Public sector banks have written off a staggering Rs 6.15 lakh crore in loans over the past five and a half years. This information was shared with Parliament by the Minister of State for Finance. The data, provisional until September 30, 2025, comes directly from the Reserve Bank of India.
Minister Pankaj Chaudhary provided this detail in a written reply to the Lok Sabha. He clarified that these write-offs follow strict RBI guidelines and bank board policies. The process specifically targets non-performing assets where full provisioning has already been completed after four years.
It is crucial to understand that writing off a loan does not forgive the borrower’s obligation. The liability to repay the debt remains firmly in place. Banks continue to pursue recovery through all available legal channels.
This recovery is an ongoing and active process. Financial institutions employ multiple mechanisms to reclaim these funds. They file suits in civil courts and Debts Recovery Tribunals.
They also take action under the SARFAESI Act of 2002. Another key route is filing cases with the National Company Law Tribunal under the Insolvency and Bankruptcy Code. These efforts persist despite the accounting write-off.
The minister emphasized a critical financial point. Since provisioning for these bad loans was done earlier, the write-off itself involves no cash outflow. Consequently, the banks’ liquidity positions remain completely unaffected.
For the banks, this exercise serves several strategic purposes. It helps clean up their balance sheets and allows them to avail of tax benefits. Furthermore, it optimizes their capital base and enhances overall lending capacity.
Strengthening investor sentiment is another significant outcome. This financial cleanup coincides with improved performance from public sector banks. They have turned profitable and strengthened their capital positions significantly.
Notably, the government has not infused capital into PSBs since the 2022-23 financial year. Instead, banks now rely on market sources and their own internal accruals. They have raised a substantial Rs 1.79 lakh crore from the market through equity and bonds since April 2022.
In a related reply, the minister addressed export finance. Banks and financial institutions remain the primary source for export credit in India. Public Sector Banks, along with SIDBI and Exim Bank, disbursed Rs 21.71 lakh crore in export credit over the last five fiscal years.
The session also revealed concerning data on financial fraud. A total of 583,291 fraud cases were registered in the last four and a half years. The amount involved in these cases reached Rs 3,588.22 crore.
Of this massive sum, only Rs 238.83 crore has been recovered so far. The minister linked the rise in such incidents to the growth of digital payments. As digital transactions increase, so too do cyber frauds and digital payment frauds.
This complex financial landscape shows banks managing legacy bad debts while navigating new-age risks. The massive write-off figure underscores the scale of past non-performing assets. Yet, the improved profitability suggests a sector in the midst of a careful turnaround.
The shift to market-based capital raising marks a new chapter for public sector banks. Their financial health appears to be on a mend, even as they grapple with recovery and modern fraud challenges.