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Ten public sector banks wrote off nearly twice the amount of bad loans that they recovered and upgraded during the June quarter, according to data compiled by Mint.

While write-offs stood at 21,222 crore, cash recovery and upgradations from bad loan accounts were at 11,393 crore. Upgradation refers to a bad loan account turning regular after the borrower restarts payments.

To be sure, most loans written off are prudential in nature and does not mean lenders stop attempting to recover them. When recovered, these loans are shown under ‘recovery from written-off accounts’, as part of a bank’s other income in the profit and loss statement.

For all their problems with bad loan accretion, public sector banks seem way ahead of private peers in disclosing write-offs in their investor presentations.

Total recoveries from written-off accounts stood at 1,694 crore in the June quarter for nine banks, as data for one state-owned bank was unavailable. State Bank of India had the highest recovery and upgradation— 3,608 crore. Owing to its sheer size, SBI also had the highest write-offs at 4,363 crore. It is followed by Punjab National Bank (PNB) with 4,120 crore in write-offs and Bank of India (BoI) with 3,505 crore.

“The definition of write-off is (the process) when no more amount is collected or where the bank has entered into a one-time settlement and has taken a haircut," said Rajnish Kumar, chairman, SBI. “That puts in perspective this whole debate and sometimes uninformed articles about what is a write-off, what is recovery and what is upgradation," Kumar told reporters on 31 July.

The Reserve Bank of India (RBI) defines technical or prudential write-off as the amount of non-performing loans that are outstanding on the books of the branches but have been written off (fully or partially) at the head office level. The amount of technical write-off should be certified by statutory auditors as mandated by RBI.

The pandemic has led to a fall in recoveries for banks as the lockdown restricted movement of recovery agents and legal avenues, too, remained out of bounds for some time. Mint reported that banks have also been going slow in recoveries during the lockdown and have resorted to nudges and sensitizing borrowers about the consequences of default.

Rajkiran Rai G., chief executive of Union Bank of India, said in an interview in June that as businesses start reopening, banks may also have to start some recovery efforts from July.

Meanwhile, banks believe recovery will gradually pick up pace in the coming quarters as the effects of the pandemic subside.

According to A.K. Das, chief executive of Bank of India, this year is a challenging one and the bank’s performance on the recovery front in the first quarter has not been as good as it was last year.

“We are expecting about 2,100 crore of cash recovery and upgradations in the September quarter," said Das.

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