Road to Recovery: Banks recover over Rs 10 lakh crore in last 9 years

New Delhi: In what could be termed as major bank reform, banks, including public sector lenders, have recovered more than Rs 10 lakh crore in the last nine years. Aided by measures taken by the government and the RBI to reduce bad loans, Scheduled Commercial Banks (SCBs) have done aggregate recovery of Rs 10,16,617 crore during the last nine financial years, according to the Reserve Bank data.

As per the Central Repository of Information on Large Credits (CRILC) data, the total funded amount outstanding of SCBs to corporate company borrowers, classified as non-performing assets (NPA) and having amount outstanding of Rs 1,000 crore or more was Rs 1,03,975 crore as on March 31, 2023.

CRILC collects, stores and disseminates credit data to lenders, and banks are required to submit report on a weekly basis to CRILC, in case of any default by borrowing entities with exposure of Rs 5 crore and above.

NPAs over Rs 20 crore and above of Scheduled Commercial Banks and All India Financial Institutions have seen a reduction decline in the last five financial years, the RBI data said.

At the end of 2018-19, the outstanding NPAs stood at Rs 7,09,907 crore. In the following year, it came down to Rs 6,32,619 crore.

NPAs came down further to Rs 2,66,491 crore at the end of March 2023.

Comprehensive measures have been taken by the government and Reserve Bank of India (RBI) to reduce non-performing assets (NPAs), enabled by which gross NPAs of SCBs have declined from the peak of Rs 10,36,187 crore (gross NPA ratio of 11.18 per cent) as on March 31, 2018, to Rs 5,71,515 crore (gross NPA ratio of 3.87 per cent) as of March 31, 2023, Minister of State for Finance Bhagwat Karad had said in a written reply in Lok Sabha earlier this week.

Talking about various steps taken by the government, he had said, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, has been amended to make it more effective.

The pecuniary jurisdiction of debt recovery tribunals (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, the minister had said.

In addition, he had said, 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.

The 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, he had said.

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 wilful defaulters and companies with wilful defaulters as promoters/directors have been debarred from accessing capital markets to raise funds, he had said.

Besides, RBI in 2019 issued Prudential Framework for Resolution of Stressed Assets 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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