Lok Sabha Question No. 401 (STARRED), answered on 2019-07-22
Subject: Losses of PSBs
Ministry: FINANCE
Asked by: Ashok Kumar Rawat

## GOVERNMENT  OF INDIA

## DEPARTMENT  OF FINANCIAL SERVICES LOK SABHA STARRED QUESTION NO.†*401

## MINISTRY OF  FINANCE

TO BE ANSWERED  ON THE 22 ND JULY  2019/ ASHADHA  31, 1941 (SAKA)

## Losses  of PSBs

## †*401.SHRI  ASHOK KUMAR  RAWAT:

Will  the Minister  of FINANCE  be pleased to state:

- (a) whether  the losses incurred  by  the Public  Sector  Banks  (PSBs) have increased upto more than  Rupees  15000 crore;
- (b) if so, the reasons  therefor;
- (c) if not,  the losses of PSBs at present;  and
- (d) the steps being  taken  by  the Government  to reduce  such losses?

## ANSWER

The Finance Minister (SMT. NIRMALA  SITHARAMAN)

- (a) to (d): A statement  is laid  on the Table  of the House.

## STATEMENT FOR LOK SABHA  STARRED QUESTION NO. †*401 FOR 22 ND JULY 2019  REGARDING  'LOSS OF PSBS' BY SHRI ASHOK KUMAR  RAWAT,  MEMBER OF PARLIAMENT

(a) to (d): As per RBI data on global  operations,  aggregate  gross advances of Public Sector  Banks  (PSBs)  increased   from Rs.  18,19,074   crore   as  on  31.3.2008   to  Rs. 52,15,920  crore  as on 31.3.2014.  As per RBI inputs,  the primary  reasons for spurt in stressed assets have been observed  to be, inter alia, aggressive  lending  practices, wilful   default/loan   frauds/corruption in  some  cases,  and  economic   slowdown. Asset Quality  Review  (AQR)  initiated  in 2015 for clean and fully  provisioned  bank balance-sheets   revealed   high   incidence   of  Non-Performing Assets  (NPAs).   As  a result  of AQR  and subsequent  transparent  recognition  by  banks,  stressed accounts were reclassified  as NPAs  and expected  losses on stressed loans,  not provided  for earlier   under flexibility given   to  restructured   loans,   were   provided   for.  Further, during  2018, all such schemes for restructuring stressed loans were  withdrawn. As a result,  PSBs posted aggregate  operating  profits  during  FY2017-18 and FY201819 of Rs. 1,55,586 crore  and Rs. 1,53,891 crore  respectively. However,  primarily due to continuing  ageing  provision  for NPAs,  they  made aggregate  provision  for NPAs  and  other   contingencies   of  Rs.  2,40,956   crore   and  Rs.  2,36,649  crore respectively, resulting   in  aggregate   net  losses of  Rs.  85,370 crore   and  Rs.  80,084 crore   respectively. Thus,   aggregate   losses of  PSBs  reduced   by   Rs.  5,286  crore   in FY2018-19  vis-à-vis  aggregate   losses  in  FY2017-18.  Further,   as  a  result  of Government's 4R's strategy of recognition, resolution, recapitalisation and reforms,   their   gross  NPAs   have  since  declined   from Rs.  8,95,601 crore   as  on 31.3.2018 to  Rs.  7,89,569 crore   as  on  31.3.2019   (RBI  data  on  global   operations; provisional  data for 31.3.2019).

Steps taken under  the aforementioned 4R's strategy include, inter-alia , the following:

- (ii) Over the last  four  financial   years,   PSBs  were   recapitalised   to  the  extent   of Rs. 3.12 lakh  crore,  with  infusion  of Rs. 2.46 lakh  crore  by  the Government and mobilisation  of over Rs. 0.66 lakh  crore  by  PSBs themselves.
- (i) Change  in credit  culture  was effected, with  the IBC fundamentally changing the  creditor-borrower relationship, taking   away   control   of  the  defaulting company   from promoters/owners   and  debarring   wilful   defaulters   from the resolution  process and debarring  them  from raising  funds from the  market.
- (iii) Key reforms  were  instituted  in PSBs as part  of PSBs Reforms  Agenda,  which include, inter-alia , the following:
- (a) Board-approved  Loan Policies  of PSBs now  mandate  tying  up necessary clearances/approvals and  linkages before disbursement, scrutiny of

group  balance-sheet   and  ring-fencing   of  cash  flows,   non-fund   and  tail risk  appraisal  in project  financing.

- (b) Use of third-party  data sources for comprehensive  due diligence  across data sources has been instituted.
- (c) Monitoring  has been strictly  segregated  from  sanctioning  roles in highvalue  loans,  and specialised  monitoring agencies combining  financial  and domain  knowledge  have been deployed  for effective monitoring  of loans above Rs. 250 crore.
- (d) To ensure  timely  and better  realisation  in one-time  settlements  (OTSs), online  end-to-end OTS  platforms  have been set up.

Gains to PSBs are amply  visible  in their   growing   financial   strength.   As  per  RBI data on global  operations  (including  provisional  data for March 2019, as reported on  2.7.2019),   gross  NPAs   of  PSBs  have  reduced   over  the  last  financial   year   by Rs.1,06,032  crore,  record  recovery  of Rs. 3,16,479  crore  has been effected over the last  four  financial   years and  domestic   credit   growth   has  risen   to  10.20%  during FY2018-19. Growing  strength  of PSBs is also evident  from the fact that  all PSBs meet  minimum   regulatory capital   requirement, six  PSBs  are  now   out  of  lending restrictions   on  account   of  placement   under Reserve   Bank  of  India's   Prompt Corrective   Action   framework, balance-sheets   of  PSBs  have  been  substantially cleaned up through  transparent  recognition  of NPAs  and their  provision  coverage ratio  is at its highest  level  in seven years.

Note: Figures cited above for PSBs include those for IDBI Bank Limited, which was re-categorised as a private sector bank by RBI with effect from 21.1.2019 .