Lok Sabha Question No. 633 (UNSTARRED), answered on 2023-07-24
Subject: Proposal to Lost Amount in NPAs
Ministry: FINANCE
Asked by: Manish Tewari

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## LOK SABHA UNSTARRED QUESTION NO-633

ANSWERED ON- 24/07/2023

## PROPOSAL TO LOST AMOUNT IN NPAs

## 633. SHRI MANISH TEWARI

Will the Minister of FINANCE be pleased to state:-

- (a) whether  the  Government  has  taken  or  proposes  to  take  action  to  recover  the  lost amount of Rs. 12.10 lakh crore, which has been written off from the total gross NPAs of Rs. 67.66 lakh crore;
- (b) the specific justification(s) regarding the circular issued by the Reserve Bank of India (RBI), which invites bank defaulters to reconcile their accounts;
- (c) the specific reasons explaining the rise of Non-Performing Assets (NPAs) in India;
- (d) whether it is a fact that India currently holds the world record in NPAs and  writeoffs, if so, the details thereof;
- (e) whether there exists any detailed plan/mechanism/memoranda provided to address this issue effectively; and
- (f) if so, the details thereof ?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (DR. BHAGWAT KARAD)

(a) to (f): As per RBI guidelines and policy approved by bank Boards, NPAs, including, 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 writeoff. 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. Such write-off  does not result in waiver of liabilities of borrowers to repay. As borrowers of written-off loans continue to be  liable  for  repayment  and  the  process  of  recovery  of  dues  from  the  borrower  in written-off  loan  accounts  continues,  write-off  does  not  benefit  the  borrower.  Banks continue  to  pursue  recovery  actions  initiated  in  written-off  accounts  through  various recovery  mechanisms  available,  such  as  filing  of  a  suit  in  civil  courts  or  in  Debts Recovery  Tribunals,  action  under  the  Securitisation  and  Reconstruction  of  Financial Assets  and  Enforcement  of  Security  Interest  Act,  2002,  filing  of  cases  in  the  National Company  Law  Tribunal  under  the  Insolvency  and  Bankruptcy  Code,  2016,  through negotiated settlement/compromise, and through sale of non-performing assets.

RBI, vide its  circular  dated  8.6.2023  has  issued  the  Framework  for  Compromise Settlements and Technical Write-offs covering all regulated entities (REs) with a view to provide  further  impetus  to  resolution  of  stressed  assets  in  the  system  as  well  as  to rationalise and harmonise the instructions across all REs. As per the framework, all REs are  required  to  put  in  place  a  Board-approved  policy,  and  objective  of  the  policy  in respect of the compromise settlements shall be to maximise the possible recovery from a distressed borrower at minimum expense, in the best interest of the REs.

The Gross NPAs of Scheduled Commercial Banks have declined in the last five years from Rs. 10,36,187 crore (gross  NPA ratio  of 11.18%) in March 2018 to Rs. 5,71,515 crore (gross NPA ratio of 3.87%) as on March 2023, as per the provisional data of RBI.

Comprehensive steps have been taken by the Government and RBI to recover and to reduce NPAs, which has enabled an aggregate recovery in NPAs including from writtenoff  loans  of  Rs.  7,15,507  crore  in  SCBs  during  the  last  five  financial  years  (RBI provisional data for FY 2022-23). These steps 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) The  Securitisation  and  Reconstruction  of  Financial  Assets  and  Enforcement  of Security Interest Act, 2002 has been amended to make it more effective.
- (3) 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.
- (4) National  Asset  Reconstruction  Company  Limited  has  been  set  up  as  an  asset reconstruction company with an aim to resolve stressed assets above Rs. 500 crore each. Government has also approved extending a guarantee of up to Rs. 30,600 crore to  back  Security  Receipts  issued  by  NARCL  to  Lending  Institutions  for  acquiring stressed loan assets.
- (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 large-value accounts.
- (7) 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.
- (8) Wilful defaulters and companies with wilful defaulters as promoters/directors have been debarred from accessing capital markets to raise funds.
- (9) 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.

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