Non-performing assets of the Indian banking system have crossed the Rs 9 lakh crore-mark
Reports suggest that asset reconstruction companies (ARCs) purchased non-performing assets (NPA) valued at around Rs 5,000 crore in the most recent July-September quarter. Compared to the previous April-June quarter purchases of ARCs, which market experts have put in the ballpark range of around Rs 7,000 crore, the total amount of NPAs brought this year have been down by around 28 per cent, a sizable dent but not one that cannot be overcome. In the last FY, ARCs bought NPAs worth Rs 35,000 crore, surpassing their FY16 purchases by about 75 per cent. Chances are that the rather lukewarm purchases by the ARCs this year could see a rise given that banks tend to press the pedal on these sales in the second half of the financial year.
However, irrespective of the sales figures that will be thrown up by the end of the year, the government could help ease pressure on banks’ balance sheets by introducing several structural reforms that have been nothing less than a roadblock to an expedited disposal of NPAs.
But first, a little bit of context. The SARFAESI or the Securitisation and Reconsturction of Financial Assets and Enforcement of Security Interest Act, passed by Parliament in 2002, provides for the establishment for ARCs. As of this day, around 19 ARCs operate in India that can purchase secured assets from banks by paying in cash or issuing debentures, bonds or any other form of security.
Banks follow a practice of putting up the NPAs for auction, after stating their reserve prices, and then proceed to sell it to the highest bidder. ARCs do not foot the entire acquisition cost upfront and instead issue security receipts.
This dynamic changed way back in 2006 when the Reserve Bank of India mandated that ARCs will have put in a minimum of 5 per cent in each segment of SRs, essentially ensuring that ARCs have some skin in the game. In 2014, the cash requirement as part of the SRs was increased to 15 per cent dealing another body blow to the possibility of a fast recovery from the seemingly interminable NPA crisis. The FY17 union budget did throw up some relief when it said that non-institutional investors would be allowed to invest in SRs, but till date there has been no action on that front.
Meanwhile, the pile of toxic loans on the balance sheets of both public and private sector banks is mounting; some estimates suggest that it has already entered the territory of around Rs 9.5 lakh crore. In such a dire situation, the focus should have been on moving these bad loans from the books of PSBs. Instead, a fastidious government’s inaction on bringing down the cash component in SRs has meant that negotiations between banks and ARCs on the selling price are not just lengthening, but many transactions are also being killed midway.
Many ARCs, to accommodate the cash requirement, have started pricing the NPAs at lower rates leading to bank officials backing out from the deals. If the government acts fast, it could possibly bring in a revival in sale of NPAs. If it does not, it will be business as usual, albeit at a snail’s pace and at even lower volumes.
Almost all PSBs require recapitalization and the government cannot provide all the money. Sustainable solutions are needed
The ever-growing bad loans of public sector banks (PSBs) have kept them perennially in need of funds from their principal owner. The government has committed to infusing Rs70,000 crore of taxpayer money under Mission Indradhanush. Reserve Bank of India (RBI) deputy governor Viral Acharya has conceded that the programme will be grossly inadequate to address the problem—and that what is needed is something like the sudarshan chakra. The deputy chairman of the erstwhile Planning Commission, Montek Singh Ahluwalia, has suggested in this newspaper recognition, resolution, recapitalization and reform (by reducing government equity to 33%) should be the four “Rs” of the sudarshan chakra.
Non-performing assets (NPAs) are inherent in banking. The discussion these days tends to concentrate on very large NPA accounts, numbering less than 50. In the process, a large chunk of agricultural, small and medium enterprises (SMEs) and mid-corporate NPAs get ignored. As almost all PSBs require recapitalization and the government cannot provide all the money, sustainable solutions are needed.
PSBs wrote off a record Rs81,683 crore worth of bad loans in the financial year ended March 2017, a jump of 42% over the previous year’s write-off amount. Loans written off during the last five years amounted to a whopping Rs2.46 trillion, comprising mainly agricultural, SME and mid-corporate loans. Though written off and valued at zero, these loans are covered by primary security and collaterals—mostly real estate—worth several thousand crores. As per regulatory prescription, these securities are valued at zero irrespective of their realizable value, sometimes much higher than the loan outstanding. In developed markets, the resolution process is quick; in India, it can take many years, and then more for actual cash recovery.
Apart from the lengthy legal process, recovery of bad loans is hampered by several other factors. First, in the case of consortium and multiple banking arrangements, the loans and underlying securities are fragmented among several banks. This creates a major impediment as a bank with a relatively insignificant share can delay or scuttle the whole resolution process. Second, unlike in developed economies, in India there is no active secondary market for NPAs that would enable an exit from problem loans when considered appropriate. Despite being experienced in NPA resolution and important actors in the financial sector, banks themselves stay away from participating in NPA auctions. Most of the time, after several failed attempts, the selling bank has no option but to sell the loan to an asset reconstruction company (ARC), which is the only bidder. The combined capability and geographic reach of ARCs is minuscule compared to the size and geographic spread of NPAs. Third, there is a lingering fear in the minds of some bank executives of their decisions being questioned by government bodies.
