Recovery of bad debts impacted by the Covid pandemic, according to BK Karad
The recovery in percentage of gross non-performing assets moderated to 12.8% in 2020-2021, against 15.8% in the previous year in the context of the pandemic, the Minister of State informed on Monday. to Finance Bhagwat K Karad.
According to data from the Reserve Bank of India on global operations, he said, Scheduled Commercial Banks (SCBs) have recovered an amount of Rs 4,18,687 crore in the past three fiscal years.
The percentage recovery of gross non-performing assets (NPAs) of SCBs stood at 13.1% in 2017-18, he said, adding that it had increased to 15.1% in 2018-19 and at 15.8% in 2019-2020.
After that, it fell to 12.8% in 2020-2021 (provisional data as of March 31, 2021) in the context of the pandemic, he said.
Comprehensive measures have been taken by the government for a swift recovery of NPAs, including those of public sector banks (PSBs), he said in a written response to Lok Sabha.
A change in the credit culture has taken place, with the Insolvency and Bankruptcy Code (IBC) fundamentally changing the creditor-borrower relationship, removing control of the failing business from promoters / owners and excluding willful defaults of the resolution process, he said.
To make the process more stringent, the personal guarantor of the debtor company was also placed under the control of IBC, he said.
As part of the IBC, resolution plans have been approved in 394 cases until June 2021, with an amount of Rs 2.45 lakh crore achievable by financial creditors, he added.
In addition, he said, a framework has been put in place through the IBC’s rules for insolvency and liquidation proceedings of systemically important financial service providers other than banks, which were not previously covered by the IBC.
Under this, a resolution plan for these financial service providers for a workable amount of Rs 37,167 crore has been approved, he said.
With the government injection complementing the raising of capital by PSOs in the market, he said, PSOs achieved a high provisioning coverage rate of 83.7% as of March 31, 2021, enabling them to take decisions on the resolution of APMs without being constrained by such a decision impacting their profitability.
Responding to another question, Karad said that the Association of Indian Banks informed the government of the incorporation of the National Asset Reconstruction Company Limited (NARCL) and that it was registered with the Registrar of Companies on July 7, 2021.
RBI, being the regulator of Asset Reconstruction Companies (ARCs), has already prescribed a regulatory framework for the operation of ARCs, he said.
In addition, there are well-established standards for the transfer of stressed assets by banks and non-bank financial corporations to ARCs and the identification of non-performing assets by an ARC is an ongoing process.
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