Retail loans emerge as top category for write-offs by Indian banks in FY25, Pg15

Key Highlights:

• In FY25, retail loans topped the list of loan write-offs by Indian banks at Rs 45,404 crore, surpassing agriculture, industries, services, and MSMEs.
• Total loan write-offs by Indian banks in FY25 amounted to Rs 1.72 lakh crore, a decrease from Rs 2.43 lakh crore in FY20.
• Recovery of money from written-off accounts increased from 19.1% in FY22 to 34.8% in FY25.
• The share of retail loans in total write-offs has risen significantly, reaching 26.4% in FY25 from 6.8% in FY15.

Detailed Insights:

• Loan write-offs are an accounting practice where banks remove loans from their assets, recognizing them as unrecoverable, but borrowers remain liable for repayment.
• The Ministry of Finance data indicates a rising trend of retail loan write-offs, prompting concerns about the increasing stress in consumer credit portfolios.
• The RBI had previously expressed concerns about the high growth in personal loans, leading to stricter lending norms for banks and non-banks in November 2023.
• Unsecured loans, such as credit card spending, were identified as a primary source of concern within the retail loan sector.
• While stress in personal loan books has generally declined, Public Sector Banks (PSBs) reported an increase in early-stage delinquencies in October-December 2025.
• NBFCs continue to exhibit high delinquency rates in the PAR 91-180 category, despite showing improvements on a quarterly and yearly basis.

Key Concepts Involved:

• Loan Write-off: An accounting practice where a lender removes a loan from its balance sheet as an asset because it is deemed uncollectible.
• Unsecured Loan: A loan that is issued and supported only by the borrower's creditworthiness, rather than by any type of collateral.
• Delinquency Rate: The percentage of loans in a portfolio where borrowers have failed to make payments according to the agreed-upon terms.