Lok Sabha Question No. 1028 (UNSTARRED), answered on 2019-02-08
Subject: NPA of Indian Lenders
Ministry: FINANCE
Asked by: PRITAM GOPINATH MUNDE, Shrirang Appa Barne, SHIVAJI ADHALRAO PATIL, ANANDRAO  ADSUL

## GOVERNMENT  OF INDIA

## MINISTRY  OF FINANCE DEPARTMENT  OF FINANCIAL  SERVICES

## LOK SABHA UNSTARRED QUESTION NO: 1028 TO BE ANSWERED ON THE 8 th  FEBRUARY,  2019/MAGHA  19, 1940  (SAKA)

## QUESTION NPA of Indian Lenders

## 1028:  DR. PRITAM  GOPINATH  MUNDE: SHRI  SHRIRANG  APPA  BARNE: SHRI  ADHALRAO  PATIL SHIVAJIRAO: SHRI  ANANDRAO  ADSUL:

## Will  the Minister  of FINANCE  be pleased to state:

- (a) whether   the  Non-Performing   Assets  (NPAs)   accumulated   by   Indian   lenders   are higher  than  those of banks  in most major economies,  including  the US,  UK, China and Japan,   if  so,  the  details   thereof   and  the  rank   of  India  out   of  the  major world economies  plagued  by  bad loans;
- (c) whether  the Government  and Reserve  Bank of India (RBI) are readying  to deal with the bad loan problem,  including  a one-time  settlement  scheme for weak  sectors and penal action  against siphoning of funds, if so, the details thereof and the plan/scheme  prepared/formulated by  the Government  in this regard;
- (b) whether  gross NPAs  increased  to 10.2 percent  in September,  2017, compared  to 9.6 percent  in March,  which  has cautioned  against  further  deterioration as  gross NPAs could  inch   up  to  10.8  percent   by   March 2018,  if  so,  the  details   thereof   and  the measures  taken  to reduce  the gross NPAs;
- (d) whether  any  comprehensive  strategy  has been chalked  out by  the Government  to nab the defaulters  and if so, the details  thereof;  and
- (e) whether  the Government  has obtained  forensic  audit  report  of the banks  on major defaulters  and if so, the details  thereof  and the time  by  which  action is likely  to be initiated  against  the defaulters?

## ANSWER

- (a): Reserve  Bank of India (RBI) has informed  that  from country-wise data on ratio  of non-performing  loans to total  gross loans available  on the International  Monetary  Fund database,  it is observed  that  the ratio  for India compares  adversely  with  those of USA, UK, China  and Japan.

## To be answered by THE MINISTER  OF STATE  IN THE  MINISTRY  OF FINANCE (SHRI SHIV PRATAP  SHUKLA)

- (b) to (e): As per Reserve  Bank of India (RBI) data on global  operations,  the aggregate gross advances of Public  Sector  Banks (PSBs) and Scheduled  Commercial  Banks (SCBs) increased  from Rs. 18,19,074  crore  and Rs. 25,07,885  crore  respectively  as on 31.3.2008

to Rs. 52,15,920  crore  and Rs. 68,75,748  crore  respectively  as on 31.3.2014.  As per RBI inputs,  the primary  reasons for spurt  in stressed assets have been observed  to be, interalia, 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 the  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   (GNPAs)   of  SCBs,  as  per  RBI  data  on  global   operations,   rose  from Rs. 3,23,464  crore  as on 31.3.2015  (4.3 % of gross advances),  to Rs. 7,90,556 crore  as on 31.3.2017   (9.3  %  of  gross  advances),   to  Rs.  8,50,178 crore   as  on  30.9.2017   (9.8  %  of gross advances),  to Rs. 10,36,187  crore  as on 31.3.2018  (11.2 % of gross advances) and as a  result of  Government's   4R's   strategy   of  recognition, resolution,   recapitalisation and reforms,  have since declined  to Rs. 10,09,286  crore  as on 31.12.2018  (10.3 % of gross advances,  as per provisional  data).

A  number   of  measures   have  been  taken   to  expedite   and  enable resolution   of  NPAs, including, inter alia , the following:

- (2) The  Securitisation   and  Reconstruction of  Financial   Assets  and  Enforcement   of Security  Interest  (SARFAESI)  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.
- (1) The Insolvency  and Bankruptcy  Code,  2016 (IBC) has been enacted,  which  has provided  for taking  over the 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.
- (3) Under  the PSB 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  through  specialised monitoring  agencies.

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),  SCBs successfully  recovered  an amount  of Rs. 3,62,120 crore.

With  regard  to scheme for weak  sectors,  with  a view  to facilitate  meaningful  restructuring of  stressed  Micro,   Small   and  Medium   Enterprises   (MSME)  loan   accounts,   RBI  has permitted  a one-time  restructuring of existing  loans with  exposure  up to Rs. 25 crore  to MSMEs without classifying them as NPA.

With  regard  to action  against  siphoning  of funds, action  is taken  by  lenders  under RBI's Master  Circular  on Wilful  Defaulters  and its Master  Directions  on Frauds -Classification and Reporting  by  commercial  banks  and select FIs. RBI Master  Directions  envisage  that forensic  audit  be undertaken  and acted upon  by  banks,  and do not envisage  action  in this regard  by  the Government.  Under  the said RBI directions/instructions, and in addition to these, a number  of steps have been taken  against  defaulters,  including, inter-alia ,  the following:

- (2) As per data reported  by  PSBs, as on 31.12.2018,  2,881 FIRs have been registered against  wilful  defaulters,  9,594 suits have been filed for recovery  from  them,  and action  has been initiated  under  the SARFAESI  Act,  2002 in respect of 7,774 cases of wilful  defaulters.
- (1) As  per  RBI  instructions, wilful   defaulters   are  not  sanctioned   any   additional facilities  by  banks  or financial  institutions, their  unit  is debarred  from  floating  new ventures  for five years,  and lenders  may  initiate  criminal  proceedings  against  them, wherever  necessary.
- (3) Under   the  Securities   and  Exchange   Board  of India  (Substantial   Acquisition of Shares and Takeovers)  (Second Amendment)  Regulations,  2016, wilful  defaulters and companies  with  wilful  defaulters  as promoters/directors have been debarred from accessing capital markets to raise funds.
- (5) The  Fugitive   Economic   Offenders   Act,   2018  has  been  enacted   to  provide   for attachment   of  property   of  a  fugitive   economic   offender,   confiscation   of  his property  and disentitling him from defending  any  civil  claim.
- (4) Under   the  Insolvency   and  Bankruptcy Code,   2016  wilful   defaulters   have  been debarred  from participating in the insolvency  resolution  process.
- (6) Government  has asked PSBs to examine  all accounts  exceeding  Rs. 50 crore,  if classified   as  NPA,   from   the  angle   of  possible   fraud   and  to  immediately initiate examination  of the issue of wilful  default  once a fraud  is reported.
- (7) Instructions/advisories  have  been  issued  by   Government   to  PSBs  to  decide  on publishing  photographs  of wilful  defaulters,  in terms  of RBI's instructions  and as per their  Board-approved  policy,  and to obtain  certified  copy  of the passport  of the  promoters/directors and  other   authorised   signatories   of  companies   availing loan facilities  of more  than  Rs. 50 crore.