Public sector banks (PSBs) have written off Rs 12.08 lakh crore of bad loans in nine years since 2015-16 while their gross non-performing asset (NPA) ratio has improved from 9.11% on 31 March 2021 to 2.58% as on 31 March 2025, Union minister of state for finance Pankaj Chaudhary informed Rajya Sabha on Tuesday.

Data shows the 12 state-run banks wrote off an aggregate Rs 5.82 lakh crore in the five financial years ending FY25.

The curve has been progressively declining, with the write off in FY21 standing at Rs 1.33 lakh crore and in FY25 at Rs 91,261 crore. For FY22, FY23 and FY24, the figures were Rs 1.16 lakh crore, Rs 1.27 lakh crore and Rs 1.15 lakh crore, respectively.

In FY25, the combined write off for four PSBs in the top of the list stood at Rs 58,452 crore. State Bank of India (SBI) wrote off Rs 20,309 crore in loans, Canara Bank Rs 14,350 crore, Punjab National Bank (PNB) Rs 12,159 crore and Union Bank of India Rs 11,634 crore. 

The next two were below the Rs 10,000 mark, with Bank of Baroda at Rs 8,796 crore and Bank of India at Rs 7,959 crore.

The remaining six state-run banks, including Indian Bank, Indian Overseas Bank, Central Bank of India, UCO Bank, Punjab & Sind Bank and Bank of Maharashtra, had their loan write-offs below the Rs 5,000 crore mark in FY25. Bank of Maharashtra had the lowest loan write off at Rs 796 crore for that year.

Loan write-offs have been massive during this nine-year period, enabling the state-run banks to move bad loans off their balance sheets. But lenders have also been aggressively targeting recoveries from the defaulters of these loans. 

“Such write-off does not result in waiver of liabilities of borrowers,” Chaudhary stated. “The borrowers continue to be liable for repayment and banks continue to pursue recovery actions initiated in these accounts.” 

Besides an internal team, the recovery mechanisms available to banks include filing of a suit in civil courts or in debts recovery tribunals (DRTs), action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) and filing of cases in the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC).

IBC has rescued 3,171 distressed companies involving 1,119 cases and recovering about Rs 3.6 lakh crore as on 31 December 2024 (about eight years). In comparison, the erstwhile Board of Industrial and Financial Reconstruction (BIFR) regime had resolved less than 3,500 cases in about three decades since its inception in 1987.

The NPA data for the past four financial years shows a consistent decline from Rs 6.17 lakh crore in March 2021 to Rs 2.84 lakh crore in March 2025.

For the fiscal ended 31 March 2022, the gross NPA ratio was 7.28% or Rs 5.41 lakh crore in absolute numbers. This dropped to 4.97% or Rs 4.28 lakh crore in March 2023 and further declined to 3.47% or Rs 3.39 lakh crore as on 31 March 2024.

“Comprehensive measures have been taken by the Government and the Reserve Bank of India (RBI) to recover and reduce NPAs,” Chaudhary said. 

These measures include change in credit culture with IBC that fundamentally changed the creditor-borrower relationship, taking away control of the defaulting company from promoters and debarring wilful defaulters from the resolution process, the minister added.

The state-run banks have identified 1,629 wilful defaulters, with outstanding dues of Rs 1.62 lakh crore, as of 31 March 2025.

The PSBs have set-up specialised stressed assets management verticals and branches for effective monitoring and focused follow-up of NPA accounts, which facilitates quicker and improved resolution and recoveries.

“Deployment of business correspondents and adoption of feet-on-street model have also boosted the recovery trajectory of NPAs in banks,” Chaudhary said.

The state-run banks have also focused on early detection of potential defaults, which has helped in lowering fresh accretion of NPAs to below 1% of their standard advances compared to 8.35% or Rs 8.96 lakh crore in March 2018.

Meanwhile, responding to another question Chaudhary informed the Rajya Sabha that the government is estimated to have forgone around Rs 99,000 crore in revenue in the financial year 2023-24 on account of tax incentives extended to corporates. Corporate tax rates have been gradually reduced since 2016 while phasing out the exemptions and incentives. 

Chaudhary also said that the present deposit insurance cover limit of Rs 5 lakh per depositor aligns with global standards signalling that the government may not raise the current cover limit on deposits.