Public sector lenders write off more bad loans than recovery

Public-sector banks are writing off more bad loans than they recover despite repeated warnings from the finance ministry.

These banks wrote off Rs 19,505 crore non-performing assets in the third quarter of 2013-14. The cash they recovered over the quarter was Rs 18,933 crore. Another Rs 21,988 crore were reclassified as not being bad any more, bringing down the sticky loan portfolio of these banks by Rs 60,426 crore.

The state-owned banks had Rs 1,64,461 crore of non-performing assets on their books on April 1, 2013, which grew by Rs 1,24,147 crore in nine months to Rs 2,28,181 crore on December 31, 2013.

A loan is written off after making a full provision from a bank's profits. But this helps banks to show lower sticky loans. Despite the reductions, gross non-performing assets of public sector banks rose to 5.17 per cent of advances at the end of December 2013 from 4.18 per cent a year ago as the economic slowdown continued.

The State Bank of India's loan write-off at Rs 7,478 crore was 142 per cent of the Rs 5,250 crore cash it recovered in the December quarter. IDBI Bank wrote off 117 per cent of recoveries, Oriental Bank of Commerce 115 per cent, UCO Bank 110 per cent and State Bank of Mysore 108 per cent.

"When the economy is going through a downturn it is not possible to recover most of the non-performing assets. Whenever there is a concern about asset quality, write-offs will be more," said an executive with the State Bank of India.

  Finance ministry data shows public sector banks recovered only 23 per cent of their bad loans in 2012-13 through debt recovery tribunals, Lok Adalats and the Securitisation and Recons-truction of Financial Assets and Enforcement of Security Interest Act. Of the Rs 86,306 crore filed for recovery, only Rs 19,963 crore were recovered.

The share of bad loans recovered has fallen from 37 per cent in 2009-10, to 31 per cent in 2010-11, and to 25 per cent in 2011-12.

Parliament's Standing Committee on Finance, headed by the Opposition Bharatiya Janata Party's leader Yashwant Sinha, has asked the government and the Reserve Bank of India to set up a cell to review loan write-offs, reclassification and restructuring. The committee questioned the finance ministry's claim that steps taken by the government and central bank had improved loan recovery by state-owned banks. The failure of public-sector banks to curb bad lending was affecting their ability to expand credit delivery, the committee added.