Write-off by bank is not waiver by government: Why confusion persists in public debate

Senior journalist and founder-editor of The Squirrels, Bhupendra Chaubey, introduced on 10 December a new paradigm in judging the loss to India's wealth by way of write-offs by public sector banks and doles for which politicians seek credit, which he insists are worse than loan waivers to farmers and default in repayment by ordinary citizens. [Refer to the video above]

The public conversation on bank write-offs resurfaces every time a list circulates online. A recent widely shared screenshot claimed that India’s largest corporate groups have enjoyed massive “loan waivers” from public sector banks. The figures were presented as cumulative totals over multiple years, with the implication that banks had forgiven thousands of crores of unpaid corporate debt. Many readers interpreted this as evidence that banks were generous towards big corporates while being harsh on individual borrowers.

The arguments reflected a familiar set of doubts that ordinary people often express:

Are banks letting large borrowers escape repayment? Do write-offs signify favours? Why do the same amounts appear again and again in public debate? Why do these numbers seem so large?

These assumptions arise from a persistent misunderstanding: a write-off is an accounting action, not a loan waiver, and the two concepts operate at different points in the credit-recovery process. Yet the misunderstanding endures because the underlying numbers – which are indeed large – are often presented without context, without accompanying recovery figures, and without clarity on how provisioning norms work.

This article explains the distinction comprehensively, traces why the confusion survives, and uses publicly available figures to illustrate how write-offs function in the Indian banking system.

What a write-off actually means

A write-off occurs when a bank removes a non-performing asset (NPA) from its balance sheet after making 100 per cent provisioning for it. Provisioning is the systematic setting aside of capital to cover expected losses. Under the RBI’s prudential framework, banks must classify a loan as NPA once interest or principal is overdue for more than 90 days; they must then build provisions progressively. After four years in the “doubtful” category, the loan generally requires full provisioning.

Once full provisioning is completed, banks may write off the asset to clean up the balance sheet. This does not erase the borrower’s liability. The loan remains legally recoverable. The bank continues to pursue repayment through specialised recovery channels such as the Insolvency and Bankruptcy Code (IBC), the SARFAESI Act, the Debt Recovery Tribunals, and one-time settlement (OTS) schemes.

A write-off therefore:

• Improves the bank’s reported asset quality
• Allows management to focus on performing assets
• Does not stop legal or commercial recovery processes

Importantly, write-offs also reduce the bank’s taxable profit, because losses quantified through provisioning and write-offs are tax deductible.

What a waiver means

A waiver is entirely different. It is a contractual relinquishment of the bank’s claim on the borrower. Only the lender can grant a waiver, and it requires explicit documentation. Examples:

• Agricultural loan waivers granted by state governments
• Waiver components within certain OTS arrangements
• Exceptional restructuring agreements approved by bank boards

Waivers extinguish the borrower’s obligation. Write-offs do not.

Confusion arises because write-offs are often colloquially reported as “waivers”, especially in political discourse. But the two terms have distinct legal consequences.

Why banks resort to large write-offs

Banks resort to write-offs because provisioning becomes complete after a point. Keeping fully provided NPAs on the balance sheet serves no analytical purpose. Banks therefore move them to off-balance sheet recovery pools.

RBI data shows that PSBs have written off over ₹10 lakh crore in the last decade, comprising legacy NPAs accumulated before the clean-up that began during the Asset Quality Review (AQR) of 2015–16. Private-sector banks too resort to write-offs, because the accounting logic is universal.

The sector-wide effect is visible in key ratios:

• The gross NPA ratio of PSBs peaked at 14.6 per cent around the AQR period.
• After aggressive recognition and provisioning, it fell below 5 per cent in recent years.
• The system-wide gross NPA ratio is now around 3 per cent, the lowest in over a decade.

These improvements were possible partly because banks removed legacy NPAs from their books and redirected attention to recovery.

Where Recovery Actually Happens

The frequently missing part of the conversation is that banks do recover substantial sums from written-off accounts.

While the numbers vary year to year, RBI’s annual Trends and Progress of Banking in India consistently reports recoveries through:

• IBC
• SARFAESI
• Lok Adalats
• Debt Recovery Tribunals
• Compromises and settlements

One representative figure illustrates the point: in a recent year, banks recovered ₹1.2 lakh crore across all channels, with the IBC alone yielding more than ₹1 lakh crore cumulatively since its introduction. Recovery percentages fluctuate depending on asset quality, sectoral stress and buyer appetite, but the central point remains: write-off does not mean banks stop recovering money.

Why the confusion with corporate names persists

The screenshot that has been circulating contains cumulative figures for major corporate groups. These appear dramatic when listed without timelines, context or explanations of how recovery proceeds. Several well-known groups have indeed featured in large NPA exposures during earlier periods of over-leveraging and downturn in sectors such as power, metals, infrastructure and telecom.

