Lok Sabha Question No. 1817 (UNSTARRED), answered on 2023-02-13
Subject: Recovery of Bank NPAs
Ministry: FINANCE
Asked by: Dinesh Chandra Yadav

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## LOK SABHA UNSTARRED QUESTION NO-1817

ANSWERED ON- 13/2/2023

## RECOVERY OF BANK NPAs

## 1817. SHRI DINESH CHANDRA YADAV

Will the Minister of FINANCE be pleased to state:-

(a) whether recovery of Non-Performing Assets (NPAs) has not been expedited despite making amendments in IBC legislation four times during the last four years and banks have  been  unsuccessful  to  recover  their  debt,  resulting  in  banks  writing  off  money  of taxpayers of the country and if so, the details thereof;

(b) whether three fourth amount of total NPAs is due on only three hundred and twelve defaulters and banks are not able to recover from them; and

(c) if so, the details thereof along with the corrective steps taken/proposed to be taken by the Government and banks jointly for recovery of the bank NPAs?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (DR. BHAGWAT KARAD)

(a) to (c): The Insolvency and Bankruptcy Code, 2016 (IBC) was enacted to provide for insolvency  resolution  of  distressed  entities  in  a  time  bound  manner.  As  of  September 2022, 553 cases were resolved through Corporate Insolvency Resolution Process (CIRP) under IBC, wherein, the realisable value to the creditors was Rs. 2.43 lakh crore.  Further, 23,417  applications  for  initiation  of  CIRP,  having  underlying  default  of  Rs.  7.31  lakh crore were resolved before their admission itself.

Further, in respect of write-off of non-performing assets (NPAs), as per Reserve Bank of India (RBI) guidelines and policy approved by banks' Boards, NPAs, inclu ding, inter-alia , those in respect of which full provisioning has been made on completion of four years, are removed from the balance-sheet of the bank concerned by way of write-off. Banks evaluate/consider  the  impact  of  write-offs  as  part  of  their  regular  exercise  to  clean  up their  balance-sheet,  avail  tax  benefit  and  optimise  capital,  in  accordance  with  RBI guidelines  and  policy  approved  by  their  Boards.  The  borrowers  of  written-off  loans continue  to  be  liable  for  repayment  and  banks  continue  to  pursue  recovery  actions initiated in written-off accounts through various recovery mechanisms available to them.

As per inputs received from RBI, as on 31.3.2022, 39.8% of gross NPAs of scheduled commercial banks pertain to top 312 defaulting borrowers. Recovery in NPA accounts is an  ongoing  process,  and  scheduled  commercial  banks  have  recovered  an  aggregate amount of Rs. 6.60 lakh crore during the last five financial years.

Comprehensive measures have been taken by the Government and RBI to prevent NPAs in public sector banks (PSBs), which include, inter alia , the following:

- (1) Change in credit culture has been effected, with IBC fundamentally changing the creditor-borrower  relationship,  taking  away  control  of  the  defaulting  company from  promoters/owners,  and  debarring  wilful  defaulters  from  the  resolution process.  To  make  the  process  more  stringent,  personal  guarantor  to  corporate debtor has also been brought under the ambit of IBC.
- (2) Further, a pre-packaged insolvency resolution process (PPIRP) was operationalised under IBC to provide an efficient alternative insolvency resolution process for corporate persons classified as micro, small and medium enterprises (MSME), ensuring quicker, cost-effective and value maximising outcomes for all the stakeholders, in a manner which is least disruptive to the continuity of their businesses and also preserving employment.
- (3) Prudential  Framework  for  Resolution  of  Stressed  Assets  was  issued  by  RBI  in 2019  to  provide  a  framework  for  early  recognition,  reporting  and  time  bound resolution of stressed assets, with a build-in incentive to lenders for early adoption of a resolution plan.
- (4) Central Repository of Information on Large Credits (CRILC) collects, stores and disseminates  credit  data  to  lenders,  and  banks  are  required  to  submit  report  on weekly basis to CRILC, in case of any default by borrowing entities with exposure of Rs. 5 crore and above.
- (5) Under the PSB Reforms Agenda, comprehensive and automated Early Warning Systems (EWS) were instituted in PSBs, with ~80 EWS triggers and use of thirdparty data for time-bound remedial actions in the borrowing accounts.
- (6) PSBs  have  also  created  Stressed  Asset  Management  Verticals  for  stringent recovery, segregated pre- and post-sanction follow-up roles for clean and effective monitoring, and engaging specialised monitoring agencies for monitoring of largevalue accounts.
- (7) The  Securitisation  and  Reconstruction  of  Financial  Assets  and  Enforcement  of Security Interest Act, 2002 has been amended to make it more effective.
- (8) Wilful defaulters are not sanctioned any additional facilities by banks or financial institutions, and their unit is debarred from floating new ventures for five years.
- (9) Wilful  defaulters  and  companies  with  wilful  defaulters  as  promoters/directors have been debarred from accessing capital markets to raise funds.

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