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What exactly is loan write-off and just how it can help banking institutions

The 21 PSU banking institutions have written down about 166 % loans since 2014 than whatever they did small personal loans for bad credit in the earlier a decade. Is that loan write-off bad or good for banking institutions?

HIGHLIGHTS

The Narendra Modi federal federal federal government happens to be under constant critique through the Opposition parties for composing down loans that are bad. The RBI data show that loans of Rs 3.16 lakh crore are written down between April 2014 and March 2018. The figure is 166 percent regarding the loans written down by all 21 sector that is public (PSUs) when you look at the decade as much as 2014.

Congress president Rahul Gandhi today took a dig in the trend that is increasing of down loans underneath the Modi federal government. He stated that even though the typical guy had been being avoided from making use of his or her own cash through demonetisation and notifications like mandatory Aadhaar linking, the top industrialists are increasingly being because of the good thing about loan write-offs.

Exactly what is that loan write-off?

That loan write-off is an instrument utilized by banking institutions to completely clean up their balance-sheets. It really is used when you look at the instances of bad loans or assets that are non-performingNPA). The exposure (loan) can be written off if a loan turns bad on the account of the repayment defaults for at least three consecutive quarters.

That loan write-off sets free the cash parked because of the banking institutions for the provisioning of any loan. Provision for that loan describes a specific portion of loan quantity put aside because of the banking institutions. The rate that is standard of for loans in Indian banks differs from 5-20 % according to the company sector and also the payment ability associated with debtor.