A few things amplify misunderstanding:

1. Cumulative multi-year numbers: When amounts written off across several financial years are aggregated, the totals run into thousands of crore. But these are not single-year giveaways. They reflect long-term provisioning outcomes.
2. Write-offs occur even during ongoing litigation: Even when a borrower remains in insolvency resolution or restructuring negotiations, accounting rules may require a write-off. The legal process continues despite the accounting entry.
3. Recoveries are not listed alongside write-offs: Public debate rarely considers how much banks have already recovered from these very borrowers. Many groups have undergone IBC-driven resolutions that yielded partial recovery for banks, sometimes exceeding 40 per cent of debt. In other cases, assets have been sold or reallocated to new owners. These facts seldom accompany social media tables.
4. Names of conglomerates evoke emotional reactions: People assume that if a corporate name appears next to a large figure, it indicates favoured treatment. In reality, these figures represent losses already suffered, not concessions offered.

Why lay people conflate write-off with waiver

Several structural reasons explain this widespread misconception.

Lack of familiarity with accounting language

Most people assume “write-off” in everyday parlance means “forgiven”. This intuition comes from household or business usage where writing something off often implies abandonment. banking follows a technical definition that differs from common usage.

Political framing

Statements in political campaigns and media debates often portray write-offs as evidence of preferential treatment. These claims rely on the visual impact of large numbers.

Presentation of data without framing

A list that shows “₹X lakh crore written off for Y corporate group” triggers a simple inference: the bank has let the borrower off. Without the accompanying context about provisioning rules, taxation treatment and recovery channels, the reader draws the wrong conclusion.

Absence of public reporting on recovery

Media outlets seldom publish consolidated lists of recoveries across cases. Write-offs make news; recoveries do not. Therefore the public hears only one side of the story.

Scale of write-offs: why the numbers are so high

Write-offs since the mid-2010s appear exceptionally large because banks recognised legacy NPAs aggressively during the AQR. Prior to that, many stressed assets had been repeatedly restructured without being declared NPA. Once recognition happened, provisioning requirements rose sharply.

Across PSBs alone, cumulative write-offs crossed ₹10 lakh crore, but these represent historical losses that were already embedded in the system. Write-offs in themselves did not create fresh losses; they merely acknowledged earlier lending errors.

Furthermore, once an NPA is written off, any subsequent recovery is recorded as income. Banks have therefore been reporting operating profits in recent years despite large write-offs, aided by recoveries and improved credit quality.

Why large corporate loans behave differently from retail loans

Corporate NPAs tend to be lumpy. A single infrastructure project may involve borrowing of ₹20,000 crore; a power plant may cost ₹30,000 crore; a telecom company may owe more than ₹40,000 crore across banks. When such accounts fail, the resulting provisions and write-offs appear enormous.

Retail and small-business NPAs, by contrast, are small-ticket but numerous. They attract political attention during agricultural cycles, but they do not individually create dramatic data points.

The public therefore notices corporate write-offs more, even though both categories undergo the same accounting treatment.

What data tells us about loss recognition and recovery

Although the circulating screenshot listed figures for particular corporate groups, the essential economic story is systemic. Over the last decade:

• Gross NPAs were fully recognised across PSBs.
• Provision coverage ratios improved sharply, crossing 70 per cent for many banks.
• Banks achieved multi-year high profit levels after provisioning cycles stabilised.
• Credit growth resumed, with system-wide credit expanding at double-digit rates.
• Recovery rates under IBC varied year to year but remained the strongest among legal channels.

This reflects a financial clean-up rather than a waiver regime. Losses were crystallised through accounting action; recovery efforts were intensified; and the system gradually returned to healthy lending.

Why the debate will keep reappearing

Even with improved clarity, lists of write-offs will continue to circulate because:

• The numbers remain large in absolute terms
• Corporate names carry political resonance
• Few people track how recovery works
• Write-offs occur every year as an accounting requirement

Moreover, banks cannot publish borrower-level recovery milestones in real time due to confidentiality constraints, so the public rarely sees the full picture.

Because write-offs are routine yet misunderstood, they remain fertile ground for political interpretation.

Understanding the distinction helps decode the numbers

The Indian banking system’s large write-offs reflect a decade-long clean-up process, not favoured treatment for corporate borrowers. A write-off is the final step in provisioning, performed only after the bank has already absorbed economic loss. The borrower’s legal liability survives, and banks continue to pursue recovery through IBC and other mechanisms. A waiver, by contrast, eliminates the borrower’s obligation and requires explicit approval.

The widespread confusion arises because cumulative write-off figures are presented without context. When large numbers appear next to corporate names, ordinary readers infer leniency. But the reality is more mundane: banks have recognised past losses, strengthened their balance sheets, and improved their credit discipline.

The public debate will evolve only when accounting terms are explained clearly, recovery data is framed adequately, and the difference between economic loss and accounting classification is widely understood.