India’s public-sector banks have written off more than ₹6.15 lakh crore in bad loans over the past five and a half years, according to new data presented in Parliament. The government maintains the write-offs do not erase borrowers’ liabilities, even as the scale of losses renews questions about banking sector reforms and recovery mechanisms.
New disclosures before Parliament have revealed a sweeping volume of non-performing assets (NPAs) erased from the books of public-sector banks (PSBs). Minister of State for Finance Pankaj Chaudhary told that PSBs wrote off an aggregate of ₹6,15,647 crore between FY 2020 and September 2025. The figure underscores the persistence of stressed assets despite successive rounds of banking sector clean-up, regulatory tightening and capital reforms.
Government officials emphasized that loan write-offs reflect accounting treatment rather than forgiveness. “Such write-off does not result in waiver of liabilities of borrowers to repay,” the minister clarified, noting that recovery efforts continue even after loans exit the balance sheet.
Capital Strengthening Without Government Infusion
In a notable shift from earlier years marked by repeated recapitalization packages, the government confirmed that no capital infusion has been made in PSBs since FY 2022–23. Officials say the banking system has shown a measurable turnaround, allowing PSBs to rely on internal accruals and market instruments to shore up reserves.
Public banks collectively raised ₹1.79 lakh crore through market borrowings and equity issuances between April 2022 and September 2025—a signal, the government argues, of improving financial resilience.
Yet analysts point out that the decline in government support places greater pressure on banks to maintain asset quality and repayment discipline at a time when legacy bad loans are still working their way through recovery pipelines.
Write-Offs as a Tool But Not an Escape for Borrowers
Under Reserve Bank of India (RBI) norms, banks may write off loans after full provisioning, typically at the end of a four-year cycle. Write-offs help clean balance sheets, reduce tax burdens and create space for new lending, but they do not absolve borrowers or halt legal action.
Officials noted that banks are continuing recovery efforts—pursuing civil suits, approaching Debt Recovery Tribunals (DRTs), invoking the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, and filing cases before the National Company Law Tribunal (NCLT). The government described recovery as “an ongoing process,” though the pace and success rate of such recoveries remain a matter of public scrutiny.
Policy experts warn that even though provisioning cushions the immediate financial impact, write-offs of this scale reshape the lending landscape, affect investor sentiment, and test the long-term stability of the public banking system.
Liquidity Intact, But Confidence in Question
The Finance Ministry reiterated that since provisioning has already been made, the write-offs do not directly impact bank liquidity. The removal of NPAs from balance sheets, it argued, allows banks to recalibrate capital, improve financial ratios and mobilize fresh credit.
But independent analysts say the issue is not liquidity alone—it is accountability. The repeated cycle of accumulating bad loans, then writing them off after provisioning, raises structural concerns: credit appraisal weaknesses, connected lending risks, and protracted delays in legal recovery.
The government’s stance suggests confidence in ongoing reforms and recovery channels. Yet for many observers, the scale of the numbers ₹6.15 lakh crore written off, and recoveries still uncertain—remains emblematic of a banking system still working to shake off the legacy of years of stressed lending.
