Banks wrote off over ₹16 lakh crore in loans since 2014

New Delhi: Indian banks have written off more than ₹16 lakh crore worth of bad loans since the financial year 2014-15, according to data placed before Parliament, underlining the scale of the banking sector’s clean-up over the past decade even as questions persist over recoveries and accountability.

The write-offs, spread across public and private sector banks, were carried out after loans had turned non-performing and were fully provided for in line with Reserve Bank of India norms. Public sector banks accounted for the bulk of these write-offs, reflecting their dominant share in corporate lending during the years when stressed assets ballooned.

The numbers are politically contentious but often misunderstood. A loan write-off does not amount to a waiver. It is an accounting exercise that removes fully provisioned bad loans from a bank’s balance sheet, while recovery efforts through insolvency proceedings, debt recovery tribunals, SARFAESI and other legal mechanisms continue.

The surge in write-offs coincided with the RBI’s Asset Quality Review launched in 2015, which forced banks to recognise stressed loans that had remained hidden under repeated restructuring. As legacy bad loans surfaced, banks made higher provisions and subsequently wrote off many of these accounts after exhausting prescribed timelines.

The clean-up has helped transform the banking sector. Gross non-performing assets have fallen sharply from their peak, public sector banks have returned to sustained profitability and capital adequacy has improved significantly. Supporters argue that recognising losses honestly was essential to restoring confidence in the financial system.

Yet the sheer magnitude of the write-offs continues to raise questions over lending standards, governance and post-disbursement monitoring. Critics argue that while banks have become healthier, the focus should now shift to recoveries, accountability for large loan defaults and measures to prevent a repeat of the credit excesses that created the bad-loan crisis.

The government has repeatedly maintained in Parliament that written-off loans remain recoverable and that banks continue to pursue borrowers even after the accounting exercise. Recoveries from written-off accounts, however, have been only a fraction of the total amount written off, keeping the debate alive over the efficiency of India’s loan recovery framework.

For India’s banking system, the story of the past decade is not merely about writing off bad loans. It is about whether the lessons from the country’s worst banking crisis have truly changed the way credit is appraised, monitored and recovered.