For the first time, retail top category for loan write-offs by Indian banks in FY25

In 2024-25 as a whole, Indian banks had to write off loans worth Rs 1.72 lakh crore, down from a peak of Rs 2.43 lakh crore in 2019-20. In the 11 years for which data was provided, loan write-offs totalled Rs 19.05 lakh crore across all categories.

Write-offs are an accounting practice and the formal recognition on a lender’s balance sheet that a loan cannot be repaid. The act of writing it off removes the loan as an asset for the bank and ‘cleans up’ the bank’s books.

In his written response to a question in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary added that loan write-offs by banks does not mean these loans have been waived. “The borrowers continue to be liable for repayment and banks continue to pursue recovery actions initiated in these accounts. Further, recovery in written-off loans is an ongoing process and banks continue pursuing their recovery actions initiated against borrowers under various recovery mechanisms available to them.”

Last year in August, the finance ministry had informed Parliament that recovery of money from written off accounts had risen in recent years from 19.1% in 2021-22 to 34.8% in 2024-25.

It was not clear from the finance ministry data if the retail loans category is inclusive of the microfinance sector, which saw a sharp increase in stress in 2024-25.

This is the first time that retail loans have risen to the top spot in the write-off category, as per the finance ministry data. But Indian banks have had to, in recent years, increasingly write off more and more of consumer credit. From 6.8% in 2014-15, the share of retail in written-off loans rose noticeably in the coronavirus pandemic year of 2020-21 to 9.5% and then to 16.4% in 2021-22, before declining to 12% in 2022-23.

However, the next two years have seen a sharp rise to 20.2% (in 2023-24) and 26.4% (2024-25).

The rise in retail loan write-offs confirms the Reserve Bank of India’s (RBI) past fears. In November 2023, the Indian central bank had made it harder for banks and non-banks to give loans to individuals – excluding a few categories such as housing, education, and vehicles – after having previously warned that certain components of personal loans were recording “very high growth”. The type of consumer loan causing the most worry was unsecured loans, such as credit card spendings.

Problems with retail loans have somewhat eased over the last year. According to credit information company CRIF High Mark, while most bank and non-bank lenders have been showing a decline in stress in their personal loan books over the last year or so, public sector banks reported an increase in early-stage delinquencies in October-December 2025. Non-bank finance companies, meanwhile, “continue to record one of the highest delinquency rates in PAR 91–180, compared to PSU and Private Banks, despite showing improvement on both QoQ and YoY basis,” CRIF High Mark said in the February 2026 edition of its How India Lends report.

PAR is Portfolio at Risk, while ‘91-180’ – a measure of late-stage delinquency – refers to the number of days past which a loan repayment is due. Early-stage delinquency is measured by ‘PAR 31–90’, or Portfolio at Risk from loans 31-90 days past their due date.

A loan must be classified by a lender as a non-performing asset, or a bad loan, if a repayment is 90 or more days late.

Early-stage delinquencies have shown “gradual improvement” irrespective of the size of the retail loan, CRIF High Mark said, adding that late-stage delinquencies have “declined sharply for loans above Rs 2 lack, reflecting stronger borrower quality in higher-ticket segments”.