Lok Sabha Question No. 1140 (UNSTARRED), answered on 2019-02-08
Subject: Banking Sector Reforms
Ministry: FINANCE
Asked by: SHIVKUMAR CHANABASAPPA UDASI

## Draft Reply GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA

## UNSTARRED QUESTION NO. 1140

## TO BE ANSWERED ON THE 08 th  FEBRUARY, 2019, MAGHA 19, 1940 (SAKA)

## Banking Sector Reforms QUESTION

## 1140. SHRI SHIVKUMAR UDASI

Will the Minister of FINANCE be pleased to state:

- a) whether the banking sector has failed to meet the targets for weaker sections of the society and if so, the details thereof;
- b) whether  the  Government  proposes  to  undertaken  any  major  reforms  in  the banking sector and if so, the details thereof; and
- c) whether the Government proposes to push banking sector reforms to lift out of Non-Performing Assets and revive lending growth and if so, the details thereof?

## ANSWER MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI SHIV PRATAP SHUKLA)

(a): In terms of Reserve Bank's extant guidelines on Priority Sector Lending, a target of 10 percent of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposure (CEOBE), whichever is higher, has been prescribed for lending to Weaker  Sections.  Reserve  Bank  monitors  the  performance  of  banks  against  the stipulated priority sector targets/ sub-targets on a quarterly as well as annual basis. As  reported  by  RBI,  Scheduled  Commercial  Banks  (SCBs)  have  achieved  the prescribed target and the advances under Priority Sector to weaker sections stood at 10.33% for financial 2016-17 and 10.74% for financial year 2017-18.

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

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-
- i. increasing  access  to  banking  services  from  home  and  mobile  through  digital banking and enhanced customer ease,
- ii. enabling easy accessibility to senior citizens and the differently-abled, through online update of pension life certificates, etc.
- 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,
- iv. strict  segregation  of  pre-  and  post-sanction  roles  and  responsibilities  for enhanced accountability,
- v. ring-fencing of cash flows and use of technology and analytics for comprehensive diligence across data sources for prudent lending,
- vi. institution  of  transparent  and  robust  one-time  settlement  mechanism  with automated escalation and monitoring,
- vii. monitoring of loans above ₹250 crore through specialised agencies for effective vigil,
- viii. establishment  of  stressed  asset  management  verticals  in  banks  for  focused recovery and timely and effective management of stressed accounts,
- 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,
- x. monetisation of non-core assets for strengthening capital base,
- xi. enabling faster bill realisation for MSMEs through discounting by banks on the Trade Receivables electronic Discounting System (TReDS),
- xii. enabling  proactive  reach-out  to  borrowers  and  stepping-up  cluster-based financing to MSMEs,and
- 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  ₹ 50 crore that turn NPA being checked for wilful default and fraud.
3. In-principle approval for MSME loans up to ₹ 1 crore within 59 minutes by PSBs through the 59 minutes portal (www.psbloansin59minutes.com).
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.

(c) : In addition to 4R's approach mentioned in (b) above, Government has taken a number of steps to expedite and enable resolution of NPAs of PSBs over the four and a half financial year period ending September 2018, 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 creditor-debtor 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 ₹ 1,97,769 crore as on 31.3.2017 and the remaining 29 had outstanding amount of ₹ 1,35,846 crore as on 30.6.2017.

(2) 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, 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  specialized monitoring agencies.

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