Tag: npas

NARCL will empower lenders, but recovery from 26 accounts is not easy, industry says, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The National Asset Reconstruction Company Ltd (NARCL) will kill all communication gaps that bank consortiums face, and will speed up the process. But chances are high that the NARCL will face a tough time recovering from the 26 accounts that have been identified.

Finance Minister Nirmala Sitharaman on Thursday said that the government has allocated more than Rs. 30,600 crore to the NARCL. The government will transfer the funds to the bad bank, according to their calendar. The Cabinet has approved to set up the NARCL, backed by the government securities, she added.

Read: Finance Minister Sitharaman announces bad bank, Cabinet approves backing of up to Rs 30,600 crore on securities receipts

NARCL – sole decision maker

Industry veterans believe that NARCL will strengthen the recovery process.

“The first and foremost advantage is that the NARCL will provide consolidation of the debt. The debt, which is spread out in 10-20 different entities of the consortium or the multiple banking arrangement, will be consolidated into one entity, providing ease of resolution. In a multiple banking arrangement, there is always a difference of opinion, which makes it difficult to reach a resolution plan,” said Sunil Mehta, chief executive officer at Indian Banks’ Association.

The biggest benefit banks will have is that they will get 15% funds upfront from the NARCL as soon as they transfer the assets. In the current scenario, it takes months for bankers to get their first cheque after a rigorous process either at the National Company Law Tribunal or at Debt Recovery Tribunals.

Read: What are NARCL and IDRCL? How do they work and what is the plan?

“The intention and the idea behind bad banks is that all the bad loans of the banks are concentrated at one place so there will be one common decision making entity. This will make the execution of asset resolution far faster,” said Jyoti Prakash Gadia, managing director at Resurgent India.

NARCL will empower lenders, but recovery from 26 accounts is not easy, industry says
Operations and recovery

Public sector banks will hold 51% stake in the NARCL, while debt management and other financial institutions will hold 49%. NARCL will be managed by professionals, and non performing asset accounts, which are larger than Rs. 500 crore, will be transferred to it. Currently, banks have identified 26 accounts, worth around Rs. 90,000 crore, which the NARCL will take over from them.

The hope is that the government-backed bad bank will bring in the right value for the banks. Because in the current situation, liquidation is much higher compared with resolution, and lenders have taken more than 90% haircuts in many accounts, including Videocon Industries, Siva Industries etc.

But while NARCL will reduce the gaps and speed up the recovery, experts have their own doubts on its recovery ratio, considering the quality of 26 assets, which will be transferred.

“I am not sure if NARCL will be able to fully recover all the accounts mentioned in the list. However, it is still better than individual recovery,” said Gadia.

Recovery has always been a challenge for lenders. RBI Governor Shakikanta Das had recently highlighted that the total recovery from Lokadalat is 5%, from DRT is 6% and from SARFAESI is 20%. The highest recovery was from the Insolvency and Bankruptcy Code, which was 30-45% in earlier days, is now reduced to 5% amid the pandemic, Das said.

Hence, despite having an NARCL, the industry is not hoping for a significant recovery. “The major challenge is that assets mentioned in the list are not very lucrative and buyers will also offer the cheapest rate,” said an industry expert, who did not wish to be quoted.

Siby Antony, former MD and CEO of Edelweiss Asset Reconstruction and a veteran in the sector, believes that ARCs will be better at reviving assets, but is not very sure whether the NARCL will recover.

“I am not hopeful. Because these (the 26 accounts) are bad assets, and finally all will go under liquidation,” Antony said.

Watch: Bad bank can only be a warehouse of bad assets, says Siby Antony



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

What are NARCL and IDRCL? How do they work and what is the plan?, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Finance Minister Nirmala Sitharaman on Thursday announced the formation of a government-backed bad bank, National Asset Reconstruction Company Ltd (NARCL). The Union Cabinet has approved up to Rs 30,600 crore of securities receipts.

What is NARCL?

