#Banking #BankWriteOffs
Interesting data. Banks have written off Rs. 9.54 Trillion worth of loans in last 5 years. This is 5% of the total bank assets as of March 21 (195 Tr).
Two ways to bring back the strength in the balance sheet is to either infuse Funds or improve Profits
PSBs contributed 7 Tr to these write offs against which Government infused 3.43 Tr. More recently, profitability seems to be improving. ‘No dividend’ decision of RBI in FY21 should have helped.
However the equation has another variable that should give some comfort. The recovery amount for 5 year period is 4.14 Tr. The recovery momentum should pick up if the IBC relaxations do not continue.
Importantly, I hope the capital infusion is one time exercise and one set of Tax Payers do not keep funding the bank losses.