Govt, RBI measures help banks recover bad loans worth over Rs 8.6 lakh crore in last 8 fiscal

Concrete steps taken by the government and RBI helped banks recover bad loans worth over Rs 8.6 lakh crore in the last eight financial years, the government informed Parliament on Monday.

Minister of State for Finance Bhagwat Karad in a written reply to the Lok Sabha said the occurrence of non-performing assets (NPAs) is normal, although an undesirable, corollary to the business of banking.

Several factors — including prevailing macroeconomic conditions, sectoral issues, global business environment, delayed recognition of stress by banks, aggressive lending during upturns, improper risk pricing and poor credit underwriting — are attributed towards NPA build-up, he said.

“Government and RBI (Reserve Bank of India) regularly issue guidelines and have taken several initiatives aimed at resolution of long-standing stressed assets on the books of banks as well as timely identification and recognition of stress immediately upon default and take corrective action for mitigation of the same,” Karad said.

These measures complement the statutory provisions already available to lenders for recovery and resolution, including, the Recovery of Debts and Bankruptcy Act, 1993, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Insolvency & Bankruptcy Code, 2016 (IBC), the minister said.

“As a result of comprehensive steps taken by the government and RBI to check the cases of NPAs and bring them down, scheduled commercial banks (SCBs) recovered Rs 8,60,369 crore over the last eight financial years (provisional data) from NPAs,” Karad said.

He said a change in credit culture has been effected with the IBC and under it, resolution plans have been approved in 480 cases up to March 2022, with Rs 2.34 lakh crore amount realisable by financial creditors.

Besides, the Central Repository of Information on Large Credits (CRILC) has been set up by the RBI to collect, store and disseminate credit data to lenders, and banks are required to submit reports on a weekly basis to CRILC in case of any default by borrowing entities with exposure of Rs 5 crore and above, he added.

Among others, willful defaulters and companies with wilful defaulters as promoters /directors have been debarred from accessing capital markets to raise funds and the jurisdiction of the Debt Recovery Tribunal (DRTs) has been 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.

Karad said all credit institutions have been mandated by the RBI to become members of all credit information companies (CICs) and submit credit information, including historical data, pertaining to borrowers to CICs, and the data to be updated regularly and to be shared with other credit institutions.