Putting PSBs’ bad loans for auction “exclusively for the PSBs” can address most of these issues and create an active secondary market for NPAs. In order to attract larger participation, the auction can be carried out with no reserve price or security deposit. As sellers and buyers are owned by the government, there wouldn’t be much scope for underhand dealing. Agricultural and SME loans can be auctioned in a calibrated manner.
Different PSBs could approach the proposed auction from different perspectives. In the case of written-off or fully provided for NPAs, any amount realized would get added to capital. This would be a saving proposition for a PSB which is starved for capital. It could be for the consolidation of bad loans scattered across banks for better resolution. It could also be for creating a distinct portfolio of loans acquired at distress prices. This could make good business sense, as even a small recovery out of this portfolio, acquired at rock bottom prices, could provide an attractive return.
The suggested process is not evergreening, for the sale would be on outright cash basis through an auction. It would be in line with RBI guidelines which permit buyers of such loans to treat them as “standard assets” for three years subject to certain conditions. No external approval would be needed as the RBI has already permitted banks to carry out such trades on the basis of a policy approved by the board of the bank concerned. Looking into the inherent advantages, some banks may transform themselves organically into “bad banks”, the creation of which is considered by many experts to be the need of the hour.
As for funds for buying these assets, they are already there with the banks; loans are “technically” written off against provisions created out of actual profits generated by banks. There is no cash outflow. For example, the State Bank of India made an operating profit of Rs50,848 crore during FY 2016-17. Out of this, Rs32,247 crore was transferred towards a loan loss provision; technical loan write-offs amounted to Rs20,570 crore, with no cash outflow.
Ideally, this process could be implemented by PSBs whose capital has been badly eroded as a prompt corrective action, prior to approaching the government for recapitalization. A similar process may be carried out before the merger of PSBs, in order to bring out the hidden value of the PSB being acquired. Selling written-off or fully provided for NPAs in an exclusive auction among PSBs for raising capital may be a better proposition than selling the bank itself for a song.
M.G. Vaidyan is former deputy managing director-stressed assets management, State Bank of India.
Here are just a few of the reasons that homeowners and investors are going to the Bank Auctions / foreclosure market.
1.PRICE ADVANTAGE: Bank Auction properties are approximately 25 % cheaper than market price.
2.LEGALLY SAFE: Since Banks / Financial Institutions have given loan after verification of all the legal aspects only, Bank Auction properties are 95 % legally safe.
3.CREDIBILITY OF SELLER: You are buying from a Bank / Financial institution, which is authorized by Govt of India to sell such properties.
4.TIME FRAME: Entire transaction will be over in less than two months period. Ownership will be transferred in one month.
5.TRANSPARENCY: 100 % transparent transaction.
Buying properties in Bank Auctions is an intelligent financial decision.
The following are the seven steps to buy properties in Bank Auctions (https://bankauctions.in/) / Foreclosure properties (http://foreclosureindia.com/).
i. Read The Auction Notice Carefully,
ii. Verify Documents,
iii. Inspect property,
iv. Make Finances ready,
v. Submit tender,
vi. Participate in Auction,
vii. Get Sale certificate.
1. Read The Auction Notice / Sale Notice Carefully: Advised to take a printout of Auction notice and read the details mentioned in the advertisement carefully and note down the important aspects like contact details, inspection date, reserve price, earnest money deposit ( EMD), cost of auction forms, tender submission time & date, auction date & time and finally e-auction website details.
2. Documents Verification: Enquire with the bank / financial institution about further information of the property. Visit the Bank and see all the documents such as registration documents of the present borrower, link documents, latest encumbrance certificate pertains to the property, approved layout for plot by the competent authority, approved plan for flats / houses by competent authority etc. If required, consult with a solicitor / advocate before the auction. Once this aspect is clear, you can proceed further.
3. Inspection of the Property: Visit the site of the property as per inspection schedule given in Sale notice. Consult people around the property to know the price prevailing in that area. While inspecting the property observe the present physical condition of the property, enquire about the pending property taxes, electricity dues, welfare associations maintenance dues. The property comes as is, as such any pending dues should be added to your consideration price before quoting.
4. Get your Finances Right: Please make sure that you are prepared for the price to be paid for the property. If you have ready cash, you can clinch the deal faster and possess the property fast. If you are thinking of availing a Bank Loan, you may approach some bank for sanction of pre-approval loan to complete the transaction in the specified time frame very smoothly.
5. Submission of Tender: Submit the bid at the specified branch before the due date and time, along with demand draft / Banker cheque as EMD ( earnest money deposit ), copies of purchasers PAN card, photo identity card and residence proof. In most of the cases the EMD amount is 10% of the reserve price.
