Government Expects State-Run Banks To Recover Rs 1.8 Lakh Crore From NPAs

The government expects state-run banks, in the current fiscal, to recover over double the amount from bad loans over the previous year.

Recoveries of about Rs 1.8 lakh crore were assessed by banks, which would be from cases under Insolvency and Bankruptcy Code and those outside it, Financial Services Secretary Rajiv Kumar told reporters. Public-sector banks recovered Rs 74,562 crore from bad loans in the year ended March 2018.

The state-run banks will focus on recoveries, which will include developing an e-auction portal for auctioning properties seized by banks, Kumar said.

“There will be focus on recoveries which also includes development of an e-auction website with all property details, and marketing the sale-able properties to the customers,” said Kumar after the annual review meeting of public-sector banks.

State-run banks have recovered Rs 36,551 crore in the quarter ended June—a 49 percent jump from the corresponding previous period, according to data shared by the Finance Ministry.

Finance Minister Arun Jaitley told reporters that non-performing assets are on the decline and recoveries for lenders have picked up.

“…This optimism of the banks and Department of Financial Services (for high recoveries) is based on the fact that several major cases are now in the pipeline and in the penultimate stage of resolution,” Jaitley said.

In his introductory remarks to bankers at the review meeting, Jaitley flagged the need to “assess and revisit the efficacy” of the Debts Recovery Tribunal to reduce pendency in disposing of cases. He pointed out to expediting recoveries from bad loans.

The ministry has asked banks to monetise their non-core assets and expects assets worth Rs 18,000 crore to be monetised this year.

PCA Norms To Be Tweaked

Eleven banks that currently come under the Reserve Bank of India's Prompt Corrective Action Framework have asked the government to relax restrictions imposed on them.

Banks come under the framework if their net NPA rises to 6 percent of their total assets, report negative return on assets for two consecutive years or if their capital-to-risk weighted assets ratio falls 250 basis points below the central bank's benchmark.

These banks have asked the government to lower the provision coverage ratio for non-performing assets, which is currently higher than 60 percent, Bank of Maharashtra Executive Director AC Rout said.

Lowering the provision coverage ratio will free up capital stuck in provisioning, Rout said. “Banks have also asked for advancing recapitalisation by the government.”