The NARCL has been incorporated under the Companies Act and has applied to the Reserve Bank of India for license as an Asset Reconstruction Company (ARC). NARCL is basically a bad bank created by the government in the mould of an asset reconstruction company.

The NARCL will pick up bad loans above a certain threshold from banks and would aim to sell them to prospective buyers of distressed debt. The NARCL will also be responsible for valuing bad loans to determine at what price they would be sold. The bad bank would provide government receipts to banks as it takes on non-performing assets from their books.

State-owned banks will hold 51% stake, while FIs or debt management companies will hold 49%.

What is IDRCL?

Along with NARCL, the government will also set up the India Debt Resolution Company Ltd (IDRCL). The IDRCL is a service company or an operational entity, which will manage assets and loop in market professionals and turnaround experts. Public Sector Banks (PSBs) and Public FIs will hold a maximum of 49% stake and the rest will be with private sector lenders.

Background

Last year, The Indian Banks’ Association had proposed to create a bad bank for swift resolution of non-performing assets (NPAs). Following this, the finance minister in the 2021-22 Union Budget proposed the setting up of an ARC, along with an Asset Management Company (AMC), to take over the stressed debt of banks.

During the Union Budget 2021-22, Sitharaman said the bad bank will manage and dispose the assets to alternate investment funds and other potential investors for eventual value realisation.

In August, IBA moved an application to the RBI seeking licence to set up the over Rs 6,000-crore bad bank. The NARCL was incorporated last month in Mumbai, following the registration with the Registrar of Companies.

Also read: Finance Minister Sitharaman announces bad bank, Cabinet approves backing of up to Rs 30,600 crore on securities receipts

The Plan

The government will not have any direct equity contribution to NARCL. It will guarantee securities receipts issued by NARCL, which will buy the bad loans from banks.

These receipts will be valid for five years, and condition precedent for invocation of guarantee will be resolution or liquidation.

NARCL is intended to resolve stressed loan assets above Rs 500 crore each, amounting to about Rs 2 lakh crore. In phase I, fully provisioned assets of about Rs 90,000 crore are expected to be transferred to NARCL, while the remaining assets with lower provisions would be transferred in phase II.

As per industry practice, it will pay up to 15% of the agreed value for the loans in cash and the remaining 85% would be securities receipts.

The NARCL will acquire assets by making an offer to the lead bank. Once NARCL’s offer is accepted, IDRCL will be looped in for management and value addition.

How is NARCL different from existing ARCs?

The proposed bad bank will have a public sector character and majority ownership is likely to rest with state-owned banks.

At present, ARCs typically seek a steep discount on loans. With the NARCL, the valuation issue is unlikely to come up since this is a government initiative.

The government-backed ARC will have deep pockets to buy out big accounts, and thereby free up banks from carrying these accounts on their books.

Watch: Bad bank can be only a warehouse of bad assets, says Siby Antony

What benefit do banks get from this new structure?

It will incentivize quicker action on resolving stressed assets, and help in better value realisation. This approach will also permit freeing up banks personnel to focus on increasing business and credit growth.

As holders of these stressed assets and securities receipts, banks will receive the gains. Further, it aims to bring improvement in banks’ valuations and enhance their ability to raise market capital.

Watch: Bad bank to preserve value, timely sale of stressed assets: IBA CEO



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , ,

Gross NPA of banks likely to cross ₹10 lakh crore by March 2022: Assocham-Crisil study

Banking & Finance

[ad_1]

Read More/Less


Banks’ gross non-performing assets (GNPAs) are likely to exceed ₹10 lakh crore by March 2022, according to a recent Assocham-Crisil joint study released on Tuesday,

This study, “Reinforcing the Code,” conducted by The Associated Chambers of Commerce and Industry of India (Assocham) in collaboration with credit rating agency Crisil, highlighted that “NPAs are expected to rise to 8.5-9 per cent by March 2022, driven by slippages in retail, micro, small and medium enterprise (MSME) accounts, as well as some restructured assets.”

