Hindustan Times ST (Jaipur)
Loan write-offs help banks post low NPAS
Several large and midsized banks aggressively wrote off large chunks of legacy bad loans in the March quarter as they sought to bring down their non-performing assets (NPA), a Mint analysis of quarterly results showed.
On an aggregate basis, 10 large and mid-sized banks wrote off 43% more bad loans in the quarter, including both technical as well as regular write-offs. At the same time, recoveries and upgrades dipped 9% from a year ago. Upgradation refers to a bad loan account being regularised after payments are made by the borrower.
While things were gradually improving in January-march, the second Covid wave set in during the end of the quarter, impacting recoveries.
Banks with higher write-offs include State Bank of India (SBI), Bank of India, Punjab National Bank (PNB), Bank of Baroda (BOB), Axis Bank, Yes Bank and IDBI Bank. Among these, recoveries fell 17-50% at SBI, BOB, Bank of India.
The quantum of loans written off by the 10 banks stood at ₹67,650 crore, higher than ₹54,438 crore recovered by the same lenders in the fiscal fourth quarter.
“Technical write-offs are only for balance sheet management purposes. It gives you multiple advantages, both optically and also brings down the priority sector requirements,” Prashant Kumar, chief executive of Yes Bank, told Mint last month. The bank’s write-offs were at ₹17,208 crore in Q4.
To be sure, most lenders have written off these loans to be prudential, and are free to pursue them any time. When recovered, these loans are shown under recovery from written-off accounts, as part of a bank’s other income in the profit and loss statement.
For all their problems with bad loan accretion, public sector banks seem way ahead of private peers in terms of disclofinancial sure of write-offs in their investor presentations. Among these 10 banks, data on recoveries from written-off accounts is available for eight lenders, adding up to ₹12,424 crore.
“As far as recovery is concerned, more or less, the numbers would remain in line with what we had achieved last time. But the only difference will be that in the last couple of years, there were certain chunky accounts which got resolved,” said Swaminathan Janakiraman, managing director, SBI.
Recoveries in FY22 and ahead will have to happen across many accounts and will depend on how fast the second wave settles down so that recovery efforts can get intensified, Janakiraman told analysts on May 21.