Write-offs at PSBS grow at faster clip than loan growth

MUMBAI:LOAN write-offs at public sector banks (PSBS) grew at a faster clip than outstanding loans in the June quarter on account of low credit demand, selective lending to corporates and the focus on recoveries, data compiled by Mint shows.

A group of 16 large- and midsized PSBS has written off more than ₹31,000 crore in the June quarter of FY19—A 37% increase over a year ago. The same set of banks saw a 4.5% growth in loan books in that period, albeit from a higher base, while gross advances at the end of the quarter stood at ₹53 trillion.

While 14 of these banks saw a rise in loan write-offs, 10 have seen an increase in their volume of advances. For instance, Punjab National Bank’s (PNB) write-offs rose 70% year-onyear (y-o-y), while its loan growth rose 7% y-o-y in the same period; Bank of Baroda’s (Bob’s) write-offs increased a massive 63 times while its loan growth was 9%, and Central Bank of India’s write-offs rose 14 times, while loans grew by a tepid 2%.

Banks write off bad loans only once it becomes unviable to recover them. Banks have to ensure that they fully provide for these loans before they are written off.

However, the provision requirements do not rise suddenly as banks have to constantly increase provisions on bad loans as they age under the central bank’s Income Recognition and Asset Classification (IRAC) norms.

Banks make some recoveries from their written-off assets and this helps shore up their other income. State Bank of India (SBI) recovered ₹2,426 crore from written-off accounts in Q1 and PNB managed to get ₹508 crore in the same quarter.