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The Reserve Bank of India (RBI)’s data on global operations stated, aggregate gross advances of Public Sector Banks (PSBs) increased from Rs. 18,19,074 crore as on 31.3.2008 to Rs. 52,15,920 crore as on 31.3.2014. As per RBI inputs, the primary reasons for the spurt in stressed assets have been observed to be, inter-alia, aggressive lending practices, wilful default/loan frauds/corruption in some cases, and economic slowdown.
Asset Quality Review (AQR) initiated in 2015 for clean and fully provisioned bank balance-sheets revealed high incidence of Non-Performing Assets (NPAs). And, as a result of AQR and subsequent transparent recognition by banks, stressed accounts were reclassified as NPAs and expected losses on stressed loans, not provided for earlier under flexibility given to restructured loans, were provided for. Further, all such schemes for restructuring stressed loans were withdrawn. Primarily as a result of transparent recognition of stressed assets as NPAs, gross NPAs of PSBs, as per RBI data on global operations, rose from Rs. 2,79,016 crore as on 31.3.2015, to Rs. 8,95,601 crore as on 31.3.2018, and as a result of Government’s 4R’s strategy of recognition, resolution, recapitalisation and reforms, have since declined by Rs. 1,56,060 crore to Rs. 7,39,541 crore as on 31.3.2019 (provisional data on global operations for 31.3.2019 as reported by RBI on 2.7.2019).
The Government has implemented a comprehensive 4R’s strategy, consisting of recognition of NPAs transparently, resolution and recovery of value from stressed accounts, recapitalising of PSBs, and reforms in PSBs and the wider financial ecosystem for a responsible and clean system. Some comprehensive steps have been taken under the 4R’s strategy to reduce NPAs of PSBs, including, change in credit culture has been effected, with the Insolvency and Bankruptcy Code (IBC) fundamentally changing the creditor-borrower relationship, taking away control of the defaulting company from promoters/owners and debarring wilful defaulters from the resolution process and debarring them from raising funds from the market. And, over the last four financial years, PSBs have been recapitalised to the extent of Rs. 3.12 lakh crore, with infusion of Rs. 2.46 lakh crore by the Government and mobilisation of over Rs. 0.66 lakh crore by PSBs themselves enabling PSBs to pursue timely resolution of NPAs.
The key reforms have been instituted in PSBs as part of the PSBs Reforms Agenda, including board-approved Loan Policies of PSBs now mandate tying up necessary clearances/approvals and linkages before disbursement, scrutiny of group balance-sheet and ring-fencing of cash flows, non-fund and tail risk appraisal in project financing; Use of third-party data sources for comprehensive due diligence across data sources has been instituted, thus mitigating risk on account of misrepresentation and fraud; Monitoring has been strictly segregated from sanctioning roles in high-value loans, and specialised monitoring agencies combining financial and domain knowledge have been deployed for effective monitoring of loans above Rs. 250 crore. Further, to ensure timely and better realisation in one-time settlements (OTSs), online end-to-end OTS platforms have been set up. In addition, as per RBI data on global operations, the NPAs of PSBs, after reaching a peak of Rs. 8,95,601 crore as on 31.3.2018, have declined by Rs. 1,56,060 crore to Rs. 7,39,541 crore as on 31.3.2019 (provisional data), and PSBs have effected record recovery of Rs. 3,09,568 crore over the last four financial years, including record recovery of Rs. 1,21,076 crore during 2018-19 (provisional data). The RBI data on global operations also stated, as on 31.3.2019 (provisional data), the total funded amount outstanding of the top 100 NPA borrowers of PSBs was Rs. 3,22,108 crore, amounting to 43.6% of gross NPAs of PSBs. According to the inputs from RBI, lists of suit-filed wilful defaulters of Rs. 25 lakh and above and of suit-filed defaulters of Rs. 1 crore and above stand disclosed in public domain on the websites of Credit Information Companies (CICs) while the list of non-suit filed wilful defaulters is confidential in nature and is exempt from disclosure under section 45E of the Reserve Bank of India Act, 1934. No legislation to amend legal disclosability as above has been introduced by the Government. In this connection, RBI has apprised that confidentiality of information related to bank customers is a universally accepted phenomenon.