI NEERAJ MAURYA:
Will the Minister of FINANCE be pleased to state:-
(a) the reasons for the write-off of loans amounting to Rs. 12.3 lakh crore by public and private
sector commercial banks in the country, between Financial Year 2015 and Financial Year 2024;
(b) whether the Government has proposed specific reforms to enhance the effectiveness,
efficiency and timeliness of existing recovery mechanisms;
(c) if so, the details thereof;
(d) the rationale behind the high write-offs of Rs. 42,000 crore, by Public Sector Banks (PSBs)
in the first half of Financial Year 2025, despite improved/better profitability and a decline in
Gross Non-performing Assets (GNPAs); and
(e) the steps being taken by the Government to minimize write-offs in future and strengthen
credit appraisal processes and ensure accountability in loan approval and recovery?
ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a): As per the Reserve Bank of India (RBI) -Resolution of Stressed Assets Directions 2025,
issued for commercial banks, write-off (a major portion of which is due to
technical/prudential/advances under collection) is an accounting procedure undertaken by a
bank to cleanse the balance sheets of bad debts which are either considered unrecoverable or
whose recovery is likely to consume disproportionate resources of the lenders.
Banks write-off non-performing assets (NPAs), including, inter-alia, those in respect of which
full provisioning has been made on completion of four years, as per RBI guidelines and policy
approved by banks’ Boards. Such write-off does not result in waiver of liabilities of borrowers
and therefore, it does not benefit the borrower. The borrowers continue to be liable for
repayment and banks continue to pursue recovery actions initiated in these accounts.
Further, recovery in written-off loans is an ongoing process and banks continue pursuing their
recovery actions initiated against borrowers under the various recovery mechanism available to
them, such as filing of a suit in civil courts or in Debts Recovery Tribunals, action under the
Securitisation and Reconstruction of Financial Assets and Enforcement of Security InterestAct, filing of cases in the National Company Law Tribunal under the Insolvency and
Bankruptcy Code, etc.
(b) and (c): Comprehensive measures have been taken by the Government and RBI to enhance
the effectiveness, efficiency and timeliness of existing recovery mechanisms which include, inter
alia, the following:
(i) Change in credit culture has been effected, with the Insolvency and Bankruptcy Code
(IBC) fundamentally changing the creditor-borrower relationship, taking away control of
the defaulting company from promoters/owners, and debarring wilful defaulters from
the resolution process. To make the process more stringent, personal guarantor to
corporate debtor has also been brought under the ambit of IBC.
(ii) The Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 and the Recovery of Debt and Bankruptcy Act have been amended to
make it more effective.
(iii) Pecuniary jurisdiction of Debt Recovery Tribunal (DRTs) was increased from Rs. 10
lakhs to Rs. 20 lakhs to enable the DRTs to focus on high value cases resulting in higher
recovery for the banks and financial institutions.
(iv) Public Sector Banks have set-up specialized stressed assets management verticals and
branches for effective monitoring and focused follow-up of NPA accounts, which
facilitates quicker and improved resolution/ recoveries. Deployment of Business
correspondents and adoption of Feet-on-street model have also boosted the recovery
trajectory of NPAs in banks.
(v) Prudential Framework for resolution of stressed assets was issued by RBI to provide a
framework for early recognition, reporting and time bound resolution of stressed assets,
with a build-in incentive to lenders for early adoption of a resolution plan.
(d): As per RBI data, public sector banks have written-off an aggregate loan amount of Rs.
35,096 crore, in the first half of financial year 2025 (provisional data). The occurrence of NPAs
is a normal albeit undesirable corollary to the business of banking which may be attributed to a
confluence of factors, including prevailing macroeconomic conditions, sectoral issues, global
business environment, delayed recognition of stress by the banks, aggressive lending during
upturns, improper risk pricing and poor credit underwriting, lack of specialized skills in project
appraisals, time and cost overruns in project implementation, etc. The Gross Non-Performing
Assets as a percentage of Gross Advances have decreased from a high of 14.58% as on March
2018 to 2.30% as on September 2025.
(e): Reserve Bank has taken several initiatives aimed at resolution of long-standing stressed
assets as well as for timely identification and rectification of stress, with the banks’ Boards
entrusted with the responsibility of ensuring effective oversight so as to reduce NPAs and write
offs in future. Credit related matters, including the due diligence requirements of regulated
entities (REs) are largely deregulated and the same are governed by the Board approved loan
policies of the lenders framed under the ambit of relevant regulatory and statutory
requirements. The regulatory provisions are broadly aimed at ensuring that the banks put in
place robust credit risk management systems and processes to address potential risks at various
stages, including pre-sanction appraisal and due diligence, post-sanction monitoring and sector
concentration.
Further, as per banks’ Board-approved staff accountability policy, staff accountability exercise is
conducted and action is taken against the erring officials, who are responsible for the lapses of
non-compliance with the laid down systems and procedures or misconduct or non-adherence
to the due-diligence norms.
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