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Banks break a sweat to recover written-off loans
August 07, 2023
Banks have stepped up efforts to recover written-off loans even as delays in the loan recovery process continues. At the same time, the share of wilful defaulters seems to be on the rise, say experts.
“In the last 3 years, banks recovery rate has been roughly 18-19%. This has been mostly on account of erosion of value of secured assets, interference from promoters, ineffective enforcement, and realisation of security,” says Siddharth Srivastava, partner, Khaitan & Co.
According to various reports, private and public sector banks combined wrote-off bad loans worth ₹2.1 trillion in 2022-23 (April-March), higher than ₹1.7 trillion in the previous year. But of the ₹5.9-trillion bad loans written off in the last three years, only ₹1.1 trillion have been recovered.
While most public sector banks give out the recovery amount from written-off, private sector banks do not give this numbers, specifically. Public sector banks have accounted for around 62% of write-offs in the last three years.
Srivastava added that the Insolvency and Bankruptcy Code (IBC) process has not yielded desired results on account of elongated insolvency resolution process and multiple litigation, and this has led to delay in successful resolution of stressed assets.
The push to recover written-off loans come at a time when the Finance Ministry has reportedly asked public sector banks to enhance recovery rate from these accounts to 40% from around 18.6% currently.
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