Lok Sabha Question No. 88 (STARRED), answered on 2021-02-08
Subject: Bad Bank Loans
Ministry: FINANCE
Asked by: Ravneet Singh

## GOVERNMENT OF INDIA MNISTRY OF FINANCE

## LOK SABHA STARRED QUESTION NO-*88

ANSWERED ON 08/02/2021

## BAD BANK LOANS

## *88. SHRI RANVEET SINGHBITTU

Will the Minister of FINANCE be pleased to state:

- whether it is a fact that as per a recent analysis by Reserve Bank of India; bad bank loans may hit a old high by September 2021 with a massive increase in the gross bad loan ratio of banks; 22-year
- (6) if so, the details thereof with the complete details of all the challenges the sector 1S likely to face in the along banking future;
- whetherthe Government is any measures to ensure the profitabilityof the banks by bringing down bad loans etc. in order to enable them to function in a sustainable manner; taking
- (d) if so, the details thereof; and
- (e) if not; the reasons therefor?

## THE FINANCE MNISTER

(SMT: NIRMALA SITHARAMAN)

- to (e): A statement is laid on the Table of the House.

## ANSWER

Statement as referred to in reply of Lok Sabha Starred Question no\_ *88 for answer on &th February, 2021/ Magha 19, 1942 (Saka) regarding 'Bad Bank Loans by SHRI RANVEET SINGH BITTU, Hon'ble Member of Parliament

(a) to (e): The Financial Stability Report (FSR) released by Reserve Bank of India (RBI) in January 2021 states that the gross nonperforming asset (GNPA) ratio of Scheduled Commercial Banks (SCBs) may increase from 7.5 per cent in September 2020 to 13.5 per cent under the baseline scenario and to 14.8 per cent under the severe stress scenario, by September 2021.

As per RBI inputs, the said GNPA ratio has been arrived at without factoring in the impact of the policy actions under way, viz:, RBIs resolution framework for COVID-19-related stress and one-time restructuring  of loans to micro,  small and medium   enterprises (MSMEs) , which aim to facilitate revival of real sector activities and mitigate the pandemic's impact on borrowers: Under the said  framework/ scheme,  resolution/ restructuring of eligible loan accounts is permitted without asset classification downgrade Therefore; the actual movement of GNPA ratio of SCBs will depend on the extent to which the benefit of the said framework/ scheme is availed of by the eligible borrowers and facilitates revival and mitigates the pandemic'$ impact on borrowers.

Loan accounts become non-performing due to a varietyof factors, which may be economy wide or to a sector or a firm Appropriate monetary policy, fiscal policy and regulatory measures are taken from time to time to address economy- wide and sectorissues with a view to achieve macroeconomic and secure financial stability In the context of economic slowdown, the impact of the pandemic and the need to support post-pandemic recovery, comprehensive measures have been taken under Govemment's Aatma Nirbhar Bharat economic package and RBIs regulatory package, revival framework and monetary policy steps to mitigate debt servicing burden and pandemic's impact on borrowers, to ensure business continuity and to facilitate revival of real sector activities while ensuring the profitability of the banks and bringing down the bad loans These include, inter alia, the following: specific specific goals Abhiyaan

- Forthe 26 sectors which the Kamath Committee identified as visible impact of the pandemic, RBI has prescribed certain financial parameter ranges for the having
- RBI has provided a framework for lenders to implement resolution plans in respect of eligible loans to corporates and micro, small and medium enterprises (MSMEs) , to enable institutions to offer customised relief to borrowers in the form of restructuring, without downgrading the loan as an NPA Such restructuring may entail the grant of various concessions to the borrower in terms of the total amount to be repaid, instalment amounts   and the rate of interest; extending moratorium and/or the residual periods of repayment; interest and converting the accumulated interest into a fresh loan with a deferred payment schedule, and sanction of additional loan: lending altering waiving penal charges,

aforesaid resolution   plans. These ranges are typically more liberal than the benchmark ranges generally adopted by banks such as State Bank of India and have enabled higher sector\_ relief for deep/ comprehensive restructuring: leading specific

- Government had issued an advisory for extension of registration and completion dates of real estate projects under Real Estate Regulatory Authorities by treating COVID-19 as an event of force majeure, and for loans to the commercial real estate sector; additional time of one year has been given for extension of the date for commencement for commercial operations.
- The debt servicing burden for borrowers have been substantially reduced as & result of reduction in the benchmark policy rate and liquidity enhancing measures taken by RBI, with reduction of 1.14% in the monthly weighted average rate on fresh loans of SCBs from March to December 2020 and reduction of 0.73% on their outstanding loans over the same lending Rupee Rupee period
- In addition, following measures have been taken for MSMEs:
- A liberal restructuring scheme for MSMEs with loan exposure of up to Rs. 25 crore has been introduced by RBI offering sector-specific relief to the entire MSME sector
- ( Further; a scheme for emergency credit line of up to Rs. 3 lakh crore; backed by 100% Government guarantee, has been launched for additional funding of up to 20% of the fund-based outstanding as on 29.2.2020, subject to a maximum of Rs. 10 crore for MSMEs and other enterprises with turover of up to Rs. 250 crore, and with a higher maximum of Rs. 100 crore for 27 specified sectors which include the metals, mining, construction; gems and jewellery and automobile sectors Till 25.1.2021,Rs. 2.39 kakh crore have been sanctioned under this scheme.