The country’s public sector banks have removed a total of ₹6.15 lakh crore of loans from their balance sheets in the last five financial years and the current financial year (till September 2025). According to the latest data released by the Reserve Bank of India (RBI), these write offs are such loans whose chances of recovery are considered very low and due to which banks want to keep their accounts clean.
The highest loan write-off was done in the financial year 2020-21, when banks removed loans worth ₹1.33 lakh crore from the balance sheet. Although recoveries continue despite write-offs, banks have recovered only ₹1.65 lakh crore of these written-off loans in the last five years, which is a very small part of the total amount.
State Finance Minister Pankaj Chaudhary clarified in Parliament that “Writing off the loan is not loan waiver. The person or company taking the loan remains fully responsible for repaying the loan.” According to him, when a loan becomes NPA and there is little hope of recovery after four years have passed, then under RBI rules banks remove it from the balance sheet. This is an accounting process, which also benefits banks in tax.
According to the government, write off has no impact on the liquidity of banks, because provision is already made for these loans. Recovery made by banks like ongoing cases in Civil Court, DRT and NCLT continues. When recovered, it is recorded as income of the bank.
The government also said that the Center has not infused any new capital into public sector banks since the financial year 2022-23, as the financial performance of these banks has been much better than before. Now banks themselves are raising money from the market to meet their needs. Between April 2022 and September 2025, public sector banks have raised capital worth ₹1.79 lakh crore by issuing shares and bonds. The government says that now banks are becoming dependent on their internal earnings and funding from the market.
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