Lok Sabha Question No. 4058 (UNSTARRED), answered on 2018-08-10
Subject: Recovery Plan of Corporate Loans
Ministry: FINANCE
Asked by: V. SATHYABAMA

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

LOK SABHA UNSTARRED  QUESTION  NO: 4058 TO BE ANSWERED  ON THE 10 th  AUGUST,  2018/SHRAVANA 19, 1940 (SAKA)

## QUESTION RECOVERY PLAN OF  CORPORATE  LOANS

## 4058: SHRIMATI V. SATHYA  BAMA:

Will  the Minister  of FINANCE  be pleased to state:

- (a) whether   the  Government   has  initiated   any   action   plan   to  recover   the  huge  amount   of outstanding  loans from corporate,  particularly after the Punjab  National  Bank fraud issue came to lime  light;
- (c) the  quantum   of  money/loan   that   have  been  recovered   from the  defaulters   in  various Public  Sector  Banks;
- (b) if so, the details  thereof;
- (d) whether  the process of recovery  is still  going  on; and
- (e) if so, the details  thereof  and if not,  the reasons  therefor?

## ANSWER

## THE MINISTER OF  STATE  IN THE  MINISTRY OF  FINANCE (SHRI SHIV PRATAP  SHUKLA)

## To be answered by

(a) to (e):   Government  has acted in a systematic  and planned  manner  to enable  recovery  of outstanding  loans from corporate  and other  borrowers.

A number  of initiatives  have been taken  to comprehensively address NPAs  in banks  and to strengthen  the mechanism  for resolution  of stressed assets and making  it timebound,  while empowering   RBI  to  direct   banks   to  initiate   the  process  for  timebound   resolution.   The Insolvency  and Bankruptcy  Code,  2016 (IBC) has been enacted  to create  a unified  framework for resolving  insolvency  and bankruptcy matters.  The Banking  Regulation  Act,  1949 has been amended,   to  provide   for  authorisation to  RBI  to  issue  directions   to  banks   to  initiate   the insolvency   resolution   process  under  IBC.  Under   this,   by   adopting   a  creditor-in-saddle approach,   with   the  interim   resolution   professional   taking   over   management   of  affairs  of corporate  debtor  at the outset,  the incentive  to resort to abuse of the legal  system has been taken   away.   This, coupled   with   debarment   of  wilful   defaulters   and  persons   associated   with NPA  accounts   from  the  resolution   process,  has  affected  a  fundamental   change   in  the creditor-debtor  relationship. Further,  as per RBI's directions,  cases have been filed under  IBC in the National  Company  Law  Tribunal  (NCLT)  in respect of 39 large  defaulters,  amounting to  about   Rs.  2.69 lakh   crore   funded   exposure,   as  on  31.12.2017.   The   rate   of  recovery   is dependent, inter-alia ,  on  the  quality   of  the  asset  in  each  case,  the  potential   for  the  sector concerned,  and market  conditions.  Prior  to enactment  of the IBC, options  available  to banks for resolution  of stressed assets were  restructuring of loans under various  schemes of RBI, a one-time  settlement  by  way  of compromise,  and filing  of suits and enforcement  of decree for recovery   thereafter.   These  were   not  time-bound,   and  tapped   either   only   the  defaulting borrower  or a limited   pool  of  potential   buyers.  IBC  has made resolution  of stressed assets time-bound   and  transparent,   with   price   discovery   from a  wider   pool  of  buyers. Such  a transparent  and open resolution  process offers banks  a fair price  discovery  mechanism. The  Securitisation   and  Reconstruction of  Financial   Assets  and  Enforcement   of  Security Interest Act,   2002  has  been  amended   to  make it  more   effective   with   provision   for  three months  imprisonment  in case the borrower  does not provide  asset details  and for the lender to  get  possession  of  mortgaged   property   within   30  days.   Also, six  new   Debts  Recovery Tribunals have  been established  to expedite  recovery.

In addition,  under the PSBs Reforms  Agenda,  PSBs have created  stressed asset management verticals   for  stringent   recovery, segregated   pre-  and  post-sanction   follow-up   roles   for  clean and  effective  monitoring, initiated   creation   of  online   one-time   settlement   platforms   and committed   to  monitoring   large-value   accounts   by   tying   up with   for  specialised   monitoring agencies for loans of Rs. 250 crore  and above.

In order  to deter economic  offenders from evading  the process of Indian  law  by  remaining outside  the jurisdiction of Indian  courts,  Government  introduced  legislation  in Parliament  and the  same  has  been  passed as  the  Fugitive   Economic   Offenders   Act,   2018.  It  provides   for attachment   of  property   of  a  fugitive   economic   offender,   confiscation   of  such  offender's property  and disentitlement of the offender from defending  any  civil  claim.  Government  has also asked PSBs to examine  all accounts  exceeding  Rs. 50 crore,  if classified  as NPA,  from  the angle of possible  fraud and in case an account  turns  NPA,  to seek a report  on the borrower from the  Central   Economic   Intelligence   Bureau,   a  nodal   agency   for  economic   intelligence mandated  to ensure  interaction  and coordination  among  all the concerned  agencies in the area of  economic   offences.  Further,   for  enforcement   of  auditing   standards   and  ensuring   the quality   of  audits, Government   has  initiated   establishment   of  National   Financial   Reporting Authority as an independent  regulator.  Government  has also advised Public  Sector  Banks to obtain   certified   copy   of  the  passport   of  the  promoters/directors and  other   authorised signatories  of companies  availing  of loan  facilities  of more  than  Rs. 50 crore.

Enabled  by  the  above  measures,   NPAs   of  PSBs  reduced   by   Rs.  2,00,646 crore   due  to recoveries  from defaulters  during  the last four financial  years (as per RBI data on domestic operations).  Recovery  is continuing  under various legal  mechanism,  as per legal  provisions.