In 2018-19, the 42 scheduled commercial banks of the country jointly invested Rs. Right off loan of 2.12 trillion

Mumbai, Ta. 29 November 2019, Friday

According to data released by the Ministry of Finance, the Finance Ministry said that two scheduled commercial banks of the country had jointly terminated loans of Rs 1.8 trillion in the financial year. In the previous financial year, the number of right-off loans stood at Rs 1.8 trillion.

Banks generally offset non-performing assets, usually right off of their books, to clear their balance sheets. Doing so reduces liabilities and potential losses.

According to the Reserve Bank's guidelines, each of their NPAs, including the provision made by banks at the expiration of four years, has to be wiped right out of their book. Banks have right off of Rs 2.5 trillion bed loans in the current financial year from 2-3 years.

Despite the fact that there are three public sector banks in the country, the amount of defaulted bad loans has been steadily increasing. In the financial year 6-8, these banks offloaded a total of Rs 1.8 trillion of bad loans, which is about 5% of the total amount of scheduled commercial banks. This number is four times the number of right offs made in 1-2.

STBI, the country's largest public sector bank, has forced the Right Off of Rs 5 crore bad loans. The merger of five other banks has led to a higher SBI write-off, said a banker.

The rise in the NPAs of India's scheduled commercial banks has also seen an increase in the Right Offices. The number of all banks' book bad loans in the range of 5-7 stood at Rs 1.8 trillion in four years.

While most banks are now adopting the Insolvency and Bankership Code (IBC) approach to recover their bad loans, the increasing proportion of bad loans and right-of-office, suggests that banks will be forced to take huge haircuts. The recovery of bad loans under IBC is currently around 5%.