“The effectiveness of the Insolvency and Bankruptcy Code (IBC) will be tested by the probable surge in NPAs, as a year-long moratorium on the filing of new insolvency cases ended in March 2021, and most pandemic-related policies or initiatives are unlikely to be continued,” said the report.

Stressed assets

According to the Assocham-Crisil study, the expected increase in GNPAs of both banks and non-banks this fiscal year as a result of the pandemic will provide an opportunity for players in the stressed assets market to resolve their debts through a variety of routes, with IBC likely to be the most popular.

While the proposed restructuring scheme for MSMEs and small debtors should keep NPAs from rising too much, stressed asset investors with experience and interest in these asset classes have an opportunity, according to the report.

The study also found that Indian banks’ risk management policies, particularly those of public sector banks, might be improved. Previously, laws were not in favour of lenders, allowing unscrupulous promoters to take advantage of the time-consuming recovery process. A significant number of bank wilful defaulters attests to this.

The RBI, on the other hand, has tightened the rules for such defaulters and made the rules for stressed asset resolution harsher. This, together with the IBC framework’s greater resolution of large-ticket NPAs, has resulted in improved NPA recovery.

According to the report, bank GNPAs have decreased since their high in March 2018 and were lower in March 2021 than in March 2020 due to supportive measures such as the six-month debt moratorium, emergency credit line guarantee scheme (ECLGS) loans, and restructuring measures.

The present asset quality stress cycle, according to the report, will be different from that of a few years ago. “NPAs largely came from larger, chunkier accounts at the time. Smaller accounts, particularly in the MSME and retail segments are projected to be more vulnerable this time than large corporations, which have significantly consolidated and deleveraged their balance sheets in recent years.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

Stabilising Ujjivan Small Finance Bank first priority for new management, other future plans on slow lane, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The future strategy of Ujjivan Small Finance Bank detailed in the annual report has just turned irrelevant.

While the bank had listed a slew of digital-centric innovations to increase product suite and improve customer outreach in its latest annual report signed by outgoing chief executive Nitin Chugh, the new management has put stability as its foremost priority, pushing everything else to the backburner for the time being.

The annual report said the bank plans to enhance its payments and ecommerce presence through fintech partners and scale up business segments such as gold loans, farm loans and loans to small and medium enterprises in FY22.

“Forget all that, our first focus is to stabilise the portfolio and the organisation,” a senior executive close to the current management told ET, in what could well be a reflection of the alleged conflict between the previous and current management.

Ujjivan founder and former managing director Samit Ghosh, who has been brought back on the bank’s board as an additional director, declined to comment.

Chugh resigned last month citing personal reasons. It is widely viewed that Ujjivan Financial Services, the holding firm for the bank, was unhappy with Chugh’s handling of asset quality following the pandemic-led stress. The promoter also expressed concerns over high attrition with several senior and middle-level executives leaving the bank.

The bank’s gross non-performing assets jumped to 9.5% at the end of June from merely 1% as of March 31, 2020. Attrition rate was nearly 20%.

Following Chugh’s exit, the group selected Carol Furtado, who was a founding member of Ujjivan Financial Services, as its interim chief executive. Chugh will officially leave the bank on September 30.

“We expect FY22 to be a year of reasonable growth and stabilisation as we retain our sharp focus on improving our earnings, maintaining a healthy portfolio quality with emphasis on digitisation that would enhance our diverse product offerings,” Chugh said in the annual report for FY21.

The bank’s digitalisation process gained steam during his two-year stint.

“Going forward, we aim to strengthen our end-to-end process digitalisation efforts and use the power of digital as a new customer acquisition and service channel,” the bank said in the annual document for shareholders. “We will also leverage the power of analytics for actionable insights for data-driven decision making. We will continue to leverage our full-stack API banking platform to partner with the fintech ecosystem for faster time to market and innovative products and solutions for our customers,” it said.

