Page 30 - Banking Finance April 2021

ARTICLE

WRITE-

OFFS

REVISITED

W rite-offs by banks is a sensitive issue in the quoted refrain that "the worst is behind us..". That this hope

public eye. There is always a brouhaha
rarely comes true is another matter.
when these figures are revealed by the
banks or some enthusiastic researcher
some time, it gained prominence after the implementation
obtains the information under RTI and tells Though the concept of write offs has been in place for quite
all. Whenever quarterly and annual results of banks are of the Narasimham Committee Report (1991)
announced, the figures of write-offs and NPAs invariably recommendations regarding, inter alia, the 4 fold assets
invite close scrutiny. The analyst community, shareholders classification according to quality (Standard, Sub-Standard,
and investors minutely probe the levels and more Doubtful and Loss) and income recognition norms.
importantly the trends and expected future of these balance
sheet/off balance sheet items and their impact on the The concept gained further traction with RBI's Master
profitability of the bank and its financial health. Most bank Circular dated 30/08/2001 on Prudential Norms on Income
chairmen know that they have to be well prepared for the recognition, Asset Classification and Provisioning pertaining
glare of search-light on this subject. This could be one to the Advances Portfolio wherein under provisioning norms
reason that bank chairmen often take refuge under the oft for Loss Assets. It clearly states, "The entire asset should be
written off. If the assets are permitted to remain in the books
for any reason, 100 percent of the outstanding should be
About the author provided for." In the same circular, a reporting format for
NPAs too seeks data on Gross NPAs and Total Provisions held
P M Bhatnagar with a separate below the line reporting requirement of
Retired DGM "Technical write off of Rs. ………. crore" and "amount of
State Bank of India technical write off (Rs…….. …crores) and provision on
Mumbai
standard assets (Rs………..crore)".

30 | 2021 | APRIL | BANKING FINANCE