Lok Sabha Question No. 1860 (UNSTARRED), answered on 2017-12-29
Subject: Economic Growth Outlook
Ministry: FINANCE
Asked by: G. HARI

1860. SHRI G. HARI:

Will the Minister of FINANCE be pleased to state:

- (a) whether as per the International Monetary Fund (IMF) report, India's economic growth outlook has improved as impact of demonetization is fading and some key reforms are paying off, if so, the details thereof;
- (b) whether the Government is concerned on the growing corporate debt and banking system vulnerabilities; and
- (c)  if so, the details thereof and the reaction of the Government thereto?

## ANSWER

MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PON RADHAKRISHNAN)

- (a) An IMF note on Global Prospects and Policy Challenges (July 2017) indicated that the outlook for India has  improved  as  the  impact  of  demonetization  seems  to  be  fading  and  recent  key  structural  reforms continue to pay off.
- (b)  &  (c)  The  gross  non-performing  advances  (GNPA)  ratio  of  Scheduled  Commercial  Banks  (SCBs) increased  from  9.6  per  cent  to  10.2  per  cent  between  March  and  September  2017.  The  share  of  large borrowers  (large  borrower  is  defined  as  a  borrower  that  has  aggregate  fund-based  and  non-fund  based exposure of Rs.50 million and more with the Scheduled Commercial Banks) in GNPAs declined between March and September 2017. As per the Financial Stability Report December 2017, India's financial system remains  stable.  The  stress  in  the  banking  sector,  particularly  the  Public  Sector  Banks  (PSBs),  while significant, appears to be bottoming out.

The Government has undertaken various measures to address the banking and corporate sector issues. The government has launched a phased program for bank recapitalization. This entails infusion of capital to the  public  sector  banks,  that  is  expected  to  encourage  banks  to  enhance  lending.  A  comprehensive bankruptcy mechanism was established via notifying Insolvency and Bankruptcy Code (IBC) in May 2016 and establishing the regulatory framework in the form of the National Company Law Tribunal in June 2016 and the Insolvency and Bankruptcy Board of India (IBBI) in October 2016. The government also empowered RBI to issue directions to any banking company or banking companies to initiate the insolvency resolution process with respect to a default, under the provisions of IBC by amending the Banking Regulation Act, 1949.

To address the vulnerabilities in the banking system, Reserve Bank of India (RBI) undertook many steps including  issuing  the  framework  to  revitalise  the  distressed  assets  in  the  economy  and  establishment  of Central Repository of Information on Large Credits to reduce information asymmetry. RBI also mandated the  formation  of  Joint  Lenders  Forum  if  any  large  borrower  emitted  early  warning  signals;  introduced Strategic Debt Restructuring Scheme with a view of facilitating the exit of inefficient managements, Scheme for Sustainable Structuring of Stressed Assets, and Corporate Debt Restructuring (CDR) Scheme.

## Government of India Ministry of Finance Department of Economic Affairs

## LOK SABHA

## UNSTARRED QUESTION NO. 1860

TO BE ANSWERED ON DECEMBER 29, 2017

## ECONOMIC GROWTH OUTLOOK