Lok Sabha Question No. 753 (UNSTARRED), answered on 2018-12-14
Subject: Public Vs Private Banks
Ministry: FINANCE
Asked by: HARISH DWIVEDI

## GOVERNMENT  OF INDIA

## LOK SABHA UNSTARRED QUESTION NO. †753 TO BE ANSWERED ON THE 14 TH  DECEMBER 2018/ AGRAHAYANA 23, 1940  (SAKA) Public Vs Private  Banks

## MINISTRY  OF FINANCE DEPARTMENT  OF FINANCIAL SERVICES

## †753.  SHRI HARISH  CHANDRA  ALIAS  HARISH  DWIVEDI:

Will  the Minister  of FINANCE  be pleased to state:

- (a) whether  the Public  Sector  Banks  (PSBs) are lagging  behind  private  sector  banks;
- (b) if so, the reasons  therefor;  and
- (c) the steps being  taken  by  the Government  to promote  the functioning  of PSBs?

## ANSWER

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

(a)  and  (b):  The  preambles   to  the  Banking   Companies   (Acquisition and  Transfer   of Undertakings)   Acts of  1970  and  1980 and  the  State  Bank of  India  Act,   1955 commit PSBs to serve economic  development  in conformity  with  national  policy  and objectives, expand banking  facilities  on large  scale particularly in underserved  areas, and fulfil  other public  purposes.  In line  with  the legislative  intent,  PSBs have played  an important  role  in nation-building as  the  principal   source   of  finance   for  several   segments   and  areas insufficiently served by   other   lenders.   PSBs  have  led  in  contributing, inter  alia, to  the following:

- (ii) 67.1% of the business of  SCBs (as on 30.9.2018,  as per provisional  RBI data)
- (i) 77.3%  of  rural/semi-urban   branches   of  Scheduled   Commercial Banks  (SCBs) other  than  Regional  Rural  Banks  (RRBs)  (as on 30.6.2018,  as per RBI data)
- (iii) 69.3% of the deposits  mobilised  by  SCBs (as on 30.9.2018,  provisional  RBI data)
- (v) 76.4% of the agriculture  and allied  activities  advances by  SCBs(as on 30.9.2018, provisional  RBI data)
- (iv) 69.5% of the priority sector advances by  SCBs (as on 30.9.2018,  provisional  RBI data)
- (vi) 67.3% of the retail  housing  advances by  SCBs (as on 30.9.2018,  provisional  RBI data)
- (viii) 26.91 crore  (80.4%) accounts  opened under Pradhan Mantri  Jan Dhan  Yojana.
- (vii) 87.51% of the number  of education  loan accounts  SCBs other  than  RRBs (for financial  year  2017-18, as per RBI data)

Further,   PSBs  have  been  in  the  lead  in  lending   for  long-gestation   projects   for  core industries   and  infrastructure, which   have  relatively lower   financial   returns   but  high economic  and social  returns.

While  recognising  the importance  and the role  of PSBs, Government  has also recognised the  need  for  greater   competition   to  foster  higher   productivity and  efficiency   in  the banking  system  and, accordingly, through  an amendment  to the Banking  Regulation  Act in  1993,  allowed   the  setting   up of  new   private   sector   banks.   As  a  result,   the  banking system in  the  country   today   has  both   public   and  private   sector   banks,   which   fulfil different  objectives.

(c): To  strengthen   banks   and  foster  a  culture   of  clean   and  responsible   banking, Government  has followed  a comprehensive  4 R's approach  of recognition,   resolution, recapitalisation and reforms:

-  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.
-  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.
-  Recapitalisation amounting   to  Rs.  2,11,000 crore   has  been  initiated   in  October 2017 to strengthen  balance-sheets  of public  sector  banks.
-  Reforms have accompanied recapitalisation through a comprehensive   PSB Reforms  Agenda  adopted  by  PSBs.

A number  of steps have been taken  to promote  the functioning  of PSBs, including, inter alia , the following:

1. Reforms,  as per the PSB Reforms  Agenda  adopted  by  PSBs 
2. (ii) enabling   easy   accessibility to  senior   citizens   and  the  differently-abled, through online  update  of pension  life certificates,  etc.
3. (i) increasing access  to  banking   services  from   home   and  mobile   through   digital banking  and enhanced  customer  ease,
4. (iii) instituting efficient  practices  for effective  coordination in large  consortium  loans by  restricting   number   of  lenders   in  consortium   and  by   adoption   of  standard operating  procedures,
5. (v) ring-fencing of cash flows and use of technology and analytics for comprehensive  diligence  across data sources for prudent  lending,
6. (iv) strict segregation of preand  post-sanction roles and  responsibilities for enhanced  accountability,
7. (vi) institution of  transparent   and  robust  one-time   settlement   mechanism   with automated  escalation  and monitoring,
8. (viii) establishment   of  stressed  asset  management   verticals   in  banks   for  focussed recovery  and timely  and effective  management  of stressed accounts,
9. (vii) monitoring   of  loans  above  Rs.  250  crore   through   specialised   agencies   for effective vigil,
10. (ix) institution   and  implementation of  a  risk   appetite   framework for  a  structured approach   to  manage,   measure   and  control   risk   and  check   aggressive   and imprudent  lending,
11. (xi) enabling  faster bill  realisation  for MSMEs through  discounting  by  banks  on the Trade Receivables  electronic  Discounting  System  (TReDS),
12. (x) monetisation  of non-core  assets for strengthening capital base,
13. (xii) enabling proactive reach-out to borrowers and stepping-up cluster-based financing  to MSMEs,  and
14. (xiii) developing human resources by rewarding top performers and enabling specialisation  through  job-families,  and role  based learning  for executives.
2.   Comprehensive   checking   of  all  accounts   above  Rs.  50  crore   that   turn NPA   being checked  for wilful  default  and fraud.
4. Strengthening governance through professional and arms-length top-level appointments  of Whole  Time  Directors  (WTDs)  and Non-executive  Chairmen  of PSBs through  the Banks Board Bureau,  institution  of performance-based  extension  in WTD appointments  and bifurcation  of the position  of Chairman  and Managing  Director  (MD) into  those of non-executive  Chairman  and an MD & CEO.
3.     In-principle  approval  for MSME loans up to Rs. 1 crore  within  59 minutes  by  PSBs through  the 59 minutes  portal  (www.psbloansin59minutes.com ).

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

- (ii) Record  recovery  of Rs. 67,026 crore  in the first half of the current  financial  year, being more than double  the amount  recovered  in the first half of last year  and nearly  at par with  the amount  of Rs. 67,107 crore  recovered  during  the whole  of the preceding  financial  year,
- (i) The Gross NPAs  peaked  in March  2018 and have begun declining  with  reduction being nearly  Rs. 23,860 crore  in the first half of the current  financial  year  to Rs. 8,71,741 crore  from  Rs. 8,95,601 as  on 31.3.2018,
- (iii) Non-NPA  accounts  overdue  by  31 to 90 days have declined  for five successive quarters,   reducing   from   Rs.  2.84 lakh   crore   as  of  March 2017 to  Rs.  1.10 lakh crore  as of September  2018, reducing  credit  at risk,  and
- (iv) Provision  Coverage  Ratio  of banks  has risen  steadily  from  49.31% at the time  of AQR to a healthy  level  of 67.17% as of September  2018.