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SBI Tops List of PSBs Writing-Off NPAs in FY21 Followed by UBI

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State Bank of India (SBI) topped the list of Public Sector Banks (PSB) writing off loans in FY21 followed by Union Bank of India (UBI).

Top 3 list of PSBs wrote off bad loans in FY21:

S.noPublic Sector BankWritten off value
1SBIRs 34,402 crore
2UBIRs 16,983 crore
3Punjab National Bank (PNB)Rs 15,877 crore

Note – As per the Reserve Bank of India (RBI) report, the reduction in NPAs through write-off by PSBs in FY21 stood at Rs 1,31,894 crore from Rs 1,75,877 crore in FY20. The NPAs of banks in FY21 declined by Rs 61,180 crore to Rs 8.34 lakh crore.

Reduction in NPAs through write-offs:

i.A loan write-off is a tool used by banks to clean up their bad loans/Non-Performing Assets (NPAs) from their balance-sheets.

ii.As per the RBI guidelines and policy approved by bank Boards, banks themselves remove the NPAs (after completion of 4 years) from their balance-sheet by way of a write-off.

ii.Even after written-off loans, the borrowers are liable for repayment (no waiver), hence the write-off does not benefit the borrower. It will benefit the banks by means of a clean balance-sheet, tax benefits and capital optimisation.

Iii. In case of merged banks, the written-off loans will be amalgamated with the lead bank (eg. Vijaya Bank and Dena Bank’s written-off loans were added with Bank of Baroda). Bank of Baroda wrote off Rs 14,782 crore in FY21.

iv.Recovery mechanisms: Banks would write-off accounts through various recovery mechanisms such as filing of a suit in civil courts or in Debts Recovery Tribunal, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, National Company Law Tribunal, and sale of NPAs.

Recent Related News:

RBI released the 23rd issue of its bi-annual Financial Stability Report (FSR) 2021. It estimated the Scheduled Commercial Banks (SCBs) Gross Non-Performing Assets (GNPAs) to rise by 9.8 percent in March 2022 (as per the baseline scenario), from 7.48 percent in March 2021.

About Non-Performing Assets (NPAs):

It is defined as a credit facility in which the interest and/or instalment of principal has remained ‘past due’ for a specified period of time. Those assets are defined as Non-performing as they do not generate income for the bank.

About State Bank of India (SBI):

Establishment – 1st July 1955
Chairman – Dinesh Kumar Khara
Headquarters – Mumbai, Maharashtra
Tagline – The Banker to Every Indian