Corporate Loan Write-Offs in India (2014-2024): A Decade of Banking Challenges
The Indian banking sector has witnessed a massive surge in corporate loan write-offs over the last decade, with public and private sector banks writing off a staggering ₹16.35 lakh crore in bad loans between 2014-15 and 2023-24. These write-offs, often linked to large corporate borrowers, have sparked debates about financial accountability, governance, and the impact on the banking system.
This article examines the extent of loan write-offs, key corporate defaulters, sectoral trends, and the measures taken by banks to recover dues.
The Scale of Loan Write-Offs (2014-2024)
Loan write-offs are a banking practice where bad loans (non-performing assets or NPAs) are removed from balance sheets to improve financial stability. However, these loans are not waived, and banks continue efforts to recover dues through legal and regulatory measures.
Year-wise Corporate Loan Write-Offs:
| Financial Year | Amount Written Off (₹ Crore) |
|---|---|
| 2014-15 | 58,786 |
| 2015-16 | 89,048 |
| 2016-17 | 1,08,374 |
| 2017-18 | 1,61,328 |
| 2018-19 | 2,36,265 (Highest) |
| 2019-20 | 2,34,170 |
| 2020-21 | 2,02,781 |
| 2021-22 | 1,74,966 |
| 2022-23 | 1,61,018 |
| 2023-24 | Data not fully available |
Sectoral Distribution
A significant portion of these write-offs came from large industries and services, which accounted for ₹9.26 lakh crore, while the remaining was spread across other sectors.
Prominent Corporate Defaulters
Several large corporate entities have been at the center of India’s biggest loan defaults. Here are some of the prominent corporate defaulters whose loans were written off:
| Company | Outstanding Debt (₹ Crore) | Key Issues |
|---|---|---|
| Gitanjali Gems (Mehul Choksi) | 7,848 | Fraud, financial irregularities, promoters absconding. |
| Era Infra Engineering Ltd | 5,879 | Stressed infrastructure sector, mismanagement. |
| REI Agro Ltd | 4,803 | Financial fraud, promoter under investigation. |
| Concast Steel and Power Ltd | 4,596 | High debt burden, operational issues. |
| ABG Shipyard Ltd | 3,708 | Insolvency, misappropriation of funds. |
| Frost International Ltd | 3,311 | Loan default, legal action by banks. |
| Winsome Diamonds & Jewellery | 2,931 | Promoters absconded, fraud allegations. |
| Rotomac Global Pvt Ltd | 2,893 | Kothari group default, banking fraud. |
| Coastal Projects Ltd | 2,311 | Financial distress, project delays. |
| Zoom Developers Pvt Ltd | 2,147 | Default on multiple bank loans. |
These companies, among others, have been flagged for financial mismanagement, loan diversion, and fraud. Many of their promoters are facing legal action under various laws, including the Insolvency and Bankruptcy Code (IBC) and the Prevention of Money Laundering Act (PMLA).
Reasons Behind Large-Scale Loan Write-Offs
Several factors contributed to the massive corporate loan write-offs in India:
- Economic Slowdown: Global and domestic economic uncertainties affected industrial performance, leading to high defaults.
- Infrastructure and Real Estate Sector Stress: Many firms in these sectors over-borrowed and struggled with project delays.
- Banking Sector Lapses: Poor due diligence and lenient lending norms led to excessive risk-taking.
- Fraud and Mismanagement: Several firms misused funds, leading to legal actions.
- Regulatory and Policy Issues: Delays in government clearances and shifting policies affected business sustainability.
Recovery Efforts: Are Banks Getting Their Money Back?
Despite these write-offs, banks continue to pursue recovery actions. Some of the recovery mechanisms include:
- Insolvency and Bankruptcy Code (IBC): A framework for resolving corporate insolvencies.
- Debt Recovery Tribunals (DRT): Legal actions taken by banks for loan recovery.
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act): Allows banks to seize and auction defaulter assets.
- National Company Law Tribunal (NCLT) Cases: Many defaulters are facing legal proceedings under the NCLT.
According to reports, banks recover only a fraction of their bad loans, with average recovery rates ranging between 20-30% depending on the sector.
Impact of Loan Write-Offs
1. Burden on Taxpayers & Public Sector Banks
Public sector banks (PSBs) account for most of these write-offs, impacting their financial health. To maintain stability, the government has infused capital into these banks, often at the cost of taxpayers.
2. Reduced Lending to Small Businesses
When large corporate defaulters fail to repay loans, banks become risk-averse and tighten lending policies for MSMEs and small businesses, affecting economic growth.
3. Impact on Investors & Shareholders
Frequent write-offs weaken bank balance sheets, leading to loss of investor confidence and lower stock prices for public sector banks.
Conclusion: The Way Forward
The last decade has shown how weak banking regulations and mismanagement can lead to massive corporate loan defaults. While loan write-offs help banks clean their balance sheets, they also highlight inefficiencies in the financial system.
What Needs to Change?
- Stricter Due Diligence: Banks must enhance risk assessment before lending large sums.
- Stronger Corporate Governance: Promoters of defaulting firms must face strict legal action to prevent fraud.
- Faster Recovery Mechanisms: The IBC process should be streamlined for faster resolution of cases.
- Accountability for Bank Officials: Bank executives who approve questionable loans should be held accountable.
Final Thought
While banks continue their recovery efforts, India needs a stronger regulatory framework to prevent loan frauds and ensure financial stability. Ensuring accountability at every level—from corporate borrowers to banking officials and regulators—is key to preventing another decade of massive write-offs.