While the first half of the financial year for Ujjivan went by navigating through the pandemic-led crisis compounded by the second wave, the next three-to-four months would be invested in bringing stability at the board and the management level. Several board members including chairman B Mahapatra Mona Kachhwaha, Ittira Davis and Harish Devarajan had left over the past few months.

The new management would also focus on an imminent reverse merger in the next few months. The bank, which completes five years of operations on January 31, 2022, is allowed by the Reserve Bank of India to reverse merge itself with the holding company.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , ,

Mudra loan ratio trebles to 20% during pandemic as stress hits small businesses, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


A man displays new 2000 Indian rupee banknotes after withdrawing them from a State Bank of India (SBI) branch in Kolkata, India, November 10, 2016. REUTERS/Rupak De Chowdhuri/Files

Gross NPAs in the Mudra loan book is estimated to have reached around 20 per cent at June-end 2021, from around 6 per cent at March-end 2020.

As the stress builds up in the economy due to pandemic, lenders are seeing a sharp uptick in NPAs in Mudra loans, which have trebled in June 2021 over the pre-Covid fiscal of 2019-20.

Gross NPAs in the Mudra loan book is estimated to have reached around 20 per cent at June-end 2021, from around 6 per cent at March-end 2020.

In Maharashtra, public sector banks’ Mudra loan NPAs have risen to 32 per cent at June-end 2021, from 26 per cent at June-end 2020.

SBI’s NPA on Mudra loans in the state is at 59 per cent as on June-end 2021 followed by Punjab National Bank at 44 per cent, Indian Bank at 33 per cent and Bank of Maharashtra at 31 per cent at June-end 2021.

In Jharkahnd, Canara Bank Mudra NPAs as high as 114.35 per cent as bad loans were Rs 183.63 crore against the outstanding amount of loans at Rs 160.58 crore.

Among private sector banks, HDFC Bank’s Mudra loan NPA in Jharkhand was at 26.21 per cent, followed by IDFC First Bank at 24.93 per cent.

The Credit Guarantee Fund for Micro Units (CGFMU) provides guarantee against loan losses in Mudra loans, but 75 per cent of NPAs in Mudra loans, while the rest of losses have to be borne by the banks.

Loan losses

Public sector banks (PSBs) have seen a sharp surge in the amount of Mudra loans turning into non-performing assets (NPAs) over the last three years. NPAs in Mudra loans had jumped to Rs 18,835 crore in 2019-20, from Rs 11,483 crore in 2018-19 and Rs 7,277 in 2017-18, according to the Finance Ministry data.

Mudra loan disbursements by state-owned banks rose to Rs 3.82 lakh crore in 2019-20, from Rs 3.05 lakh crore in 2018-19 and Rs 2.12 lakh crore in 2017-18. The Mudra loan NPAs as a percentage of total loans rose to 4.92 per cent in 2019-20 from 3.42 per cent in 2017-18.

Banks and financial institutions have sanctioned Rs 14.96 lakh crore to over 28.68 crore beneficiaries in the last six years. The average ticket size of the loans is about Rs 52,000, it said.

Under PMMY collateral-free loans of up to ₹10 Lakh are extended by Member Lending Institutions (MLIs) viz Scheduled Commercial Banks, Regional Rural Banks (RRBs), Small Finance Banks (SFBs), Non-Banking Financial Companies (NBFCs), Micro Finance Institutions (MFIs) etc.

The scheme

Under the scheme, credit up to Rs 10 lakh is provided by banks and non-banking financial companies to small and new businesses.

The loans are given for income generating activities in manufacturing, trading and services sectors and for activities allied to agriculture.

The government has sanctioned loans of Rs 15.5 lakh crore under PMMY since its inception in April 2015.

Till March 31, 2021, the Government had sanctioned 29.55 crore loans under the scheme. Of this more than 6.8 crore loans worth Rs 5.2 lakh crores have been given to new entrepreneurs.

