Banks write off nearly Rs 10 lakh crore in corporate loans over 12 years

Banks have written off nearly Rs 10 lakh crore in loans extended to large industries and services over the past 12 financial years, with the government telling Parliament that such write-offs are accounting measures and do not amount to waiving the liabilities of borrowers. Minister of State for Finance Pankaj Chaudhary, citing Reserve Bank of India data, said banks had written off loans worth Rs 9,95,000 crore given to large corporates and the services sector during the 12-year period.

The annual amount written off reached a high of Rs 1,48,753 crore in 2018-19 before declining substantially in subsequent years. In 2025-26, write-offs involving large industries and services stood at Rs 20,485 crore, according to the data placed before Parliament. The government stressed that a loan being written off from a bank's books does not mean that the borrower is freed from the obligation to repay it. Banks can continue pursuing recovery through the mechanisms available to them even after the amount has been technically written off.

Outstanding loans rise

While write-offs have accumulated over the years, outstanding bank credit to large industries and services has continued to increase. According to the RBI data cited by the minister, outstanding loans to these sectors rose from Rs 63,19,057 crore in 2024-25 to Rs 69,21,734 crore in 2025-26. This represents an increase of more than Rs 6 lakh crore in a year, reflecting continued expansion in bank lending to large businesses and the services sector.

Chaudhary explained that debt write-off is essentially an accounting procedure and does not provide relief to the debtor, irrespective of whether the borrower is a farmer, a corporate entity or another category of borrower.

Banks generally write off loans that have remained non-performing for a prolonged period and for which adequate provisions have already been made. Removing such loans from the active balance sheet can provide a clearer picture of the bank's financial position, but recovery proceedings against borrowers may continue.

Write-off not a loan waiver

The government sought to draw a clear distinction between a write-off and a loan waiver.

Under a loan waiver, the borrower is relieved of the obligation to repay the specified debt. A write-off, however, is primarily an accounting action undertaken by the lender. The borrower's liability remains, and banks retain the right to pursue recovery.

The minister said write-offs, including technical or prudential write-offs of advances that remain under collection, are carried out by banks to adjust their balance sheets in accordance with applicable policies and regulatory requirements.

Such write-offs, therefore, do not result in a waiver of the borrower's liabilities and do not provide any direct benefit to the borrower, he said.

Banks can continue to pursue recovery through measures including enforcement of security interests, proceedings before debt recovery tribunals, action under the Insolvency and Bankruptcy Code and negotiated settlements, depending on the circumstances of individual cases.

RBI framework for stressed loans

The government also referred to the RBI's Resolution of Stressed Assets Directions, 2025, which provides a framework for lenders dealing with borrowers facing financial stress.

The directions, dated November 28, 2025 and updated on July 1, 2026, allow lenders to undertake financial restructuring of stressed borrowers in accordance with board-approved policies and regulatory guidelines.

The framework is intended to give regulated lenders a structured mechanism for dealing with viable borrowers facing financial difficulties while ensuring that stressed assets are recognised and managed in a prudent manner.

The banking system has undergone a broader clean-up of stressed assets over the past decade, with lenders making provisions against bad loans, writing off legacy non-performing assets and using insolvency and other recovery mechanisms.

Government cites fiscal consolidation

Responding separately on the state of government finances, Chaudhary said the Centre remained committed to fiscal prudence while supporting sustainable economic growth.

The Centre's fiscal deficit declined from 9.2 per cent of GDP in 2020-21, when government finances were heavily affected by the Covid-19 pandemic, to 4.4 per cent in 2025-26, according to provisional actuals cited by the minister.

The government's outstanding liabilities have also moderated as a proportion of the economy. They declined from 61.5 per cent of GDP in 2020-21 to 58.2 per cent in 2025-26.

The government said these indicators reflected continued improvement in fiscal sustainability as it sought to balance deficit reduction with spending required to support economic growth.

Capital spending expands

At the same time, the Centre has sharply increased expenditure on infrastructure and other capital assets.

Capital expenditure rose from Rs 4.3 lakh crore in 2020-21 to Rs 10.7 lakh crore in 2025-26, according to provisional actuals.

The government has increasingly relied on capital expenditure as a key element of its economic strategy, arguing that spending on roads, railways and other infrastructure can create productive assets while encouraging private investment and generating employment.

The figures on corporate loan write-offs, however, are likely to renew scrutiny over the scale of stressed lending accumulated by banks over the years. The government's position remains that the headline write-off figure should not be interpreted as an equivalent loss to the banking system or as debt being forgiven, since borrowers continue to remain liable and recovery efforts can proceed even after loans are removed from banks' active books.