Scheduled commercial banks (SCB) have recovered over Rs 10 lakh crore from bad loans and non-performing assets (NPA) between 2014-15 and 2022-23, the Government informed the Lok Sabha.
“Comprehensive measures have been taken by the Government and RBI to recover and to reduce NPAs, including those pertaining to corporate companies, which has enabled an aggregate recovery of Rs 10,16,617 crore (RBI provisional data for FY 2022-23) by SCBs during the last nine financial years,” Minister of State in the Finance Ministry Bhagwat Karad said in a written reply. As on date, the list of SCBs comprises 12 public sector banks (PSB), 22 private banks, 12 small finance banks, four payment banks (which act as agents in loan business), 43 regional rural banks, and 45 foreign banks.
According to Karad, as per the Central Repository of Information on Large Credits (CRILC) data, the total amount outstanding of SCBs to corporate company borrowers, classified as non-performing assets (NPA) and with outstanding of Rs 1,000 crore or more, was over Rs 1.03 lakh crore as on March 31, 2023. He also listed nine measures which helped in recovery.
He said a change in credit culture has been effected, with the Insolvency and Bankruptcy Code, 2016 (IBC) fundamentally changing the creditor-borrower relationship, taking away the control of the defaulting company from promoters/owners, and debarring wilful defaulters from the resolution process. To make the process more stringent, the personal guarantor to corporate debtor has also been brought under the ambit of IBC.
Next, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, has been amended to make it more effective. National Asset Reconstruction Company Limited (NARCL) has been set up as an asset reconstruction company to resolve stressed assets above Rs 500 crore each. The Government has also approved extending a guarantee of up to Rs 30,600 crore to back the security receipts issued by NARCL to lending institutions for acquiring stressed loan assets.
Early warning system
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 engaged specialised monitoring agencies for large-value accounts. CRILC collects, stores and disseminates credit data to lenders, and banks are required to submit reports on a weekly basis to CRILC, in case of default by borrowing entities with exposure of Rs 5 crore and above.
Under the PSB reforms agenda, comprehensive and automated early warning systems (EWS) were instituted, with 80 EWS triggers and use of third-party data for time-bound remedial actions in the borrowing accounts. 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.
“Wilful defaulters and companies with wilful defaulters as promoters/directors have been debarred from accessing capital markets to raise funds,” Karad said. Further, a prudential framework for resolution of stressed assets was issued by RBI in 2019 for early recognition, reporting and time-bound resolution of stressed assets, with a built-in incentive to lenders for early adoption of a resolution plan
Web Title – Banks recovered over ₹10 lakh crore dues in 9 years