Modi government's '4R' strategy to resolve NPA crisis shows results; bad debt reduces by Rs 89,189 crore

Bad loans of public sector banks have declined by Rs 89,189 crore to Rs 8.06 lakh crore during the financial year 2018-19, according to government data.

"Provisional data showed that Gross Non Performing Assets (GNPAs) or bad loans of the public sector banks (PSBs) declined by Rs 89,189 crore to Rs 8.06 lakh crore as on March 31, 2019," said Finance Minister Nirmala Sitharaman in a written reply to a question in Lok Sabha on Monday.

NPAs declined as a result of the government's 4Rs strategy of recognition, resolution, recapitalisation and reforms, Sitharaman said.

The Finance Minister said that GNPAs of PSBs jumped over two-fold to Rs 8.95 lakh crore in FY18 from Rs 2.79 lakh crore in FY15, according to RBI data, mainly on account of the recognition of stressed assets as a bad loan by the central bank.

As per RBI provisional data on global operations, gross NPAs of Scheduled Commercial Banks (SCBs) stood at Rs 9.49 lakh crore during FY19.

The Reserve Bank of India (RBI) had initiated an asset quality review (AQR) in 2015 to clean up balance sheets of the bank. "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."

"As per RBI inputs, the primary reasons for the spurt in stressed assets have been observed to be aggressive lending practices, wilful default, corruption in some cases, and economic slowdown," said Nirmala Sitharaman.

Gross advances of the state-owned bank increased from Rs 18.19 lakh crore in FY08 to Rs 52.16 lakh crore as on FY14.

Various initiatives taken by the government have yielded results, with PSBs recovering Rs 3.59 lakh crore over the last four financial years, including record recovery of Rs 1.23 lakh crore during 2018-19, the FM said.

Sitharaman informed the House that the Prime Minister Narendra Modi-led NDA government has taken comprehensive steps under its 4Rs strategy to clean up the banking system.

"Over the last four years, the government has taken comprehensive steps under its 4R's strategy of recognising NPAs transparently, resolving and recovering value from stressed accounts, recapitalising PSBs, and reforms in banks and financial ecosystem to ensure a responsible and clean system," she said.

Steps taken to expedite and enable resolution of NPAs of PSBs, include, the Insolvency and Bankruptcy Code (IBC), Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act and stressed asset management verticals, she added.

Edited by Chitranjan Kumar

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