Public sector banks have written off loans value Rs 6.1 lakh crore within the final 5 monetary years and the primary half of the present fiscal 12 months, the Union Ministry of Finance instructed Parliament on Tuesday.
Writing off a nasty mortgage permits a financial institution to maneuver a non-performing asset out of the property facet in its books and record it as a loss. This helps the financial institution scale back the variety of its non-performing property and lowers its tax burden, as the quantity written off just isn’t labeled as revenue.
The ministry stated that there was no capital infusion by the Union authorities into public sector banks for the reason that monetary 12 months 2022-’23. “Public sector banks have improved their monetary efficiency, turning worthwhile and strengthening their capital place,” it added.
The Union authorities stated that the general public sector banks now depend on market borrowing and inside accruals to satisfy their capital necessities. They have raised Rs 1.7 lakh crore by means of fairness and bonds since April 1, 2022, until September 30 this 12 months.
The data was shared in response to a query on whether or not the federal government plans to infuse capital into public sector banks, the quantity of dangerous loans written off by public sector banks and the influence of such write offs on the liquidity of the banks.
The finance ministry stated that the write offs don’t consequence within the waiver of liabilities of debtors to repay.
The restoration of written off loans is an ongoing course of and the banks have continued to pursue their restoration actions by means of a number of mechanisms, the ministry stated.
The actions embrace submitting circumstances in civil courts and debt restoration tribunals, initiating motion below the 2002 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, and approaching the National Company Law Tribunal below the 2016 Insolvency and Bankruptcy Code.
The authorities stated that since provisioning for dangerous loans had already been made, writing off loans didn’t contain any precise money outflow and due to this fact didn’t have an effect on the liquidity of the banks.
The provisioning of dangerous loans means the setting apart of funds, often from the financial institution’s income, to cowl anticipated losses from loans that debtors could default on.
It added that write offs are a part of a routine stability sheet clean-up train.
