In the face of the pandemic, the recovery as a proportion of gross non-performing assets (NPAs) has slowed to 12.8 percent in 2020-21, down from 15.8 percent the previous fiscal year, Minister of State for Finance Bhagwat K Karad told Parliament on Monday.
According to the Reserve Bank of India (RBI) data on worldwide operations, scheduled commercial banks (SCBs) have recovered Rs 4,18,687 crore. He stated that recovery as a proportion of gross non-performing assets (NPAs) of SCBs was 13.1 percent in 2017-18, rising to 15.1 percent in 2018-19 and 15.8 percent in 2019-20. Following that, it fell to 12.8 percent in 2020-21 (provisional statistics as of March 31, 2021) due to the pandemic, he added. The government has taken comprehensive efforts to expedite the recovery of NPAs, including those of public sector banks (PSBs), he said in a written reply to the Lok Sabha.
The Insolvency and Bankruptcy Code (IBC) significantly changed the creditor-borrower relationship, stripping management of the defaulting firm away from promoters/owners, and excluding wilful defaulters from the resolution process, he added. Personal guarantor to the corporate debtor has also been placed inside the jurisdiction of IBC to make the procedure more severe, he added. According to the IBC, resolution plans have been authorised in 394 instances till June 2021, with a total value of Rs 2.45 lakh crore realisable by financial creditors, he noted. Furthermore, he stated that a framework has been established under IBC regulations for bankruptcy and liquidation procedures of systemically significant financial service providers other than banks, which were previously not covered by IBC. According to him, a resolution plan for such financial service providers of Rs 37,167 crore has been authorised.
PSBs have reached a high provisioning coverage ratio of 83.7 percent as of March 31, 2021, he added, with government injection complementing capital raised by PSBs from the market, allowing them to make decisions on NPA resolution without being restricted on account of such decision impacting their profitability. According to him, a resolution plan for such financial service providers of Rs 37,167 crore has been authorised.
PSBs have reached a high provisioning coverage ratio of 83.7 percent as of March 31, 2021, he added, with government injection complementing capital raised by PSBs from the market, allowing them to make decisions on NPA resolution without being restricted by regulatory requirements.
In response to another query, Karad stated that the Indian Banks' Association informed the government of the establishment of the National Asset Reconstruction Company Limited (NARCL), which was established with the Registrar of Companies on July 7, 2021. He stated that the RBI, as the regulator of Asset Reconstruction Companies (ARCs), has already established a regulatory framework for the operation of ARCs.
There are also well-established standards for the transfer of stressed assets to ARCs by banks and non-banking financial organisations, and the identification of non-performing assets by an ARC is a continuous process.