To answer the question, Let us understand write-off first:

Banks accept money from depositors for lending. They have to repay the money to the depositors even if the borrowers have not paid it. RBI supervises banks to make sure that bank never defaults on their depositors. Provisioning is one of the ways by which RBI keeps the bank a safe place for depositors.

What is a provision?

If there is no repayment from a loan account after 90 days, the same will be considered a non-performing asset. When a loan becomes a non-performing asset, the bank has to set aside 25% - 100% of the loan amount from its profit. This set-aside portion is called the provision.

For example, if a loan of Rs one crore becomes NPA, the bank should maintain Rs 25 lakh as a provision during the first year. Rs 40 Lakh in the second year and Rs 1 crore in the third year.

1. The example shows that even if one crore is not repaid by the borrower, the depositor's money is safe because of the provision.

2. There is no use in carrying the non-performing loan in the bank's balance sheet.

3. The provision amount will have to be kept idle.

The write-off removes the account from the balance sheet and will use the provision amount for other purposes. The Head office will do this. So the NPA account will still be active in the bank branches. So the NPA account will still be active in the bank branches, Even after the Write-off.

To answer the above question:

• Never stop paying your EMI.
• Written-off loans will also be recovered by the bank.
• After the write-off, the defaulter's collaterals will be appropriated to close the loan account.
• The defaulter's CIBIL score will get affected drastically.


Loan Write-off is entirely different from Loan Waiver. Banks will never waive off your loans.
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SIBY JEYYA

15/12/2022 09:16 PM