Government and RBI measures help banks recover bad debts worth more than Rs 8.6 Lakh Crore in past 8 fiscal years

Concrete steps taken by the government and RBI have helped banks recover bad debts worth more than Rs 8.6 lakh crore over the past eight financial years, the government informed on Monday.

Minister of State for Finance, Bhagwat Karad, in a written response to the Lok Sabha, said the appearance of non-performing assets (NPA) is a normal, albeit undesirable, corollary of banking activity.

Several factors – including prevailing macroeconomic conditions, industry issues, the global business environment, banks’ late recognition of stress, aggressive lending during recoveries, inappropriate risk pricing and poor credit underwriting – are attributed to the NPA buildup, he said.

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

These measures complement existing legislation already available to lenders for recovery and resolution, including the Debt Recovery and Bankruptcy Act 1993, the Securitization and Reconstruction of Financial Assets Act 2002 and the enforcement securities and the Bankruptcy and Insolvency Code 2016 (IBC), the Minister said.

“As a result of the comprehensive measures taken by the government and RBI to verify the cases of NPAs and bring them down, Scheduled Commercial Banks (SCBs) have recovered Rs 8,60,369 crore in the last eight fiscal years (provisional data) NPAs,” Karad said.

He said a change in credit culture has been made with the IBC and under it, resolution plans have been approved in 480 cases till March 2022, with an amount of Rs 2.34 lakh crore realizable by financial creditors.

In addition, the Central Large Credit Information Repository (CRILC) has been set up by the RBI to collect, store and disseminate credit data to lenders, and banks are required to submit weekly reports to the CRILC in default cases of borrowing entities with an exposure of Rs 5 crore and above, he added.

Among other things, willful defaulters and companies with willful defaulters as promoters/directors have been barred from accessing the capital markets to raise funds and the jurisdiction of the Debt Recovery Tribunal (DRT) has been increased. from Rs 10 lakh to Rs 20 lakh to allow DRTs to focus on high value cases, resulting in higher recovery for banks and financial institutions.

Six new DRTs have also been created to speed recovery.

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

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