GOVERNMENT OF INDIA
Ministry of Finance
DEPARTMENT OF FINANCIAL SERVICES 

RAJYA SABHA
UNSTARRED QUESTION NO. 2047
ANSWERED ON THE FEBRUARY 11, 2014 / MAGHA 22, 1935 (SAKA) 

QUESTION
Risk to Banking Industry Due to Bad Loan 

2047. SHRI RAJEEV CHANDRASEKHAR: 

Will the Minister of FINANCE be pleased to state; 

(a)   whether Government is aware of a 2012 report by Credit Suisse Group stating that the aggregate debt of 10 large Indian business houses accounts for about 13 per cent of total bank loans and constitutes almost 98 per cent of the entire net worth of the banking system, leading to an unprecedented, high concentration risk for Indian banks, as compared to other Asian and BRIC banks; 

(b)   if so, the systemic risks that arise from this situation; 

(c)    the share of NPAs to total assets in PSU and Private banks, bank-wise; and 

(d)   the details of steps Government is taking to focus on loan recovery given RBI Governor's recent statement that focus must be on loan/asset recovery, instead of write-offs, which would amount to writing off taxpayer funds? 

ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI NAMO NARAIN MEENA)

 (a) & (b): As per RBI Master Circular on Exposure norms, July 2013, 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 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.

 (c): The share of NPAs to total assets in PSU and Private banks, bank-wise is as per Annex.

 (d): The Government has advised PSBs to constitute a Board level Committee for monitoring of recovery, appointment of Nodal officers for recovery at the Head Office/Zonal Office/for each DRT, to conduct special drives for recovery of loss assets, and has instructed PSBs that writes-offs should not be more than recovery.

 Reserve Bank of India (RBI) has issued instructions to put in place an effective mechanism for information sharing for sanction of fresh loans/ad-hoc loans/renewal of loans to new or existing borrowers, to have a robust mechanism for early detection of signs of distress including prompt restructuring in the case of all viable accounts, to have a loan recovery policy which sets down the manner of recovery of dues, targeted level of reduction (period-wise), norms for permitted sacrifice/waiver, factors to be taken into account before considering waivers, decision levels, and reporting to higher authorities, monitoring of write-off/waiver cases.

 ANNEX

Note: Data for Sep-13 are provisional & unaudited
Source: RBI- OSMOS Data base, domestic operations, provisional