Loan Write-Offs by PSBs Surpass ₹58,000 Crore in FY25: A Growing Concern | Vizzve Finance
India's Public Sector Banks (PSBs) have written off loans worth more than ₹58,000 crore in FY25 so far, as per the latest ET Graphics data. This alarming figure underscores the growing challenge of non-performing assets (NPAs) and persistent bank frauds impacting the nation's banking sector.
Why Are PSBs Writing Off So Much?
A loan write-off doesn’t imply a waiver for borrowers. It’s a technical accounting move to clean the balance sheet. However, it raises a red flag when this becomes a frequent and large-scale occurrence.
Key Drivers of Loan Write-Offs:
Chronic Defaulters: Long-standing defaults, especially by corporates.
Fraudulent Borrowers: Sharp rise in cases of misappropriation and shell companies.
Weak Recovery Mechanisms: Limited success in asset reconstruction or legal recovery.
Political & Systemic Pressures: Policy leniency and lack of strict enforcement.
Bank Frauds: A Parallel Concern
In tandem with loan write-offs, reported bank frauds in FY25 have also seen a steep surge. These include:
Forgery of documents
Loan diversion
Misuse of working capital
Combined with NPAs, the dual impact raises serious concerns about the governance and risk management within PSBs.
Impact on Indian Economy
Loss to Exchequer: Public money continues to be drained.
Erosion of Trust: Depositor and investor confidence is adversely affected.
Higher Lending Risk: Increased NPAs restrict credit growth, affecting MSMEs and retail borrowers.
How Can This Be Fixed?
Strengthen credit appraisal and risk management.
Implement strict recovery and penal measures.
Ensure transparency in borrower profiling.
Leverage technology and AI in fraud detection.
Vizzve Finance Viewpoint
At Vizzve Finance, we believe financial discipline, transparency, and accountability are cornerstones for a resilient banking system. Massive write-offs and rising frauds highlight the urgent need for reform at both policy and operational levels in India’s banking ecosystem.
Conclusion
The surge in loan write-offs and frauds paints a worrying picture of India's public sector banking landscape. As fiscal discipline becomes more vital than ever, financial platforms like Vizzve Finance are working towards a transparent, accountable, and efficient banking ecosystem.
(FAQ) – FREQUENTLY ASKED QUESTIONS
Q1: What does a loan write-off mean?
A: A loan write-off is when a bank removes a loan from its active books after concluding it's unlikely to be recovered. However, recovery efforts may still continue.
Q2: Does loan write-off mean the borrower is free from paying?
A: No. The borrower remains liable. It’s only removed from the bank’s active balance sheet for accounting clarity.
Q3: Why are NPAs increasing despite reforms?
A: NPAs continue to rise due to poor credit appraisal, ongoing financial mismanagement, and economic stress in certain sectors.
Q4: How do loan write-offs affect the common man?
A: It can indirectly impact public resources, reduce credit availability, and lead to higher interest rates.
Q5: How can platforms like Vizzve Finance help?
A: Vizzve Finance offers transparency-driven solutions, better loan advisory, and market insights to promote responsible borrowing and lending.
Published on : 23rd July
Published by : Selvi
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