NPAs: During the UPA rule and under the present government

NEW DELHI: The government today presented a comprehensive picture on the non-performing assets (NPAs) of banks and the steps taken to clean the banking processes. Banking secretary Rajeev Kumar said in a press conference today the stock of NPAs had reduced by Rs 21,000 crore in last quarter. Banks recovered Rs 36,551 crore in the first quarter of FY19. There was a need to increase scale and synergy for growth momentum to continue, he said.

Kumar presented a slide that compared how NPAs were tackled during the previous UPA government and the present government. He also presented a slide on the various actions taken by the government to clean lending processes.

NPAs: Then and Now

THEN: Phone banking
NOW: No interference in commercial decisions

THEN: Layered entry operations
NOW: 2.96 lakh shell companies struck off

THEN: Consortium with 30-31 members Consortium number limited to 7 to 9
NOW: Cash flow not ring fenced Ring fencing of cash flows ensured

THEN: Funds released even when sanction conditions not complied
NOW: Strict enforcement of sanction conditions before release

THEN: Inadequate monitoring
NOW: Specialised Monitoring for loans >Rs.250cr.

THEN: Wilful default/ fraud not necessarily seen on NPAs
NOW: Now mandatory for loans > Rs. 50 cr.

THEN: Restructuring of stressed assets
NOW: Resolution through IBC- Connected party debarred

Reforms introduced by the NDA government for clean banking
Strict enforcement of conditions of loan sanctions
Stressed Asset Vertical in Banks
Transparent Recognition of NPAs
Upfront Provisioning for losses on NPAs: Rs. 5.88 Lakh Cr. provisioned
in 4 years
EASE – an agenda for reform at PSBs
Expensive AT 1 Bonds recalled
Rationalisation of overseas operations
Effective management of operational risks including technology risks
Passport details of borrowers for loans > Rs. 50 Cr.
Continuing transparency in appointments – results on the day of interview
Customer Comfort: Digitisation of banking outreach, increasing use of Technology/Fintech
Udyamimitra portal as one stop portal for Mudra and other MSME loans
TReDS operationalised for MSMEs – All PSBs registered, over 142 corporates as buyers
National Financial Reporting Authority – Auditors’ Regulator initiated
Negotiable Instruments Act amended
Ban on Unregulated Deposits Bill introduced in Parliament
Fugitive Economic Offenders Act

Gains visible due to the reforms
Stock of NPAs no longer rising, reduction by ~Rs.21,000 Cr. in Q1 FY’19
Higher margin of safety: Increase in Provision Coverage Ratio to 63.7% (Jun’18)
PSB share in CASA up from 32.95% (Mar15) to ~38% (June18)
Robust credit growth: 13.5% - (YoY-Aug18)
MSME Credit Growth: YoY (June18)
< 10 Lakhs 26.7% ; 10 to 50 Lakhs 21.4% ; 50 to 1 Cr. 16.9%. 10.49% (July ’18)
Cash Recovery: Highest ever in Q1FY 2019
Fastest growing economy of the world - 8.2% Q1- FY19
Sixth largest economy of the world