Lok Sabha Question No. 1191 (UNSTARRED), answered on 2021-12-06
Subject: Ranking of Indian Banks
Ministry: FINANCE
Asked by: Lavu Sri Krishna Devarayalu

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA UNSTARRED QUESTION NO. 1191

TO BE ANSWERED ON THE 6 TH  DECEMBER 2021/ AGRAHAYANA 15, 1943 (SAKA)

## Ranking of Indian Banks

## 1191. SHRI LAVU SRI KRISHNA DEVARAYALU:

Will the Minister of FINANCE be pleased to state:

(a) the details of the number of Indian banks that rank in the top list of 100 banks worldwide in terms of total assets, especially in comparison to major economies such as USA, China and Japan;

(b) the manner in which the Government proposes to finance various projects such as Gati Shakti Master Plan which are capital intensive considering the total assets of our banks still remain small as compared to the world average;

(c) whether  the  Non-Performing  Assets  (NPAs)  accumulated  by  the  public  and  private  sector banks  are  higher  than  those  of  banks  in  the  aforesaid  most  major  economies,  if  so,  the  details thereof; and

(d) whether the Government has taken any measures excluding the setting up of the bad bank to reduce the gross NPAs across the public and private sector banks and if so, the details thereof?

## ANSWER

## THE MINISTER OF STATE FOR FINANCE (DR. BHAGWAT KARAD)

(a): As per S&P Global Market Intelligence Report, April 2020, published by a division of Standard and Poor's Global Inc. that publishes financial research and analysis and is considered the largest of the Big Three credit-rating agencies globally, State Bank of India, ranked at 55, is the only Indian bank in the list of top-100 banks worldwide in terms of total assets. USA, China and Japan have 11, 19 and 8 banks respectively in that list.

(b):  Measures  taken  by  the  Government  and  the  Reserve  Bank  of  India  to  facilitate  financing  of capital intensive or infrastructure project include, inter alia , the following:

- (i) To  enable  fresh  infrastructure  lending,  besides  leveraging  existing  channels  of  finance  from lending  institutions  and  financial  markets,  the  new  professionally  managed  Development Financial  Institution,  National  Bank  for  Financing  Infrastructure  and  Development,  having both  developmental  and  financial  objectives  has  been  set  up  to  anchor  efforts  to  act  as  a provider, enabler and catalyst for infrastructure financing in the country;
- (ii) Government,  has  set up  a National Investment  and  Infrastructure Fund,  India's first infrastructure  specific  investment  fund  or  a  sovereign  wealth  fund,  in  February  2015  that maximises  economic  impact  mainly  through  infrastructure  investment  in  commercially  viable projects.  It  manages  over  USD  4.5  billion  assets  under  management  through  its  three  funds, including  NIIF  Master  Fund,  the  largest  India-focussed  infrastructure  fund,  investing  in  high quality businesses / assets across different core infrastructure sectors.
- (iii) Banks  have been permitted to invest in Real Estate Investment Trusts (REITs)  and Infrastructure  Investment  Trusts  (InvITs)  within  the  overall  ceiling  permitted  for  direct investments in shares, convertible bonds/ debentures, etc. and have also been allowed to lend to InvITs subject to certain conditions;
- (iv) Facilitating access to external commercial borrowings through expansion of eligibility to include all entities eligible to receive FDI and reduction in the minimum average maturity requirement of the borrowing to three years;
- (v) Banks have been permitted to extend finance for funding promoters' equity in cases where the proposal  involves  acquisition  of  shares  in  an  existing  company  engaged  in  implementing  or operating an infrastructure project in India;
- (vi) Banks can raise funds from the market by way of infrastructure bonds, and the assets financed by such funds are exempted from the Priority sector lending requirements and the funds raised are exempted from reserve requirements.
- (vii) Considering the importance of an efficient bond market for raising funds for the infrastructure sector besides derisking the banks' balance sheets, banks have been allowed to provide credit enhancement for bond issuances, subject to certain conditions.
- (viii) Allowed setting up of Infrastructure Development Funds, both as NBFCs and Mutual Funds, to take over the post-construction assets from banks and facilitate take-out financing.
- (ix) Allowed for debts due to the lenders in case of PPP projects to be considered as secured to the extent assured by the project authority in terms of the Concession Agreement.
- (x) Public Sector Banks (PSBs) are back to the position of strength to support credit growth in the economy,  including  credit  for  capital  intensive  sectors,  with  strengthened  capital  adequacy position  of  each  PSB,  clean  balance  sheets  supported  by  a  healthy  provision  coverage,  along with return to profitability.

(c):  As  per  RBI  data,  aggregate  gross  advances  of  Scheduled  Commercial  Banks  (SCBs)  in  their global operations increased from Rs. 25,03,431 crore as on 31.3.2008 to Rs. 68,75,748 crore as on 31.3.2014.  As  per  RBI  inputs,  aggressive  lending  practices  during  this  period  along  with  wilful default/loan  frauds/corruption  in  some  cases,  economic  slowdown  etc . 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. Further, all such schemes for restructuring stressed loans were withdrawn in the financial year (FY) 2017-18. Primarily as a result of transparent recognition of stressed assets rose from Rs. 3,23,464 crore as on 31.3.2015, to Rs. 10,36,187 crore on 31.3.2018, and although as a result of Government's strategy of rec ognition, resolution, recapitalisation and reforms, have since declined to Rs. 9,33,779 crore on 31.3.2019, Rs. 8,96,082 crore as on 31.3.2020, and further to Rs. 8,35,051 crore, as on 31.3.2021, these are higher than those of banks in major economies like USA, China and Japan.

(d): Government has taken comprehensive measures to reduce gross NPAs which include, inter alia , the following:

- (i) Change in credit culture has been effected, with the  Insolvency and Bankruptcy Code (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.
- (ii) 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.
- (iii) As per RBI instructions, 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 and from  accessing  capital  markets  to  raise  funds, vide Securities  and  Exchange  Board  of  India (Substantial Acquisition of Shares and Takeovers) Regulations, 2016.
- (iv) Pecuniary 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 expedite recovery.
- (v) With Government infusion supplementing the raising of capital by PSBs from market, PSBs have achieved a high provisioning coverage ratio of 84.9% as on 30.9.2021, equipping them to take  decision  on  resolution  of  NPAs without being constrained on account of such decision impacting their profitability.
- (vi) Key reforms have been instituted in PSBs as part of the PSBs Reforms Agenda, including, inter alia , the following:
- (1) Stressed  Asset Management  verticals  were  set  up  in  banks  for  focused  slippage prevention,  recovery  arrangement  and  time-bound  action  in  respect  of  large-value stressed assets.
- (2) Board-approved loan policies of PSBs now mandate tying up necessary clearances/approvals and linkages before disbursement, scrutiny of group balance-sheet and ring-fencing of cash flows, non-fund and tail risk appraisal in project financing.
- (3) Institution of comprehensive, automated Early Warning Systems (EWS) in banks, with ~80 EWS triggers, use of third-party data and workflow for time-bound remedial actions, to  proactively  detect  stress,  reducing  slippage  into  NPAs,  and  thus  mitigating  risk  on account of misrepresentation and fraud.
- (4) Monitoring has been strictly segregated from sanctioning roles 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.