A fifth of Rs 29 lakh crore are NPAs -Governance Now

A fifth of Rs 29 lakh crore are NPAs

Banks are saddled with massive NPAs so RBI has provided them various tools to tackle stress in their asset portfolios

GN Bureau | July 22, 2017

#RBI #NPAs #banks

(Illustration: Ashish Asthana)

Banks have advanced a staggering Rs 29,46,060 crore to the industrial sector, of which Rs 6.93 lakh crore are non-performing assets (NPAs).

Finance minister Arun Jaitley informed the Lok Sabha about the gross advances by Scheduled Commercial Banks (SCBs) to the industry sector as on March 31, 2017 and said that the data regarding big industrial houses is not centrally maintained.

The Reserve Bank of India has provided the banks with various tools to tackle stress in their asset portfolios. These tools include Scheme for Sustainable Structuring of Stressed Assets (S4A), Strategic Debt Restructuring Scheme (SDR), Flexible Structuring for long term project loans to Infrastructure and Core industries (5/25 Scheme), Formation of Joint Lenders’ Forum (JLF) for revitalising stressed assets in the system.

The NPAs have been steadily rising and banks are now facing a sharp haircut..

The finance minister had informed the Lok Sabha on March 24, 2017 that as on Dec 31, 2016, Gross Non Performing Assets (GNPAs) of Scheduled Commercial Banks (SCBs) stood at Rs 6.93 lakh crore against Rs 5.66 lakh crore as on March 31, 2016.

Parliament was informed that the government has taken sector specific measures where incidence of NPA is high.

The insolvency and bankruptcy code (IBC) has been enacted and SARFAESI Act and the Recovery of Debts Due to Banks and Financial Institutions (RDDBFI) Act have been amended to improve resolution/recovery of bank loans. Six new Debt Recovery Tribunals (DRTs) have been established for improving recovery.

The advances to the industry coupled with the huge NPAs need to be juxtaposed with the RBI’s May 22, 2017 communique that said an Internal Advisory Committee focused on large stressed accounts and took up for consideration the accounts which were classified partly or wholly as non-performing from amongst the top 500 exposures in the banking system.

The IAC recommended for IBC reference all accounts with fund and non-fund based outstanding amount greater than Rs 5,000 crore, with 60 percent or more classified as non-performing by banks as of March 31, 2016. The IAC noted that under the recommended criterion, 12 accounts totaling about 25 percent of the current gross NPAs of the banking system would qualify for immediate reference under IBC.

As regards the other non-performing accounts which do not qualify under the above criteria, the IAC recommended that banks should finalise a resolution plan within six months. In cases where a viable resolution plan is not agreed upon within six months, banks should be required to file for insolvency proceedings under the IBC.

Speaking at a meeting of the consultative committee attached to the finance ministry in March, Jaitley said that to deal with the NPAs of the banks is a challenging task even though the NPAs have shown declining trend in the last quarter of the current financial year.

The core problem of NPAs is with very large corporates, though few in numbers, predominantly in the steel, power, infrastructure and textile sectors. He said that they had expanded their capacity during the boom period (2003-08) but could not face the onslaught of global financial crisis and consequent slow down thereafter, he said.

He said that the government is taking sectoral specific measures to deal with the problem of NPAs specifically in the resolution of large debts. He added that the steel sector is on its path of recovery while many decisions have been taken in the infrastructure, power and textile sectors to resolve their problems.

Comments

Other News

GST revenue in May clocks 12% y-o-y growth

The gross Good & Services Tax (GST) revenue collected in the month of May, 2023 is ₹1,57,090 crore of which CGST is ₹28,411 crore, SGST is ₹35,828 crore, IGST is ₹81,363 crore (including ₹41,772 crore collected on import of goods) and cess is ₹11,489 crore (including ₹1,057 crore collecte

Need local solutions to climate change: P Velrasu of BMC

Climate change rising temperature and sea levels are posing new risks for coastal cities. With population growth rate of 1%- 2% in India every year, Mumbai too is growing and is population will double from 20 million to 40 million in the coming years. The city is also at the risk of rising sea level. It ne

Civil Services 2022 Top 20 felicitated

Union Minister of State (Independent Charge) for Science and Technology, MoS PMO, Department of Atomic Energy and Department of Space and MoS Personnel, Public Grievances and Pensions, Dr Jitendra Singh on Tuesday interacted with and felicitated the first 20 All India Toppers of IAS/ Civil Services Exam 20

Boost to offshore wind energy projects

In a major decision, the Government has decided to grant waiver of ISTS charges to Off-Shore Wind Projects and extend the waiver to Green Hydrogen/Green Ammonia. This decision has been taken to facilitate wider execution of offshore wind energy initiatives, to promote the expansion of Green Hydrogen / Gree

Duty of stakeholders to provide cost effective, alternate energy fuels: Gadkari

Urging use of alternative and cost effective fuels to reduce pollution caused by vehicles, union road transport and highways minister Nitin Gadkari on Thursday said finding cost-effective fuels is the need of the hour and underlined that use of fuels like bio-CNG and green hydrogen help in protecting the e

Record production of rice, wheat, and sugarcane estimated

The foodgrain production of 3305.34 lakh tonnes is estimated in the current agricultural year 2022-23 – higher by 149.18 LMT as compared to the previous year, according to the Third Advance Estimates of production of major crops released by the ministry of agriculture and farmers welfare.