MUMBAI: It is more clatter than action when it comes to recovery of bad loans. When banks appealed that they were accelerating loan recovery, on the ground it really slowed — to Rs 22,678 crore at the end of financial year 2016 from Rs 30,792 crore a year earlier, according to central bank data.
Public sector banks sustained to lag behind private lenders in loan recoveries even as they were hampered with a high proportion of nonperforming assets, the Reserve Bank of India stated in its latest Financial Stability Report. PSU banks could only recover Rs 19,757 crore last financial year against Rs 27,849 crore in financial 2015.
The recoveries through the Sarfaesi Act, which allows banks to auction assets to recover loans, fell 52%. While banks mended over Rs 13,179 crore at the end of financial year FY16, this number was Rs 25,600 crore the year before.
On the other hand, recovery through Lok Adalats and debt recovery tribunals increased. Banks recovered Rs 6,365 crore against Rs 4,208 the last year via the tribunal. Recoveries via Lok Adalats totaled Rs 3,224 crore in financial 2016, compared with Rs 984 crore the year before.
Banks were loaded with more than Rs 6 lakh crore in bad loans. This has led to a simulated freeze in lending activity with credit growth in low single digits for several state-run banks.
The ratio of gross non-performing spreads of commercial banks rose to 9.1% from 7.8% between March and September 2016, strident the overall stressed advances ratio to 12.3% from 11.5% at the end of March quarter. The significant of special mention accounts-2 — accounts where the loan is overdue for 60 days or more — increased across bank groups, RBI data showed.
Banks have condensed some stress by selling bad assets to asset reconstruction companies (ARCs). Bad loans worth Rs 72,626 crore were sold to 16 ARCs at the end of March 2016, compared with Rs 58,479 crore in the last year.
Vinod Rai, chairman of government-constituted Banks Board Bureau that would help renovate the industry, stated recently that the top agenda for PSU banks was recovery from bad loans. The bureau had succumbed a variety of plans to the finance ministry to improve loan recovery. “The entire idea is how to resolve the stressed asset issue. So lots of debates are taking place; some of these things will fall into place very soon,” Rai had stated.