Lok Sabha Question No. 982 (UNSTARRED), answered on 2019-02-08
Subject: Debt Burden of PSBs
Ministry: FINANCE
Asked by: SRINIVAS KESINENI

## GOVERNMENT  OF INDIA

## LOK SABHA UNSTARRED QUESTION NO. 982

## MINISTRY  OF FINANCE DEPARTMENT  OF FINANCIAL SERVICES

## TO BE ANSWERED ON THE 8 TH  FEBRUARY  2019/ MAGHA  19, 1940  (SAKA) Debt Burden of PSBs

## 982. SHRI KESINENI NANI:

Will  the Minister  of FINANCE  be pleased to state:

- (a) whether  the Public  Sector  Banks (PSBs) have recorded  close to Rs. 1.7 trillion  in losses between  December  2015 and June 2018, if so, the details  thereof  and the steps taken  by  the Government  to improve  the debt burden  of the PSBs;
- (b) the percentage  of Non-Performing  Assets (NPAs)  of PSBs out of the total  Gross NPA (GNPA)  along with  the number  of loans from PSB, that have turned  into  NPAs during  the last five years;
- (c) the steps taken  by  the Government  for the recovery  of loans;
- (d) whether  the Government  is planning  to set up specialized  monitoring  agencies for loans above Rs. 250 crore  and a separate  vertical  for NPAs,  if so, the details  thereof;  and
- (e) whether   the  Government   is  thinking   of  privatizing PSBs  which   are  under huge debt, if so, the details  thereof?

## ANSWER

## Minister of State in the Ministry  of Finance (SHRI SHIV PRATAP  SHUKLA)

(a) to (e): 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   PSBs,  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. During  the fourth  quarter  of financial  year  (FY) 2017-18, all such schemes for restructuring stressed loans were  withdrawn. Primarily as a result  of transparent  recognition  of stressed assets as NPAs,  gross NPAs  of Public  Sector Banks,   as  per  RBI  data  on  global   operations,   increased   from   Rs.  2,27,264 crore   as  on 31.3.2014,  to Rs. 2,79,016 crore  as on 31.3.2015,  Rs. 5,39,968 crore  as on 31.3.2016,  Rs. 6,84,732 crore   as  on  31.3.2017,   Rs.  8,95,601 crore   as  on  31.3.2018,   and  as  a  result of Government's   4R's  strategy   of  recognition, resolution,   recapitalisation and  reforms, declined   to  Rs.  8,75,619  as  on  30.6.2018   and  further   to  Rs.  8,64,433  crore   as  on 30.12.2018   (as  per  provisional   data).  While   PSBs  have  consistently posted  operating profits  of Rs. 3,90,717 between  December  2015 and June 2018, they  have posted losses primarily on account  of continuing  ageing  provision  for NPAs  recognised  as a result of AQR initiated  in 2015 and subsequent  transparent  recognition  by  banks,  including  RBI's circular  discontinuing  restructuring schemes in the fourth  quarter  of FY 2017-18. PSBs have made aggregate  provision  for NPAs  and other  contingencies  of Rs. 5,27,233 crore between   December   2015 and  June 2018.  Year-wise   details   of  profitability, as  per  RBI data on global  operations  and data reported  by  PSBs, are at Annex.

Government  has taken  a number  of steps for recovery  of loans,  including, inter alia , the following:

- (1) The Insolvency  and Bankruptcy  Code,  2016 (IBC) has been enacted,  which  has provided  for the taking  over management  of the affairs of the corporate  debtor  at the outset of the corporate insolvency resolution process. Coupled with debarment  of wilful  defaulters  and persons associated  with  NPA  accounts  from the  resolution   process,   this   has  effected  a  fundamental   change   in  the  creditordebtor  relationship. Further,  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.  As  per  RBI's  directions   under the aforesaid   amended   provision   in  the  Banking   Regulation   Act,   1949,  cases  have been  filed  under   IBC  before  the  National   Company Law  Tribunal   (NCLT)   in respect of 41 borrowers,  12 of which  had cumulative  outstanding  amount  of Rs. 1,97,769 crore  as on 31.3.2017  and the remaining  29 had outstanding  amount  of Rs. 1,35,846 crore  as on 30.6.2017.
- (2) The Securitisation   and  Reconstruction of  Financial   Assets  and  Enforcement   of Security  Interest  Act  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.
- (3) Under  the PSB Reforms  Agenda  announced  by  the Government  last year,  PSBs have created  Stressed Asset Management  Verticals  for focussed recovery  in highvalue  accounts,  committed  to engagement  of specialised  agencies for monitoring large   credit   exposure of,  say,   above  Rs.  250  crore,   segregated   pre-  and  postsanction  follow-up  roles for clean and effective  monitoring, and initiated  creation of online  one-time  settlement  platforms.

Enabled by the above steps, as per RBI data on global  operations,  since the initiation of transparent  recognition  in FY 2015-16 till  December  2018 (as per provisional  data),  PSBs successfully  recovered  an amount  of Rs. 3,33,491 crore.

No proposal  for privatisation  of PSBs is presently under Government's consideration.

Annex Lok Sabha Unstarred  Question  no.982, for  8.2.2019  regarding  'Debt Burden  of PSBs' Amount in Crore  Rs.

| Period        | Period              | Operating Profit (1)   | Provisions madeduring the period(2)   | NetProfit (1)-(2)   |
|---------------|---------------------|------------------------|---------------------------------------|---------------------|
| Q4-FY'2015-16 | (Jan-Mar16 quarter) | 37,911                 | 61,616                                | (23,705)            |
| FY'2016-17    |                     | 1,58,994               | 1,70,383                              | (11,389)            |
| FY'2017-18    |                     | 1,55,542               | 2,40,352                              | (84,810)            |
| FY'2018-19    | (Jun-18 quarter)    | 38,270                 | 54,882                                | (16,612)            |

Source:  RBI, Banks.