Indian Public Sector Banks Write Off Rs 6.15 Lakh Crore in Loans: Recovery Challenges and Financial Strategies

The peak of write-offs reached Rs 1.33 lakh crore during the financial year 2020-21.

New Delhi:

According to data provided by the Reserve Bank of India, public sector banks have written off loans totaling Rs 6.15 lakh crore over the past five financial years and the current fiscal year up to September 30, 2025.

Despite these substantial write-offs, the government has not injected capital into PSBs since the fiscal year 2022-23, citing their improved financial health and stronger capital positions.

The total amount written off reached its highest point at Rs 1.33 lakh crore for the financial year 2020-21, subsequently decreasing to Rs 1.16 lakh crore in 2021-22 before increasing again to Rs 1.27 lakh crore in 2022-23.

From these written-off loans, PSBs have managed to recover only Rs 1.65 lakh crore over the last five years, a fraction of the total amount written off.

In the absence of government capital support in recent years, PSBs have increasingly turned to the market to meet their capital requirements. Between April 2022 and September 2025, state-run banks raised Rs 1.79 lakh crore through equity and bond issuances. The government indicated that PSBs now rely on market financing and internal accruals as their profitability has improved.

State Finance Minister Pankaj Chaudhary explained that loan write-offs occur after banks make complete provisions for NPAs, typically after four years, in accordance with RBI guidelines and board-approved policies. He clarified that a write-off does not constitute a loan waiver, and borrowers remain obligated to repay their debts.

Banks continue their recovery efforts through various channels, including civil courts, Debts Recovery Tribunals (DRTs), actions under the SARFAESI Act, and insolvency proceedings before the National Company Law Tribunal (NCLT).

The government stated that recoveries from written-off accounts are recorded as income when realized. Since provisioning is already completed, write-offs do not result in fresh cash outflows, thus having no impact on banks' liquidity. Additional benefits of write-offs include cleaned balance sheets, tax advantages, optimized capital, and enhanced investor sentiment.