Lok Sabha Question No. 3484 (UNSTARRED), answered on 2021-12-20
Subject: Bank NPAs
Ministry: FINANCE
Asked by: Su Thirunavukkarasar

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## LOK SABHA UNSTARRED QUESTION NO-3484 ANSWERED ON 20/12/2021

## BANK NPAs

## 3484. SHRI THRUNAVUKKARASAR SU

Will the Minister of FINANCE be pleased to state:

- whether India's banking system NPAs may expect to rise to 8-9 per cent by the end of financial year 2021-2022;
- (6) if so, the details thereof with details of the recovery rate of NPAs in PSBs the last three years, year-wise; along during
- whether the recovery of NPAs has reduced the last three years; during
- (d) the reasons therefor; and SO,
- (e) the details of the steps taken by the Goverments to ensure prompt recovery of the NPAs by the PSBs?

## ANSWER

## THE MNISTER OF STATE IN TH MNISTRY OF FINANCE

## (DR BHAGWAT KARAD)

- (a) to (e): As per the Financial Stability Report (FSR) released by Reserve Bank of India (RBI) in July 2021, macro-stress tests, on the basis of regression modelling; indicate that the gross non-performing asset (GNPA) ratio of Scheduled Commercial Banks, under the baseline scenario, may increase from 7.48 per cent in March 2021 to 9.80 percent by March 2022.

As per RBI the said GNPA ratio has been arrived at without factoring in the impact of the policy actions under way: Therefore; the actual movement of GNPAs of SCBs will depend on the extent to which the benefit of such policy interventions from the Central Government and RBI is availed of by the eligible borrowers which; in turn, facilitates revival of accounts under stress. inputs,

As per RBI data, aggregate gross advances of sector banks (PSBs) increased from Rs. 18,19,074 crore as on 31.3.2008 to Rs. 52,15,920 crore as on 31.3.2014. As per RBI inputs; aggressive practices this with   wilful default loan  frauds /corruption in some cases, economic slowdown; were observed to be primary reasons for the spurt in the stressed assets. Asset Quality Review (AQR) initiated in 2015 for clean and fully provisioned bank balance-sheets revealed high incidence of NPAs. As a result of AQR and subsequent transparent recognition by banks, stressed accounts were reclassified as NPAs and expected losses on stressed loans, not provided for earlier under flexibility given to restructured loans, were provided for: Primarily as a result of transparent recognition of stressed assets, gross NPAs of PSBs rose from Rs 2,79,016 crore (gross NPA ratio of 4.97%) as on 31.3.2015, to Rs. 8,95,601 crore (gross NPA ratio of 14.58%) as on 31.3.2018, and as a result of Government's strategy of recognition; resolution, recapitalisation and reforms, have since declined to Rs. 6,16,616 crore (gross NPA ratio of 9.11%) as on 31.3.2021. public lending during period along

Comprehensive steps have been taken by the Government to reduce NPAs and to effect recovery, which enabled PSBs to recover Rs. 5,49,327 crore over the last seven financial years. The steps taken include, inter alia, the following:

- The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act; 2002 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.
- (1) in credit culture has been effected, with the Insolvency and  Bankruptcy Code (IBO fundamentally changing the creditor-borrower relations) 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 Under IBC resolution plans have been approved in 394 cases up to June 2021, with Rs. 2.45 lakh crore amount realisable by financial creditors. Change hip; taking
- (3) As per RBI instructions, wilful defaulters are not sanctioned any additional facilities by banks or financial institutions, and their unit is debarred from new ventures for five floating years.
- (5) Jurisdiction of Debt Recovery Tribunal (DRTs) was increased from Rs. 10 lakh to Rs. 20 lakh to enable the DRTs to focus on high value cases resulting in higher recovery for the banks and financial institutions. Six new DRTs have also been established to recovery. expedite
- Wilful defaulters and companies with wilful defaulters as promoters/ directors have been debarred from accessing   capital markets to raise funds, vide   Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2016.
- (6) With Government infusion supplementing the of capital by PSBs from market, PSBs have achieved a high provisioning coverage ratio of 83.7% as on 31.3.2021, equipping them to take decision on resolution of NPAs without constrained on account of such decision impacting their profitability raising being
- Stressed Asset Management Verticals  were set up in banks for focused prevention, recovery arrangement and time-bound action in respect of value stressed assets. slippage large-`
- reforms have been instituted as part of the Public Sector Banks Reforms Agenda, including, inter alia, the following: Key :
- 1) Board-approved loan of PSBs now mandate tying Up necessary clearances/ approvals and linkages before disbursement; scrutiny of group balance-sheet and -fencing of cash flows, non-fund and tail risk appraisal in project financing . policies ring'
- (iv) Monitoring in high-value  loans, and specialised  monitoring   agencies ` combining   financial  and domain knowledge have been deployed for effective monitoring of loans above Rs. 250 crore:
- ( Use of third-party data sources for comprehensive due diligence across data sources has been instituted, thus mitigating risk on account of misrepresentation and fraud.
- To ensure timely and better realisation in one-time settlements   (OTSs) , end-to-end OTS platforms have been set up in PSBs.

With to the details of the recovery rate of NPAs, RBI has informed that it has not formally defined "recovery rate in the context of NPAs in the banking industry: However; as per RBI data, recovery made by sector banks (PSBs) the financial year as a percentage of gross NPA as on beginning of the financial year (FY) has improved from 11.33% in FY2O17-18, to 13.52% in FY2018-19, to 14.69% in FY2O19-20. In FY2O20-21, despite widespread impact of the COVID-19 pandemic on the economy and its cascading effect on the actions in respect of recovery measures, the recovery the financial year as a percentage of gross NPA as on beginning of the financial year was still at 12.28%. regard public during during