Banks expect to recover Rs 1.80 lakh cr from NPAs: FM Arun Jaitley

Banks expect to recover about Rs 1.80 lakh crore from overall non-performing assets (NPAs) through insolvency and other resolution mechanisms, Finance Minister Arun Jaitley said on September 25.

Reviewing the performance of state-owned lenders with their bank chiefs, Jaitley said apart from NPA recoveries, lenders also expect to monetise close to Rs 18,000 crore in this financial year via non-core divestments.

So far, lenders have recovered Rs 36,551 crore in the first quarter (April to June) of the current fiscal ending March 2019. This is 49 percent higher than the same quarter last year. In 2017-18, banks recovered Rs 74,562 crore.

Jaitley also asked the heads of public sector banks to take "effective action" in cases of fraud and wilful loan defaults.

"Provisioning has been made, recapitalisation has been announced; thus focus should be on arresting fresh slippages," Rajeev Kumar, Secretary, Department of Financial Services said.

Kumar said that bankers have decided to set up a "strict action plan" to take "timely action" before any account turns into a non-performing asset (NPA).

"This entails that there is full vigilance on account operations, stock audits, checking rising leverage ratios, up/downgradings, studying projected cash flows, timely settlement, etc," he said.

PSBs have been reeling under mounting non-performing assets and severe capital crunch. Public banks suffered a cumulative loss of Rs 87,357 crore in 2017-18.

The Finance Ministry on September 11 had launched e-DRT to make the entire auction process electronic.

"Robust databases and effective use of data analytics will enable PSBs to increase transparency and expand the customer base to attract competitive bids and increase recovery from property sale," read a statement issued by the ministry.

e-DRTs will have features similar to e-court software including e-filing, e-payment of fees, uploading of orders, viewing case status and cause list generation.

"Records of 39 DRTs and five debt recovery appellate tribunal (DRATs) have been computerised and e-DRTs will be launched across all DRTs from October 1, 2018," Rajeev Kumar, Secretary, Department of Financial Services had said. "This will help in easy identification of cases through uniquely generated code."

The Finance Minister likened the recoveries to fast-pace solutions delivered by National Company Law Tribunal (NCLT) and "fear of losing their business" under IBC.

According to government estimates, lenders made cash recovery of Rs 36,551 crore in the first quarter of the current fiscal. This was up by 49 percent year-on-year basis. During 2017-18, banks recovered Rs 74,562 crore.

Kumar said that banks have decided to monetise their non-commercial assets by December 2018 to the tune of Rs 18,000 crore.

"They have decided to cut costs, reduce the number of foreign branches so that foreign operations get rationalised and during the year, about 57 branches will be closed," Kumar said.

During the performance review meeting of PSBs, banks have pitched for a relaxation in the Reserve Bank of India's (RBI) prompt corrective action (PCA) norms.

"Bankers also have certain expectations. Some of them have said that the PCA guidelines should be revisited because that is indirectly impacting their lending ability," Jaitley said, adding that banks asked government to be "upfront" regarding capital requirement of these banks.

"I have assured them that we will immediately look into the matter," he said.

Under the PCA, banks are prohibited from distributing dividends and remitting profits. They are curtailed from expanding their branch networks while maintaining higher provisions. Management compensation and directors' fees are also capped. Out of 21 PSBs, 11 are under PCA.

Kumar said that banks have requested for relaxing provisioning norms and "strict" adherence to BASEL-III norms.

"The suggestions that came from the bankers was that unless their incomes increase, there is difficulty in coming out of PCA... So there are two thresholds in the norms and they have requested for (relaxing) the threshold-I norms for the way the provisioning and risk based assets are assigned," he said adding that have requested for "alignment with BASEL-III, exactly as it says - - the various risk-weights and provisioning norms".

The RBI’s interpretation of Basel III norms requires banks to maintain a minimum common equity (CET) Tier-I ratio of 5.5 percent of risk-weighted assets. Under the original Basel III guidelines, banks need to set aside a minimum of 4.5 percent of their assets.

"Banks are holding provisions of 60 percent, so the banks are asking for some sort of regulatory perseverance. So that if we are holding more provisioning, we should be given more capital adequacy," said an official from Bank of Maharashtra, one of the banks under PCA.

He said that banks have requested to reduce the provisioning norm from 60 percent to at least 50 percent.

Last year, government announced recapitalisation package of Rs 2.11 lakh crore to help the ailing PSBs. During 2018-19, Centre plans to off-load Rs 65,000 crore as recapitalisation.

The Centre also launched three initiatives to promote financial inclusion in the country. These include a Financial Inclusion Index for each state, 'Jan Dhan Darshak' app and 'PSBloansin59min.com', a web portal for micro, small and medium enterprises.

The index would give information regarding access to financial services in a state, it's level of penetration and quality of services.

JDD app will provide one-stop solution to customers regarding banking information. The app would use GPS to help an individual locate nearest bank branches of a specific bank, ATM machines, post offices, etc.