Lok Sabha Question No. 2556 (UNSTARRED), answered on 2017-03-17
Subject: Banks Lending for Private Investments
Ministry: FINANCE
Asked by: ELUMALAI VELLAIGOUNDER

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA

## UNSTARRED QUESTION NO.2556

TO BE ANSWERED ON THE 17 th  March 2017/ Phalguna 26, 1938 (SAKA)

## Banks Lending for Private Investments QUESTION

## 2556.  SHRI V. ELUMALAI:

Will the Minister of FINANCE be pleased to state:

- (a) whether the banks inability to lend hindering is private investment and if so, the details thereof;
- (b) whether the domestic private investment is the only growth engine that still needs to pick up and banks must recover their loans to help boost private investment and if so, the details thereof; and

(c) whether  a  large  part  of  the  delay  in  recovery  of  loans  was  due  to  deliberate  steps  taken  by creditors  not  to  pay  their  debts  on  time  and  if  so,  the  details  thereof  and  the  steps  taken  by  the Government in this regard?

## ANSWER

## The Minister of State in the Ministry of Finance (SHRI SANTOSH KUMAR GANGWAR)

(a) & (b): Reserve Bank of India (RBI) has informed that the Annual credit growth of Public Sector Banks (PSBs) slowed down from 7.12% as at end of March 2015 to 3.82% as at end of March 2016. Lower credit growth of PSBs could possibly be on account of rebalancing of portfolio in the wake of impairments leading to higher credit costs including provisions, stress in certain sections etc. As for private investment due to over leveraged position of several corporates, they may be postponing the new investments.

The  management  of  loan  sanctioning  /  recovery  activity,  in  a  bank  is  essentially  an  internal management  function  and  each  bank's  Board  is  authorized  to  frame  suitable  policies.  Banks  have been advised to prepare a well-defined loan policy approved by their Board of Directors which should lay down exposure limits to individual/group borrowers, documentation standards, margin, security, sectoral  exposure  limits,  delegation  of  powers,  maturity  and  pricing  policies,  factors  taken  into consideration for deciding interest rates etc. Banks have to consider different loan proposals based on their  commercial  judgment  and  merits  of  each  case  keeping  in  view  the  loan  policies  approved  by their Board of Directors.

(c):    RBI  has  provided  a  number  of  tools  in  this  regard -Corporate  Debt  Restructuring  (CDR), Formation of  Joint  Lenders'  Forum  (JLF),  Flexible  Structuring  for  long  term  project  loans  to Infrastructure  and  Core  Industries  (5/25  Scheme),  Strategic  Debt  Restructuring  Scheme  (SDR)  and Sustainable Structuring of Stressed Assets (S4A). The Government has taken sector specific measures (Infrastructure, Power, Road, Textiles, Steel etc.) where incidence of NPA is high. The Insolvency and Bankruptcy Code (IBC) has been enacted and Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) and the Recovery of Debts due to Banks and Financial  Institutions  (RDDBFI)  Act  have  been  amended  to  improve  resolution  /  recovery  of  bank loans. Six new Debt Recovery Tribunals (DRTs) have been established for improving recovery.

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