For FY22, loans worth Rs 3,804 crore have been sanctioned by 13 public sector banks (PSBs) as on June 25.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,

Will not haul up RBI for declaring loans as NPAs, says Apex Court

Banking & Finance

[ad_1]

Read More/Less


“Economy is booming in the country after the second Covid wave,” said the Supreme Court on Friday as it refused to entertain a batch of pleas seeking contempt action against the Governor of Reserve Bank of India and senior officials of other banks for declaring loan accounts as Non-Performing Assets (NPA).

The top court said that contempt is between court and contemnor and it is not inclined to initiate contempt action against senior officials of banks.

“In our considered view, we are not inclined to exercise our contempt jurisdiction, since it is not in the interest of justice,” said a bench of Justices DY Chandrachud, Vikram Nath and Hima Kohli.

The bench said that petitioners are at liberty to seek remedy under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi Act), 2002.

Advocate Vishal Tiwari, appearing in a batch of petitions said that despite the top court’s order of September 3, 2020 that the accounts which were not declared NPA till August 31, 2020 shall not be declared NPA till further orders, banks unilaterally declared the accounts as NPA under the Act.

‘Not going to haul up RBI’

At the outset, the bench said, “Economy is booming in the country after the second Covid wave. That’s what we have read in newspapers. Since the second wave, when these orders were passed, a lot of development has taken place. We are not going to haul up the RBI for this. Contempt is between court and the contemnor”.

Tiwari said that RBI has itself issued a notice in March, last year after the nationwide lockdown granting moratorium from paying the instalment for loan.

‘Several petitions’

Several traders have moved the top court against declaration of their account as NPA by the banks and seeking contempt action against the senior officials of the banks. One of the pleas, filed by Ajay Hotel and Restaurants through its proprietor has contended that it was availing various credit facilities by way of financial assistance against various assets creating security interest in favour of the State Bank of India and timely payment of the instalments of the loan were made and its Account was not turned NPA till August 31, 2020.

“That on May 18, 2021 the State Bank of India (R-3) issued a demand notice under section 13 (2) of the Sarfaesi Act, 2002 to the petitioner demanding the Amount…as on May 18, 2021 inclusive of interest”, the plea said.

It added that the bank had unilaterally classified the petitioner as NPA on November 30, 2020 and no show cause notice was given. The plea said that despite the express order of the top court on September 3, 2020, the banks continued to proceed under provisions of the Act.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , ,

Moody’s, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The asset recovery Indian banks is set to get delayed as the second wave has crippled economic activity, says Moody’s Investor Services.

“For India (Baa3 negative), Moody’s projects the economy will return to growth in the fiscal year ending March 2022,” the global rating company said in a note. “But the severe second coronavirus outbreak will delay improvements in asset quality.”

Some of the Southeast Asian countries including Singapore, Vietnam and Malaysia appear to be better off with economic activities resuming.

The global economic activity will likely boost trade growth in Vietnam (Ba3 positive), Malaysia (A3 stable) and Singapore (Aaa stable).

“This will help offset domestic economic disruptions from the pandemic, although slow deployment of vaccines is a risk for Vietnam,” Moody’s said.

The asset quality risk is still looming large amid resurgence of coronavirus infections. The slower pace of vaccinating citizens will add to the woes.

Slow vaccination rates will hinder economic recovery, though to varying degrees, Moody’s said.

Unemployment rates have risen across the country going by the June quarter. This contributes to any jump in bad loans.

The growing young populations in economies such as India, Indonesia, Malaysia and Philippines could help accelerate economic expansion and boost overall wealth, which will lead more people to engage banking services, said the rating company.

“This, however, will depend highly on the governments’ ability to support domestic labour markets.”

However, extended support by central banks and governments can help fix any further dent in the economy.

“Continued policy support for borrowers from governments and central banks will prevent sharp increases in defaults on bank loans,” Moody’s said.

The financial impact of the prolonged pandemic for now is concentrated on a few economic segments, which will limit the deterioration of banks’ overall asset quality.

