India’s banking system has written off nearly ₹8.90 lakh crore in non-performing assets (NPAs) over the past five financial years and the current year up to September 2025, marking one of the largest balance-sheet clean-ups undertaken by the sector. Further, public sector banks (PSBs) have written off an aggregate loan amount of ₹615,647 crore during the past five financial years and the current financial year up to 30 September 2025. In a written reply to the Lok Sabha, the government says the extensive write-offs, spread across PSBs and private sector banks (PVBs), have not impacted liquidity as provisioning had already been made earlier and recovery efforts from these accounts continue through various legal and resolution channels.
According to
data shared by minister of state for finance Pankaj Chaudhary, PSBs accounted for the bulk of the clean-up, writing off ₹580.550 crore between FY20-21 and FY25-26 (till 30 September 2025). Private banks wrote off ₹309,042 crore during the same period. The government clarified that write-offs do not amount to a waiver of borrower liability and that banks remain fully empowered to pursue recovery through civil courts, debt recovery tribunals (DRTs), the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, and the Insolvency and Bankruptcy Code (IBC).
Members of Parliament (MPs) Mohammed Abu Taher Khan and have asked two separate questions on bad loans written off by banks and NPAs in the banking system, respectively.
Responding to the question on
bad loans written off by PSBs, the minister says, as per RBI data, PSBs have written off an aggregate loan amount of ₹615,647 crore during the past five financial years and the current financial year till 30 September 2025, based on provisional data.
In his written replies, Mr Chaudhary says, despite the large volumes written off, overall asset quality has improved markedly across the banking system. RBI (Reserve Bank of India) data presented to the lower house showed gross NPAs of PSBs falling from ₹616,000 crore in March 2021 to ₹283,000 crore in March 2025, while private banks saw their gross NPAs decline from ₹202,000 crore to ₹132,000 crore during the same period. Sector-wise data from domestic operations revealed a similar downward trend across agriculture, industry, services and retail loans, indicating sustained improvement in credit risk management.
The government emphasised that write-offs are carried out only after full provisioning and approval by bank boards, ensuring no adverse impact on liquidity. Banks use write-offs as part of periodic balance-sheet cleansing exercises to optimise capital, improve tax efficiency, enhance lending capacity and strengthen investor confidence. As provisioning is already completed before accounts are written off, the exercise does not result in any cash outflow.
The data also highlighted the recovery efforts underway across various forums. Scheduled commercial banks (SCBs) referred between 28,000 and 56,000 cases annually to DRTs over the last five years, involving amounts as high as ₹402,000 crore, with recoveries ranging between ₹8,113 crore and ₹39,777 crore. Under the IBC, 1,300 cases that yielded resolution plans took an average of 603 days, while cases ending in liquidation took an average of 518 days, with delays primarily attributed to litigation.
Mr Chaudhary says PSBs have significantly strengthened their financial position and profitability, eliminating the need for government capital infusion since FY22-23. Instead, PSBs have raised ₹179,000 crore through market borrowings and internal resources between April 2022 and September 2025. The transition to market-based funding reflects both stronger balance sheets and improved investor sentiment, he added.
To prevent future NPAs, the government and RBI have implemented extensive reforms, including automated early warning systems (EWS) with around 80 triggers, strengthened credit appraisal and monitoring norms, amendments to SARFAESI and DRT laws, and the behavioural shift brought about by the IBC’s 'creditor in control' framework. The reply noted that more than 30,000 default cases involving ₹1,378,000 crore were settled at the pre-admission stage in IBC courts by March 2025, underscoring the deterrent effect of insolvency proceedings.
The government says it continues to work with RBI to strengthen recovery mechanisms through legal amendments, supervisory oversight and streamlined resolution processes. Several amendments aimed at speeding up IBC timelines are under legislative consideration.
Mr Chaudhary told Parliament that recoveries from written-off accounts will remain an ongoing effort, as banks leverage all available mechanisms to prevent value erosion and further improve asset quality.
