GOVERNMENT OF INDIA
Ministry of Finance
DEPARTMENT OF FINANCIAL SERVICES
UNSTARRED QUESTION NO. 199
ANSWERED ON THE JULY 8, 2014 / ASHADHA 17, 1936 (SAKA)
Rising Non-Performing Assets (NPAs) of Banks
199: SHRI RAJEEV CHANDRASEKHAR:
Will the Minister of FINANCE be pleased to state;
(a) the details of NPAs of public sector and private banks as on 31 March 2014;
(b) whether it is a fact that the rise in Non-Performing Assets (NPAs) of public sector banks is much higher as compared to private sector banks;
(c) whether Government is aware of a Credit Suisse report of 2012 highlighting that only 10 groups in India account for Rs. 5,50,000 crores of debt, which is 98 per cent of the entire banking system net worth and an unprecedented concentration of risk on PSU Banks not prevalent in any other country; and
(d) if so, the details of remedial steps, Government has taken, proposes to take to restructure and restore the health of public sector banks, and ensure that taxpayers are not burdened further?
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SMT. NIRMALA SITHARAMAN)
(a) & (b): The details of NPAs of public sector and private banks as on 31 March 2014 is as under
Gross NPAs (Amt in Rs Crore)
Variation Mar 13
over Mar 14
Public Sector Banks (PSBs)
Private Sector Banks
Source: Reserve Bank of India (RBI)
(c): As per RBI Master Circular on Exposure norms, dated 1st July, 2014, a bank's exposure to a single borrower can go up to 25 per cent of the bank's total capital while its group exposure limit can go up to 55 per cent of its total capital. Financial Stability Report (FSR), December, 2013, of RBI has stated that these are on higher side by International standards and suggests review of the same to enhance stability of the banking sector. However, the report also states that the current level of NPAs do not pose a systemic concern as the CRAR of the banking system is above the prescribed levels and many projects are just delayed, not unviable.
FSR June 2014 has noted that the level of gross non-performing advances (GNPAs) as percentage of total gross advances for the entire banking system declined to 4 per cent in March 2014 from 4.2 per cent in September 2013. This improvement in asset quality was due to the lower slippage of standard advances to non-performing advances and a seasonal pattern of higher recovery and write-offs that generally take place during the last quarter of the financial year.
FSR further states that there are five sub-sectors; infrastructure (which includes power generation, telecommunications, roads, ports, airports, railways [other than Indian Railways] and other infrastructure), Iron and steel, textiles, mining (including coal) and aviation services which contribute significantly to the level of stressed advances. The share of these five sub-sectors in total advances is the highest for public sector banks.
(d): RBI released guidelines dated 30th January, 2014 for "Early Recognition of Financial Distress, Prompt Steps for Resolution and Fair Recovery for Lenders: Framework for Revitalizing Distressed Assets in the Economy" suggesting various steps for quicker recognition and resolution of stressed assets. This Framework provides for centralised reporting and dissemination of information on large credits; early formation of a lenders' committee with timelines to agree to a plan for resolution; incentives for lenders to agree collectively and quickly to a plan - better regulatory treatment of stressed assets if a resolution plan is under way, or accelerated provisioning if no agreement can be reached; improvement in current restructuring process, Independent evaluation of large value restructurings mandated, with a focus on viable plans and a fair sharing of losses (and future possible upside) between promoters and creditors; more expensive future borrowing for borrowers who do not co-operate with lenders in resolution and more liberal regulatory treatment of asset sales.
The intention of this Framework is not to encourage a particular resolution option, e.g. restructuring or recovery, but to arrive at an early and feasible resolution to preserve the economic value of the underlying assets as well as the lenders' loans.