Lok Sabha Question No. 956 (UNSTARRED), answered on 2019-02-08
Subject: Strengthening of Banking Sector
Ministry: FINANCE
Asked by: SRIRAM MALYADRI

## GOVERNMENT  OF INDIA

## LOK SABHA

## MINISTRY  OF FINANCE DEPARTMENT  OF FINANCIAL SERVICES

## UNSTARRED QUESTION NO. 956 TO BE ANSWERED ON THE 8 TH  FEBRUARY  2019/ MAGHA  19, 1940  (SAKA)

## Strengthening  of Banking Sector

## 956. SHRI MALYADRI  SRIRAM:

Will  the Minister  of FINANCE  be pleased to state:

- (a) whether  the Government  has taken  cognizance  that  banking  is the life blood  of Indian economy  and at the time  of downfall  different  types  of business help them  to invest  more and  more  and  earn  profits   and  to  change   the  laws   of  banking   sector  to  help   them   in recession  from  the downfall  of every  sector;
- (b) if  so,  the  details   thereof   along   with   the  steps  being taken   to  strengthen   the  banking sector;
- (c) whether  the Government  has made any  effort to improve  banking  services in education sector;  and
- (d) if so, the details  thereof  along  with  the steps taken  by  the Government  in this  regard?

## ANSWER

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

(a)  and  (b):  RBI  had  observed   in  its  guidelines   on  Corporate   Debt  Restructuring (CDR) Mechanism   that   inspite   of  their   best  efforts  and  intentions,   sometimes   corporates   find themselves   in  financial   difficulty because  of  factors  beyond their   control   and  also  due  to certain  internal  reasons, and for their  revival  as well  as the safety  of the money  lent,  timely support  through  restructuring in genuine  cases is called  for. Against  this background,  based on  the  experience   in  other   countries   of  institutional mechanism   for  corporate   debt restructuring and need for a similar  mechanism  in India,  a CDR  System  was issued by  RBI in 2001 for implementation by banks,  which  allowed  a standard  asset not to be classified  in the sub-standard  category  with  rescheduling  of instalments  of the principal  debt,  provided  the loan/credit  facility  was fully  secured.  RBI withdrew  the said asset classification  benefits  on restructuring with   effect  from   1.4.2015.   Subsequently, RBI  introduced   other   restructuring frameworks,  such as Strategic  Debt Restructuring and Scheme for Sustainable  Structuring  of Stressed Assets, which  were  also aimed  at resolution  of stressed assets. RBI has informed that   these  frameworks   mimicked   the  desirable   attributes   of  bankruptcy law   with   built-inincentives  for lenders  to encourage  resolution.

To  strengthen   banks,   Government   has  followed   a  comprehensive   4  R's  approach   of recognition,  resolution,  recapitalisation and reforms:

RBI has further  informed  that  following  the enactment  of the Insolvency  and Bankruptcy Code,   2016  (IBC),  it  issued  Revised   Framework for  Resolution   of  Stressed  Assets  in February   2018,  which   used  the  IBC  as  lynchpin, withdrew  various   restructuring schemes issued earlier  by  RBI, and gave banks  the flexibility to formulate  their  own  ground  rules  in devising  resolution  plans  without forbearance in asset classification.

- (i) Recognition   of  restructured   standard   assets  as  NPAs,   initiated   with   Asset  Quality Review  in 2015, have declined  from the peak  of 6.5% in March  2015 to 0.49% as of September  2018.
- (ii) Resolution process has been strengthened by changing the creditor-debtor relationship  through  the Insolvency  and Bankruptcy Code  and debarment  of wilful defaulters  and connected  persons,  which  has resulted  in record  recovery.
- (iii) Recapitalisation amounting  to Rs. 2,11,000 crore  has been initiated  in October  2017 to strengthen  balance-sheets  of PSBs.
- (iv) Reforms  have accompanied  recapitalisation through  a comprehensive  PSB Reforms Agenda adopted by  PSBs.

The steps taken  by  the Government  have resulted  in positives  for PSBs, including, inter alia , the following:

- (i) Gross NPAs peaked in March 2018 at Rs. 8,95,601 crore,  and have declined  by  Rs. 31,168 crore  in the first three  quarters  of the current  financial  year  to Rs. 8,64,433 crore  (provisional  data).
- (ii) Record  recovery  of Rs. 97,151 crore  (provisional  data),   in the first three  quarters  of the  current   financial   year   has  been  effected,  being more   than   double   the  amount recovered  during  the same period  of last year.
- (iii) Non-NPA   accounts   overdue   by   31  to  90  days   have  declined   for  five  successive quarters,  reducing  from  Rs. 2.25 lakh  crore  as of June  2017 to Rs. 0.87 lakh  crore  as of September  2018, reducing  credit  at risk.
- (iv) Provision  Coverage  Ratio  of banks  has risen  steadily  from  46.1% at the time  of AQR to a healthy  level  of 68.9% as of December  2018 (provisional data).

(c)  and  (d):  Banks   provide   education   loans  under the  Model   Education   Loan  Scheme prepared  by  the Indian  Banks'  Association  to deserving/meritorious students  for pursuing higher  education  in India and abroad.  The  scheme provides, inter-alia, provides  for securityfree loan  up to Rs. 4 lakh,  (ii) repayment period  up to 15 years,  (iii)  one-year  moratorium for repayment  after completion  of studies in all cases, (iv) moratorium taking  into  account  spells of  unemployment/under-employment, say   two   or  three   times   during   the  life  cycle   of  the loan,   (v)  moratorium for  the  incubation   period   if  the  student   wants   to  take   up a  start-up venture   after  graduation,   (vi)  collateral-free   loans   up  to  Rs.7.5   lakh   under  the  Credit Guarantee  Fund Scheme for Education  Loans,  (vii) provision  of online  application  on Vidya Lakshmi   web-based  portal,   where   students   can  view,   apply   and  track   education   loan applications  online,  etc. The Ministry of  Human  Resource  Development  provides  interest subsidy  for the period  of moratorium on loans taken  by  students  from  economically weaker sections.