SBI, other banks saw massive rise in NPAs last fiscal: Finance Ministry

Public sector banks as well as their private sector peers have added a staggering amount of non-performing assets (NPSs) to their respective portfolios over the past year, according to date submitted by the Union Finance Ministry in Parliament on Monday, July 18.

Bhagwat Karad, the Junior Minister of Finance, on Monday (July 18), submitted a written reply in Parliament on questions regarding comparative accumulation of NPAs by public sector banks and scheduled commercial banks over the past two years as well as details of loans written off in this period for the respective banks.

According to data produced by Karad, ₹25,021 crore worth of NPAs have been added to the government-owned State Bank of India (SBI) over the past year alone, while the corresponding amounts for banks including Union Bank of India (₹22,877 crore), Punjab National Bank (₹27,378 crore), HDFC Bank (₹25,999 crore), ICICI Bank (₹19,036 crore), Axis Bank (₹18,576 crore) and Canara Bank (₹17,954 crore) are equally staggering.

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Sharing the data in a statement, Karat stated  the occurrence of NPAs is a “normal” phenomenon although “undesirable corollary to the business of banking.”

Key factors

He attributed the piling up of NPAs to factors such as prevailing macroeconomic conditions, sectoral issues, global business environment, delayed recognition of stress by banks aggressive lending during upturns, poor credit underwriting and flawed governance structures.

The minister said the government’s initiatives to resolve long-standing stressed assets and steps taken for recovery and resolution of assets under the Recovery of Debts and Bankruptcy Act, 1993, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and Insolvency and Bankruptcy Code, 2016, helped bring down the cases of NPAs. The legislation also helped banks recover ₹8,60,369 crore over the past eight fiscal years, he added.

“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 defaulter from the resolution process,” the minister stated.

He said, under the IBC, resolution plans have been approved in 480 cases up to March 2022 with ₹2.34 lakh crore realisable by financial creditors.

While the Reserve Bank of India has set up the Central Repository of Information on Large Credits (CRILC) to collect, store and distribute credit data to lenders, banks have been instructed to submit weekly reports to CRILC in case of defaults by borrowers with exposure of ₹5 crore and more.

This apart, amendments have been made to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to deter defaulters from violating rules, Karad said. Under the legislation a borrower can invite three months of imprisonment if he or she does not provide asset detail, and for the lender to get possession of mortgaged property within 30 days.

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“As per RBI instructions, wilful defaulters are not sanctioned any additional facilities by banks or financial institutions, and their unit is debarred from floating new ventures for five years,” the statement said.

Besides, the jurisdiction of the Debt Recovery Tribunal was also upgraded from ₹10 lakh to ₹20 lakh to help it focus on high value cases and thus aid in more recovery for banks and financial institutions.

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