what do you mean by " write off loans by banks"?
Dear student,
Please find below the solution to the asked query.
The following points may help you-Please find below the solution to the asked query.
- Write off loan by the banks is the process of disclassyfying loan as an asset.
- Imagine you have taken a loan of Rs 5,00,000 from a bank but unable to repay.In this loan is an asset and the interest paid by you would have been income.
- But in case if you stop repayiong the monthly instalment then the bank will generate lower revenue due to lack of interest payment.
- But the amount of loan remain as an asset in the hope that you will pay the loan in future.
- According to the RBI norms if there is no interest comming from an asset then the bank will have to provide for the loss of asset and eliminate this loan from the balance sheet.
- This process is known as write off loan by the banks.
Hope this information will clear your doubts about the topic.
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