Lok Sabha Question No. 3202 (UNSTARRED), answered on 2023-03-20
Subject: NPAs of PSBs
Ministry: FINANCE
Asked by: Thalikkottai Rajuthevar Baalu

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## LOK SABHA UNSTARRED QUESTION NO-3202

ANSWERED ON- 20/03/2023

## NPAs of PSBs

## 3202. SHRI T.R. BAALU

Will the Minister of FINANCE be pleased to state:-

(a) whether  it  is  a  fact  that  the  long  shadow  of India's  Non -Performing  Assets (NPAs)  crisis  has  left  Public  Sector  Banks  (PSBs)  with  shrinking  market  share, deeply  institutionalized  risk  aversion  (particularly  to  industrial  and  infrastructure lending) and little confidence in public markets (highly depressed stock prices); and

(b) if so, the steps taken/proposed to be taken by the Government keeping in view the fact that PSBs are no longer sought after by big borrowers, and also that they are unable to adopt new ways to access small businesses?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (DR. BHAGWAT KARAD)

(a)  and  (b):  Asset  Quality  Review  (AQR)  initiated  by  the  Reserve  Bank  of  India (RBI) in 2015 revealed high incidence of non-performing assets (NPAs) in banks. Following  the  AQR  results,  banks  initiated  transparent  recognition,  reclassifying standard restructured advances as NPAs and providing for expected losses on such advances. Thus, primarily as a result of transparent recognition of advances with stress as NPAs, gross NPA ratio of public sector banks (PSBs) rose from 5.0% in March  2015  to  14.6%  in  March  2018.  The  proportion  of  standard  restructured advances  reduced  progressively  from  7.0%  to  0.8%  during  the  same  period. Increase in NPAs led to additional provisioning, which affected the profitability of banks,  and  number  of  PSBs  were  brought  under  the  prompt  corrective  action (PCA)  framework  of  RBI.  This  had  an  adverse  impact  on  business  growth  of PSBs.

Government  implemented  a  comprehensive  4R's  strategy  of  Recognising  NPAs transparently,  Resolution  and  recovery,  Recapitalising  PSBs,  and  Reforms  in  the financial ecosystem. Major banking reforms undertaken by the Government over the last  eight  years  addressed credit  discipline,  responsible  lending  and  improved governance, besides adoption of technology, amalgamation of banks, and maintaining general confidence of bankers.

As a result of implementation of Reforms, performance of PSBs has significantly improved, as reflected in the following:

- (a) Asset  quality  has  improved  significantly  with  Gross  NPA  ratio  of  PSBs declining from the peak of 14.6% in March 2018 to 5.53% December 2022.
- (b) Resilience  has  increased  with  provision  coverage  ratio  of  PSBs  rising  from 46.0% to 89.9% in December 2022.
- (c) Capital  adequacy  ratio  of  PSBs  has  improved  significantly  from  11.5%  in March 2015 to 14.5% in December 2022.
- (d) All  PSBs  are  in  profit  with  aggregate  profit  being  Rs.  66,543  crore  in  the financial year (FY) 2021-22, and profit continued with PSBs earning aggregate profit of Rs. 70,167 crore in first nine month of FY 2022-23.
- (e) Banks, earlier placed under Prompt Corrective Action (PCA) framework by RBI, have made significant improvement resulting in removal of each one of them from the PCA restrictions.
- (f) Total  market cap of PSBs (excluding IDBI Bank, which was categorised as private sector bank in January 2019) has increased from Rs. 4.52 lakh crore in March 2018 to Rs. 10.63 lakh crore in December 2022.

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