Public Sector Banks Write Off Loans Worth ₹6.15 Lakh Crore Over 5 Years

Public sector banks (PSBs) in India have written off loans amounting to ₹6.15 lakh crore over the past 5 financial years, as per data from the Reserve Bank of India. Despite the significant write-offs, borrowers remain responsible for repaying their dues. 

Loan Write-Offs and Financial Performance 

The cumulative loan write-offs by PSBs peaked at ₹1.33 lakh crore in the financial year 2020-21. This figure decreased to ₹1.16 lakh crore in 2021-22 but rose again to ₹1.27 lakh crore in 2022-23.  

Despite these substantial write-offs, the government has not infused capital into PSBs since FY 2022-23, citing improved financial performance and stronger capital positions. 

Recovery Efforts and Capital Mobilisation 

PSBs have managed to recover only ₹1.65 lakh crore from the written-off loans over the last 5 years. With no recent capital support from the government, these banks have increasingly turned to market sources for capital.  

Between April 2022 and September 2025, PSBs raised ₹1.79 lakh crore through equity and bond issuances, relying on market financing and internal accruals due to enhanced profitability. 

Read More: These Public Sector Banks Have Cut Interest Rate on Loans: Check Name of Your Bank Here! 

Understanding Loan Write-Offs 

According to State Finance Minister Pankaj Chaudhary, loan write-offs occur after banks make full provisioning for non-performing assets (NPAs), typically after 4 years, in accordance with RBI norms and board-approved policies. A write-off does not equate to a loan waiver, and borrowers are still liable to repay their dues. 

Recovery Mechanisms and Benefits of Write-Offs 

Banks continue recovery efforts through various mechanisms, including civil courts, Debts Recovery Tribunals (DRTs), actions under the SARFAESI Act, and insolvency proceedings before the National Company Law Tribunal (NCLT). Recoveries from written-off accounts are recorded as income when realised.  

The government has stated that write-offs do not impact banks' liquidity, as provisioning is already done, and there is no fresh cash outflow. Other benefits of write-offs include cleaning balance sheets, availing tax benefits, optimising capital, and improving investor sentiments. 

Conclusion 

Public sector banks in India have written off a significant amount in loans over the past 5 years, yet borrowers remain liable for repayment. The lack of recent government capital infusion has led PSBs to seek market financing, while recovery efforts continue through various legal and financial mechanisms. 

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