Finance Minister Nirmala Sitharaman on Monday said the non performing assets (NPAs) of public sector banks (PSBs) has declined to Rs 7.27 lakh crore as on September 30, 2019, from Rs 8.96 lakh crore at the end of March 2018. This was attributed to slew of measures taken by the government to improve financial health of the banks.
"The government has instituted comprehensive reforms in PSBs to improve, governance, underwriting, monitoring and recovery, and has leveraged technology in all aspects of banking, resulting in reduction in their NPAs," Sitharaman said in written reply to a question in the Lok Sabha.
"Record recovery of Rs 2.03 lakh crore over the one-and-half year period ending September 2019, 12 out of 18 PSBs reporting profit in the first half of the current financial year, and the highest provision coverage ratio in seven-and-half years," she said.
As per RBI data, gross NPAs of PSBs rose from Rs 2,79,016 crore as on March 31, 2015, to Rs 6,84,732 crore as on March 31, 2017 and Rs 8,95,601 crore as on March 31, 2018.
Nirmala Sitharaman also said in Lok Sabha that state-owned bank's provision coverage ratio has risen to 61.5 per cent from 60.5 per cent over the same period implying increased resilience of the banking sector. PSBs' net non-performing assets ratio has declined indicating increased provisioning, she added.
Replying to question regarding the bank's confidence in extending loans, she said sporadic credit default events and incidents of frauds have contributed to reluctance in lending by banks.
Fraud cases reported by Scheduled Commercial Banks and select financial institutions increased from Rs 23,934 crore in FY17 to Rs 41,167 crore in FY18, Rs 71,543 crore in FY19. The number spiked to Rs 1,13,374 crore in the first half of the current financial year, as per government data.
Sitharaman, however, added that government has taken a number of measures to address these and other matters concerning lending by banks. She said the measures include maintenance of overall positive liquidity through open market operations by the RBI, liquidity support to the NBFC sector, and enabling of financial support for stalled housing and real estate projects.
"Mechanism for resolution of stress in NBFCs has been created by empowering RBI to take action in this regard through amendments...and bringing NBFCs with an asset size of Rs 500 crore and above within the ambit of resolution under IBC," Sitharaman said.
Recently, RBI's financial stability report stated that scheduled commercial banks' capital adequacy ratio improved significantly from 14.3 per cent in March 2019 to 15.1 per cent in September 2019 due to recapitalisation of state-owned banks.
By Chitranjan Kumar with PTI inputs