IF THE gross non-performing assets (NPAs) of many Indian banks look rather modest, much of the credit must go to their managements for dutifully writing off bad loans. Introduced as a tool for banks to manage their tax liabilities on impaired assets, writing off bad loans is increasingly being used as an instrument to bring down the quantum of NPAs. A study of the reduction of NPAs in the past five years shows that write-offs account for as much as 40% and actual recoveries 32%. If the figures for the past 12 years (2001-2013) are considered, write-offs account for 41.3% of the reduction in NPAs.
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India’s bank trick
How do you fix NPAs? Simple. Write them off.
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