Various initiatives taken by the government have yielded results, with the bad loans of public sector banks declining by over Rs 23,000 crore from a peak of Rs 9.62 lakh crore in March 2018, said a senior finance ministry official. At the same time, public sector banks (PSBs) have also made a record in recovery of Rs 60,726 crore in the first half of the current financial year, which is more than double the amount recovered in the corresponding period last year. “Gross non-performing assets (NPAs) of PSBs have started declining after peaking in March 2018, registering a decline of Rs 23,860 crore in the first half of the current financial year,” Financial Service Secretary Rajiv Kumar said. According to the latest finance ministry data, non-NPA accounts overdue by 31 to 90 days (Special Mention Accounts 1 & 2) of PSBs have declined by 61 per cent over five successive quarters – from Rs. 2.25 lakh crore as of June 2017 to Rs 0.87 lakh crore in September 2018. “This has substantially pared down credit at risk,” he said.
Talking about various initiatives, Kumar said, recognition of restructured standard assets as NPAs, initiated with Asset Quality Review in 2015, and discontinuation of restructuring schemes, the recognition exercise is nearly over with such assets declining from the peak of 7 per cent in March 2015 to 0.59 per cent as of September 2018. He also said that the resolution process has been strengthened by changing the creditor-debtor relationship through the Insolvency and Bankruptcy Code and debarment of wilful defaulters and connected persons, which has resulted in record recovery this year.
“Reforms have accompanied recapitalisation in the form of a comprehensive PSB reforms agenda that addresses the root causes of poor asset quality, and commits banks to clean lending and rolling out of next-generation banking services by leveraging benefits of technology and formalisation of the economy,” the secretary said. Banks have got capital support of over Rs 3 lakh crore since commencement of clean-up in 2015-16.
Earlier this month, Finance Minister Arun Jaitley said the government will invest an additional Rs 41,000 crore into state-owned lenders over and above what was announced earlier to strengthen their capital base. This would enhance the total recapitalisation in the current fiscal from Rs 65,000 crore to Rs 1.06 lakh crore. On December 20, the government sought Parliament’s approval for infusion of an additional Rs 41,000 crore into the lenders. Jaitley had said that this would enhance the lending capacity of PSBs and help them exit the Reserve Bank of India’s Prompt Corrective Action (PCA) framework that imposes curbs on certain business operations at the banks.