Moody’s expects non-performing loan ratios across ASEAN and Indian banks to remain broadly stable at 2020 levels over the next 12-18 months.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , ,

HFCs may see robust growth but NPAs could rise: CARE Ratings

Banking & Finance

[ad_1]

Read More/Less


The second wave of the Covid-19 pandemic is expected to lead to a rise in the non-performing assets of housing finance companies in the near term with the Gross Stage 3 ratio expected to increase by 30 basis points this fiscal.

According to a report by CARE Ratings, the Gross Stage 3 ratio for housing finance companies would be 3.1 per cent, which would be around 30 basis points higher that 2.8 per cent in 2020-21.

“The deterioration would be higher in the first half of 2021-22; however, we expect that collections and asset quality for housing finance companies would improve in the second half as the economy improves,” CARE Ratings said on Monday.

While a large portion of deterioration would come from developer loan book, it expects that retail prime loans would also witness stress as borrowers have also been impacted economically during the pandemic.

The agency had earlier estimated a 20 basis points increase in Gross Stage 3 assets to 2.9 per cent at the end of 2021-22 from an estimated 2.7 per cent last fiscal.

For the analysis, it has considered top six large housing finance companies it rates.

Robust business growth

However, business growth for housing finance companies has remained robust and early indications from this fiscal suggest there would be a growth of about 8 per cent to 12 per cent in their portfolios, it said.

It also noted that many large housing finance companies have raised equity capital during last fiscal and some are in the process of raising equity capital in this financial year. “This has improved the strength of their balance sheets and augmented their loss-absorption capacity,” it said.

CARE Ratings further said that according to its estimate, the total equity capital likely to be raised during the current fiscal along with actual equity raised last fiscal would be more than sufficient for the total increase in Gross Stage 3 assets during 2020-21 and 2021-22.

“While we expect that the impact of the pandemic on Gross Stage 3 assets would be higher than what was earlier estimated, stronger balance sheets of large housing finance companies and higher equity capital buffers provide good comfort,” it said, adding that improvement in fund-raising abilities of these firms by tapping retail deposits augurs well for their longer-term credit outlook.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , ,

Canara Bank restructures loans worth Rs 13,000 crore, MSME, retail worst hit, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Public sector lender Canara Bank has restructured loans of over Rs 13,000 crore as MSME and retail loans took a beating due to the second Covid wave. Fresh slippages came at Rs 4,253 crore which fell sharply on a sequential basis, 19% of the slippages came from the retail segment and 56% came from MSMEs. The bank also restructured loans worth Rs 13,234 crore under the Covid 2.0 recast scheme, out of this Rs 7,610 crore worth of loans were recast from the retail sector while Rs 3,331 crore came from MSMEs. Special mention category loans or which are due beyond 0-90 days stood at Rs 23,985 crore.

“For the retail and MSMEs borrowers who we have assisted with the Covid recast scheme a part of them have started to pre-pay and we are hopeful that as business momentum recovers a large part of these accounts will normalise,” said L.V. Prabhakar, MD, Canara Bank. “As of June 30, our collection efficiency is 91%, which means instalments are coming. There was stress which was duly addressed by giving them recast benefit.”

Profits nearly tripled to Rs 1,177 crore at the end of the June quarter as fee income and treasury gains grew sharply. The lender had reported profits of Rs 406 crore in the corresponding period last year. Though it’s net interest income was flat at Rs 6,147 crore from Rs 6,096 crore in Q1FY21.

Non-Interest Income which includes fees and treasury gains was up by 67.47% to Rs 4,438 crore in the June quarter versus Rs 2,650 crore a year ago.

The bank reported improvement in asset quality metrics. It’s GNPA ratio came at 8.50% for the quarter under review from 8.84% a year ago. Net NPA ratio was at 3.46%.

Total provisions rose nearly 18% to Rs 4574 crore at the end of the June quarter versus Rs 3880 crore a year ago. This included a one time income tax provision of Rs 845 crores. The bank also holds Covid related provisions of Rs 842 crore.

