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On Writing off Non-performing Assets
The huge write-off of loans and the low loan recoveries by banks favour the large borrowers.
Indian banks are having a gala time. News reports say that the quarterly profits of commercial sector banks have touched an all-time high of around `59,000 crore in September 2022. This is more than 50% higher than the profits recorded in the same quarter last year. The finance minister attributed the increase in bank profitability to the sharp reduction in non-performing assets (NPAs) of banks.
It is true that the gross NPAs of the commercial banks have rapidly declined from the peak levels of `10,36,187 crore, which was about 11.2% of their gross assets, in March 2018 to `75,37,835 crore or 5.9% of their gross assets by end March 2022, which is a six-year low. And the Financial Stability Report of June 2022 estimates that the gross NPAs will further go down to 5.3% by March 2023 in a baseline scenario. However, the NPAs still remain at double-digit levels in a few sectors—mining and quarrying, food processing, engineering, gems and jewellery and construction.
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