India’s 12 public sector banks (PSBs) have written off a staggering Rs12.08 lakh crore in bad loans between financial year (FY)15–16 and FY24–25, according to a statement tabled in the Rajya Sabha. The information was provided in a written reply by minister of state for finance Pankaj Chaudhary to a question raised by member of Parliament (MP) Ritabrata Banerjee, confirming a decade-long trend of large-scale loan write-offs across India’s largest State-run banks. The disclosure coincides with government data showing that over 1,600 wilful defaulters, owing a total of nearly Rs1.63 lakh crore, have been officially identified by PSBs as of 31 March 2025.
According to data furnished by the Reserve Bank of India (RBI) and annexed to the minister’s response, write-offs in the past five financial years alone cross Rs2.9 lakh crore. While the government was quick to clarify that these write-offs do not mean a waiver of borrower liability, the scale of bad loan resolution via accounting erasure raises serious questions about credit risk management, transparency in large lending and the sluggish pace of recoveries.
Bank-wise, the largest contributor to write-offs remains the State Bank of India (SBI), with over Rs1.14 lakh crore written off in the past five years alone, including Rs20,309 crore in FY24–25 (provisional). Other large state-run banks such as Punjab National Bank (Rs81,243 crore), Union Bank of India (Rs85,540 crore) and Bank of Baroda (Rs70,061 crore) also figure prominently in the list. Canara Bank stands out for rising write-offs, increasing from Rs8,422 crore in FY21–22 to Rs14,350 crore in FY24–25.
The finance ministry explained that such write-offs are carried out as per RBI guidelines which allow banks to remove non-performing assets (NPAs) from their balance sheets after full provisioning, typically, after four years of default. However, write-offs are not equivalent to forgiveness, Mr Chaudhary, the state minister, stressed, asserting that borrower obligations continue and recovery actions remain active.
The reply stated that PSBs continue to pursue recovery of written-off assets through multiple legal channels including civil courts, debt recovery tribunals (DRTs), the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, and proceedings under the Insolvency and Bankruptcy Code (IBC). Still, recovery rates for written-off loans remain low, and that write-offs often dilute public pressure to act decisively against chronic defaulters.
PSBs had come under sharp scrutiny in the past for writing off loans of major corporate defaulters even as small borrowers were subjected to stringent recovery measures. The finance ministry’s reply, while reiterating standard protocol, does not offer granular data on how much of the written-off amount has actually been recovered. This gap continues to be a sore point in debates around transparency and accountability in public sector lending.
The ongoing reliance on write-offs as a clean-up tool for PSBs also raises concerns about moral hazard, where habitual defaulters might assume eventual impunity. While write-offs help improve the banks' financial statements and meet regulatory norms, they also reduce the pressure on defaulting borrowers, particularly in cases involving well-connected entities.
The government has previously asserted that a healthy write-off mechanism is critical to freeing up capital and enabling fresh lending, especially under frameworks like the 4R strategy—recognition, resolution, recapitalisation and reform. Yet, when the cumulative amount written off crosses Rs12 lakh crore in under a decade, questions inevitably surface about the efficacy of the current credit appraisal and monitoring ecosystem in PSBs.
The scale of write-offs is further underscored by recent government data on wilful defaulters. In a separate response in the upper house to a question asked by MP Sagarika Ghose, the finance ministry revealed that, as of 31 March 2025, 1,629 unique borrowers—excluding overseas borrowers—were classified as wilful defaulters by PSBs, with an outstanding aggregate loan amount of Rs162,961 crore. These borrowers have been reported to all credit information companies (CICs) and their names are publicly accessible through the CIC websites, in accordance with RBI’s master direction on the treatment of wilful defaulters.
The government also highlighted several deterrent measures against wilful default. These include a five-year bar on access to new credit and capital markets, disqualification from restructuring of loans, and the possibility of criminal proceedings in eligible cases. In particularly serious instances, the Fugitive Economic Offenders Act, 2018 (FEOA) has been invoked. As per the ministry, nine individuals who fled the country have been declared fugitive economic offenders, with confiscated assets amounting to over Rs16,000 crore under both Prevention of Money Laundering Act (PMLA) and FEOA. In total, assets worth Rs25,806 crore have been restituted to victim banks in fraud cases.
These figures add a stark dimension to the Rs12 lakh crore written off by PSBs over the past decade, reinforcing concerns that recovery mechanisms remain insufficiently robust to deter repeat or large-scale defaults. While regulatory structures have evolved, the enforcement and execution of recovery remain a pressing concern for India’s public financial system.
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