PSB Loan Write-Offs Cross ₹12 Lakh Cr in 10 Years, Recovery Actions Continue

Over the last ten financial years, public sector banks (PSBs) in India have written off bad loans totalling ₹12.08 lakh crore, as per data shared by the Ministry of Finance in the Rajya Sabha on July 22, 2025. The government clarified that these write-offs do not translate into waivers for borrowers—recovery proceedings remain active through established legal mechanisms.

According to the statement by the Minister of State for Finance, the write-offs were conducted under Reserve Bank of India (RBI) guidelines. Non-performing assets (NPAs) that are fully provisioned after four years are written off as part of standard accounting practice, while borrowers remain liable for repayment. Banks continue recovery through civil suits, Debt Recovery Tribunals (DRTs), SARFAESI Act, and the Insolvency and Bankruptcy Code (IBC).

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SBI, Union Bank, and PNB Lead in Write-Offs

In the last five years, the State Bank of India (SBI) reported the highest loan write-offs, totalling ₹1.14 lakh crore, followed by Union Bank of India at ₹85,540 crore and Punjab National Bank (PNB) at ₹81,243 crore. Other major banks, including Bank of Baroda, Canara Bank, and Bank of India, also recorded significant write-offs.

In FY25 alone, SBI wrote off ₹20,309 crore, while PNB and Union Bank followed with ₹12,159 crore and ₹11,634 crore, respectively. These actions reflect the long-term clean-up process undertaken by banks to streamline their balance sheets.

Declining NPA Ratios Signal Progress

Despite the large write-offs, the gross NPA ratio of PSBs has shown a steady decline—from 9.11% in March 2021 to just 2.58% by March 2025. The gross NPA value fell from ₹6.17 lakh crore to ₹2.84 lakh crore during the same period. This improvement is attributed to policy initiatives such as the RBI’s Asset Quality Review (AQR), the government’s 4R strategy (Recognition, Resolution, Recapitalisation, and Reforms), and the implementation of IBC.

The IBC has facilitated the recovery of ₹3.6 lakh crore from 3,171 distressed companies since 2016, outperforming the previous BIFR system, which resolved fewer cases over three decades.

Systemic Measures Strengthen Recovery Process

To improve recoveries, the government increased the DRT jurisdiction limit from ₹10 lakh to ₹20 lakh, allowing the tribunals to focus on higher-value cases. PSBs have also established dedicated NPA resolution branches, leveraged business correspondents, and adopted field-level strategies to pursue collections more effectively.

According to ministry officials, early detection mechanisms have lowered fresh NPAs to under 1% of standard advances, a major improvement from the post-AQR spike in 2018 when the NPA ratio surged following the detection of previously hidden bad loans.

Conclusion

The ₹12 lakh crore write-off by PSBs over the past decade reflects a major clean-up drive, not a relief for defaulters. Banks continue recovery efforts through structured legal frameworks. Supported by government reforms and better asset monitoring, India’s banking sector has made strong strides in reducing bad loan burdens, reinforcing financial discipline and resilience.