Lok Sabha Question No. 2234 (UNSTARRED), answered on 2021-03-08
Subject: Laws on NPAs
Ministry: FINANCE
Asked by: Hemant Patil, Rahul Ramesh Shewale, Omprakash Bhupalsinh alias Pawan Rajenimbalkar

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## LOK SABHA UNSTARRED QUESTION NO-2234

ANSWERED ON- 08/03/2021

## LAWS ON NPAs

## 2234. SHRI HEMANT SRIRAM PATIL SHRI RAHUL RAMESH SHEWALE SHRI OMPRAKASH BHUPALSINH ALIAS PAWAN RAJENIMBALKAR

Will the Minister of FINANCE be pleased to state:

- a) whether the Government has evaluated the performance of laws enacted by the Government to cutb Non-Performing Assets (NPAs) of the Public Sector Banks (PSBs) before decision of infusion of in such banks; rising taking capital
2. () if the details and outcome thereof and if not; the reasons therefor; SO,
3. whether the Government has conducted any study on the success of the previous tecapitalisation of PSBs in the country;
4. (d) if s0, the details and outcome thereof and if not; the teasons therefor; and
5. (e) the other steps /being taken by the Government to ensure effective implementation of the Laws enacted to curb NPAs to avoid re-capitalisation of PSBs in the country?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (SHRI ANURAG SINGH THAKUR)

- (a) to (e): Three laws assist in dealing with non-performing assets (NPAs) of banks, viz: the Insolvency and Bankruptcy Code, 2016 (IBC), the Secutitisation and Reconstruction of Financial Assets and Enforcement of Security Interest; 2002 (SARFAESI Act), and the Recovery of Debts and Bankruptcy Act; 1993 (RDB Act) As per data of the Insolvency and Bankruptcy Board of India, through action borrowers under IBC, financial creditors including scheduled commercial banks (SCBs) have recovered an amount of Rs: 1,76,674 crore the last three financial years, and as per Reserve Bank of India SCBs have additionally tecovered an amount of Rs 1,66,187 crore through action under SARFAESI Act and RDB Act the same period This recovery and other steps taken by Government and the Reserve Bank of India, have led to a reduction in gross NPA of from a of Rs: 8.96 lakh crore as on against duting data, during public have peak

With regard to recapitalisation of PSBs, the objectives of recapitalisation are aligned with those of the regulatory framewotk; and include the resilience of institutions, addressing system-wide tisks, and increasing the tisk coverage of the capital framework Timely recapitalisation has enabled PSBs to remain compliant with stringent raising banking

Basel II norms implemented for banks in India we.f 31.3.2008, and also with further stringent Basel III norms W.e.f 1.4.2013. capital capital

Capital is infused in PSBs from time to time to supplement banks efforts to meet capital requirement: Since March 2008, Government has infused Rs 3.87 lakh crore in PSBs, whereas PSBs themselves have mobilised of Rs. 4.05 lakh crore from market in the form of both equity and bonds, out of which Rs 55,670 crore have been raised in the cutrent financial yeat; up to 3.3.2021. capital

Capital a measure of a banks capacity for generating loan assets, is essential for credit   expansion: Enabled by the  recapitalisation; PSBs'   advances have   grown at a compound annual rate of 11.4%/ from March 2008 to March 2020. build-up of stress in their loan portfolio resulting in theic gross non-performing assets (GNPAs) at 14.58%. being key ` growth during period During

Recapitalisation has been part of Government s overatching policy response of recognition of stress, resolution of stressed accounts, recapitalisation, and reforms in banks As a part of the reforms, Government has instituted since 2018,a comprehensive framework fot institutionalised monitoring of bank-wise progress on Enhanced Access & Service Excellence   (EASE) Reforms for   PSBs. Under EASE Reforms; bank-wise progress is monitored through an independent agency on over 100 objective and benchmarked metrics incorporated in an EASE Reforms Index; which is reviewed on quatterly basis by and also publicly reported in a transparent manner through an annual report and quarterly updates. It is observed that all PSBs have shown improvement over their baseline Index score in each of the last two financial years being

As a result of timely recapitalisation coupled with reforms, financial health of PSBs has improved significantly, as reflected in the following:

- Record recovery of Rs. 2.74 lakh crore has been effected since March 2018 till December 2020;
- Gross NPAs have reduced from Rs 8.96 lakh crore in March 2018 to Rs 5.77 lakh crore in December 2020;
- Occurrence of frauds has declined  sharply,  from an average of 0.72%/ of advances FY2009-10 to FY2013-14 and of 1.01% in FY2013-14 to 0.23%/ in FY2019-20; during peak
- As 2 out of 21 PSBs in in March 2018, 11 out of 12 PSBs were in in December 2020; against profit profit
- (iv) Asset   quality has   improved significantly, with the net  NPA  (NNPA) ratio reducing from 7.97% in March 2018 to 2.32% in December 2020;
- (vi) Number of PSBs under RBIs prompt corrective action (PCA) reduced from 11 in March 2018,to 3 in December 2020; and
- Capital to risk-weighted assets ratio (CRAR) improving by 208 basis points, from 11.66% in March 2018 to 13.74% in December 2020,and
- (vii)   Capital adequacy has improved significantly, with
- Provision   coverage ratio to 87.47%/ in December  2020, from 62.7%/ in March 2018,reflecting increased resilience rising