It’s total loans grew by 5.94% to Rs 6.6 lakh crore, out of which retail loans grew at 9.57% while agriculture loans rose 17.03%. The bank said it is targeting an annual credit growth rate of 7-8%.

Net Interest Margin for the reporting quarter fell to 2.71 per cent for Q1FY22 as against 2.84 per cent for Q1FY21.

The bank’s asset quality profile improved with gross non-performing assets down to 8.5 per cent in June 2021 from 8.84 percent during Q1FY21. The net NPA also dipped to 3.46 per cent during the quarter from 3.95 per cent in June 2020.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

Number of unique wilful defaulters rose by 286 in pandemic, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The number of wilful defaulters has increased from 2,208 to 2,494 at the end of March 31, 2021, Finance Minister Nirmala Sitharaman informed Parliament on Tuesday.

As per RBI data on global operations, during the last three financial years, public sector banks (PSBs) have effected recovery of Rs 3,12,987 crore in non-performing assets (NPAs) and written-off loans.

“RBI has further apprised that the total number of unique wilful defaulters reported by PSBs was 2,017 as on March 31, 2019, 2,208 as on March 31, 2020 and 2,494 as on March 31, 2021,” she said.

Bank NPAs

Sitharaman said that the RBI has apprised that as per data reported by banks to the Central Repository of Information on Large Credits (CRILC), the total funded amount outstanding of borrowers whose sector code is private and whose loans are classified as NPAs in the PSBs as on March 31, 2019, March 31, 2020, and March 31, 2021, is Rs 5,73,202 crore, Rs 4,92,632 crore and Rs 4,02,015 crore respectively.

Banks are required to take steps to initiate the legal process, wherever warranted, against the borrowers or guarantors for recovery dues, she said. They may also initiate criminal proceedings against wilful defaulters, wherever necessary, she added. In reply to another question, the Finance Minister said public sector banks have done a write-off of Rs 1,31,894 crore during 2020-21 as compared to Rs 1,75,876 crore in the previous year. As a result of the government’s strategy of recognition, resolution, recapitalisation and reforms have led to decline in gross NPAs as a percentage of total advances to 9.11 per cent as of March 31, 2021, from 11.97 per cent on March 31, 2015.

Top 100 wilful defaulters

The total size of the top 100 wilful defaults rose 5.34% in FY20 from Rs 80,344 crore as of March 2019.
Mehul Choksi-owned Gitanjali Gems topped the wilful defaulters’ list with Rs 5,693 crore dues, followed by Jhunjhunwala brothers’ REI Agro with Rs 4,403 crore and Jatin Mehta’s Winsome Diamonds & Jewellery with Rs 3,375 crore.

The top 10 wilful defaulters include another jewellery maker Forever Precious Jewellery, and Vijay Mallya’s Kingfisher Airlines Punjab National Bank had the highest exposure to Gitanjali Gems with Rs 4,644 crore of non-performing assets (NPA) as of March 2020. PNB also had Rs 1,447 crore exposure to Gili India and Rs 1,109 crore to Nakshatra Brands.

Write-offs

State Bank of India had Rs 1,875 crore dues from top 10 wilful defaulter ABG Shipyard with the bank writing o the entire amount. Uco Bank had Rs 1,970 crore exposure to REI Agro with half of it being written off.

Write-offs are accounting entries for shifting NPAs from the active balance sheet to off-balance sheet accounts. These are backed by 100% provision and therefore any recovery from these accounts adds to net profit.
RBI collects credit data from banks monthly, with data on defaults being collected on a weekly basis. The regulator has mandated banks to provide fully against NPAs older than four years and allowed to write these old NPAs.

The reduction in NPAs during FY20 was largely driven by write-os, RBI had said in its report on Trend & Progress of Banking in India. Banks’ total gross NPA reduced to 8.2% at the end of March 2020 from 9.1% a year earlier.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,
1 2 3 4 5 … 7