Private banks write off nearly half of NPAs in FY26, outpace PSBs

KOLKATA: The Reserve Bank of India's financial stability report showed that the ratio of write-offs relative to bad loans for private banks was more than double that for public sector banks, although state-owned lenders accounted for 63.2% of the total non-performing assets.

Public sector banks wrote off 24.3% of the bad loans, while the ratio was 49.7% for private sector lenders and 39.6% for foreign banks, the data showed.

In all, the domestic banking sector wrote off 33.2% of the bad loans in 2025-26, totalling at least Rs 1.28 lakh crore, according to the report.

"Private banks utilise these write-offs and provisioning buffers to proactively clean up their balance sheets, while public sector banks generally rely more heavily on aggregate long-term or systemic recovery," said Kuntal Sur, partner and leader for risk consulting, financial services and treasury, at PwC India. "Unsecured retail loans in general have shown deteriorations leading to higher write-offs."

Write-offs served as a major component of banks' balance sheet cleansing exercise over the past six years, driving the sectoral bank loan ratio to a multi-decadal low of 1.8% or ?3.85 lakh crore in absolute terms. Gross non-performing assets ratio at the end of March 2021 was 7.3%, down from 9.6% at March-end 2017.

Public sector lenders wrote off Rs 5.81 lakh crore between 2020-21 and 2024-25, while private banks wrote off Rs 3.09 lakh crore during this period, according to the government's submission in the Lok Sabha.

Public sector banks controlled 54.4% of the total banking sector advances of Rs 213.6 lakh crore as of March 31, while they accounted for 63.2% of the total bad loans.

Private banks had substantial exposure to the microfinance sector, credit cards, personal loans and unsecured business loans, which saw increasing defaults for the past few years, said people tracking the sector.

"Write-offs are a way of taking bad loans off books to keep the portfolio clean. Unrecovered microfinance loans could be the reason for higher write-offs by private sector lenders," said Bank of Baroda chief economist Madan Sabnavis.