Indian banks' gross non-performing assets (NPAs) or bad loans fell marginally to 9.8 percent during Q2 (July-September) of FY18, as compared to 10 percent in the previous quarter. Union Minister of State for Finance Shiv Pratap Shukla has highlighted that as per RBI's financial stability report (FSR) released on December 2017, the gross non-performing advances ratio of scheduled commercial banks (SCBs) increased from 9.6 percent to 10.2 percent between March and September 2017. Further, he noted that as per FSR, macro stress test for credit risk indicates that under the baseline scenario, the GNPA ratio of the banking sector may increase to 10.8 per cent by March 2018.
Shukla has stated that the problem of bad loans of banks has been addressed holistically through transparent and realistic recognition of NPAs, provision for expected losses and unprecedented recapitalisation, and putting in place a clean recovery system. He also pointed out that Asset Quality Review (AQR) initiated by RBI in 2015, and subsequent transparent recognition by banks revealed high NPAs, which have impacted balance-sheets of several Public Sector Banks (PSBs). Besides, he noted that under 'Indradhanush' roadmap announced in 2015, the government provided for Rs 70,000 crore till 2018-19 for strengthening PSBs' balance-sheets, as a result of which despite high NPA and consequential provisioning, banks were successful in complying with capital adequacy norms.
The minister further said that with the object of increasing credit off-take and promoting creation of jobs, in October 2017 the government announced, and has since initiated, recapitalisation of PSBs by Rs 2,11,000 crore within two financial years to make banks weakened by NPAs strong. Adding further, he said that to enable effective action in respect of defaulters, Insolvency and Bankruptcy Code, 2016 was enacted, which provides for timebound resolution of stressed assets. He added that cases have been instituted under the Code in the National Company Law Tribunal (NCLT) in respect of the 12 largest defaulters, amounting to about 25 per cent of the NPAs of the entire banking system.