₹6.15 Lakh Crore Loans Written Off by Public Sector Banks in Just 5 Years

Public sector banks (PSBs) have written off loans totaling Rs 6.15 lakh crore over the last five financial years and the current fiscal year up to September 30, 2025, according to Reserve Bank of India data. Despite these huge write-offs, the Centre has not infused capital into PSBs since FY 2022-23, citing improved profitability and stronger capital positions.

The cumulative write-offs peaked at Rs 1.33 lakh crore in 2020-21 before declining to Rs 1.16 lakh crore in 2021-22 and rising again to Rs 1.27 lakh crore in 2022-23. Over the same period, PSBs managed to recover only Rs 1.65 lakh crore from these written-off loans.

To meet capital requirements, PSBs have increasingly turned to the market, mobilising Rs 1.79 lakh crore through equity and bond issuances between April 2022 and September 2025. The government stated that banks now rely on market financing and internal accruals due to their improved profitability.

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Finance Minister Pankaj Chaudhary clarified that loan write-offs follow RBI norms and bank board policies, usually after four years of full provisioning for NPAs. “A write-off does not mean a loan waiver; borrowers remain liable to repay their dues,” he emphasised.

Recovery efforts continue even after write-offs, through mechanisms such as civil courts, Debts Recovery Tribunals (DRTs), the SARFAESI Act, and insolvency proceedings before the National Company Law Tribunal (NCLT). Recoveries from written-off accounts are recorded as income when realised, with no fresh cash outflow due to prior provisioning.

The government highlighted that write-offs help clean balance sheets, optimise capital, avail tax benefits, and improve investor sentiment. This practice, while significant in scale, is part of the banks’ broader strategy to maintain financial health and support future lending.

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