6. Participating in Auction: Based on the data & statistics of the foreclosure properties / bank auction properties in India, around 60% of the Bank auction properties are unsold, due to various reasons. Around 30% properties are getting one bid only. Around 10% properties are getting two or more bids. In case of E-Auction, please take training from the E-Auction service provider at free of cost, the details of e-auction service provider are available in E-auction notice. Any Bidder / Investor is successful, if he/ she is the highest bidder in the Auction. Bidder / Investor needs to pay 25% of the highest bid amount minus 10% EMD amount already paid, on the same day of the auction. Balance 75 % amount is to be paid with in 15 days / 30 days as specified by the Bank / Financial Institution.
7. Sale Certificate & Registration: After payment of the total amount either from own sources or through Bank loan, a sale confirmation certificate will be issued. Investor have to pay the stamp duty and get the property registered on their name. The Authorized officer will register the property on behalf of the Bank. After completion of registration, the physical possession of the property will be handed over to the Investor.
All the real estate Investors / NRI investors are invited to utilize this opportunity to buy good properties at much discounted rate.
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MUMBAI, DECEMBER 29:
Though banks have been making serious efforts to reduce their non-performing assets through various legal channels, the amount recovered by scheduled commercial banks (SCBs) in 2015-16 at ₹22,768 crore was 26 per cent lower compared with ₹30,792 crore in the previous year, the Reserve Bank of India said.
The legal channels that banks resort to for reducing NPAs include Lok Adalats, Debt Recovery Tribunals (DRTs) and invocation of SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act).
Public sector banks (PSBs), which are burdened with a high proportion of the banking sector’s NPAs, could recover only ₹19,757 crore, compared to ₹27,849 crore in the previous year, said the report.
The deceleration in recovery by SCBs was mainly due to 52 per cent reduction in recovery through the SARFAESI channel, to ₹13,179 crore in 2015-16 from ₹25,600 crore in 2014-15. However, recovery through Lok Adalats soared 228 per cent year-on-year to ₹3,224 crore. Recovery via DRTs jumped 51 per cent y-o-y to ₹63.65 crore. The number of cases referred to these three legal channels cumulatively was up 47.5 per cent at 46,54,753 as against 31,55,672 in the previous year.
Banks also reduced their stressed assets by selling them to asset reconstruction companies (ARCs). This has been increasing since March 2014 because of the regulatory support extended to banks under the Framework to Revitalise the Distressed Assets in the Economy.
In FY16, 16 ARCs acquired stressed assets amounting to ₹72,626 crore from banks, compared with 14 ARCs acquiring ₹58,479 crore in the previous year.
Moots e-auction of NPAs, asks lenders to frame policy
MUMBAI, SEPTEMBER 1:
The Reserve Bank of India on Thursday expanded the market for banks’ stressed assets by permitting them to be sold to other lenders, including non-banking financial companies and financial institutions.
The central bank also issued guidelines specifying that all assets classified as doubtful should be reviewed by the board of banks or a committee of board members.
“Early identification will help in low vintage and better price realisation for banks,” RBI said.
“At least once in a year, preferably at the beginning of the year, banks shall, with the approval of their Board, identify and list internally the specific financial assets identified for sale to other institutions, including securitisation companies and reconstruction companies,” it added. Currently, banks are required to lay down detailed policies and guidelines on sale of their stressed assets to securitisation companies or reconstruction companies. The policy has to cover the financial assets to be sold; norms and procedures for sale; valuation procedures to be followed to ensure that the realisable value of financial assets is reasonably estimated; besides delegation of powers of various functionaries for taking decision on the sale.
The e-auction mechanism has been mooted besides a public solicitation of bids to attract a wide variety of buyers. Banks should lay down a board-approved policy in this regard, the RBI said.
On asset valuation, the central bank said banks should clearly specify (on a case-to-case basis) whether they would accept internal or external valuation of the asset being sold, besides clearly specifying the discount rate for asset valuation in their policy.
Two external valuation reports have been mandated for loans above ₹50 crore.
The cost of valuation has to be borne by the banks. Banks have been directed to review the efficacy of their extant policies on sale of NPAs, with focus on valuation of stressed assets, and rework them according to the new guidelines.
Report said the move is credit-positive for NBFCs with a retail focus, especially those which are in the mortgage space.
Domestic rating agency Icra has said the decision to extend provisions of the Sarfaesi Act to loans given by non-banking finance companies will help bring down delinquencies and may result in cheaper funds for borrowers.
“The access to the Sarfaesi Act will strengthen NBFCs’ ability to contain life-time losses,” the rating agency said in a weekend note after the finance ministry decided recently to extend the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act 2002 to non-banking financial companies (NBFCs) with over Rs 500 crore in assets.
The report said the move is credit-positive for NBFCs with a retail focus, especially those which are in the mortgage space. As of March this year, only 19 per cent of the overall NBFC credit of Rs 5 trillion was extended as loan against property (LAP) and housing loans.
The ministry notification has a list of 196 NBFCs that will benefit under the new framework. “If credit costs were to come down, there could be some moderation in lending rates by NBFCs, which would benefit borrowers, going forward,” the agency added.
“If we add the loans extended to SMEs, which include both property-backed and non-property backed credit to LAP, the total NBFC credit stood at Rs 1.2 trillion,” it said, adding that the share of non-property is very modest.
The average ticket size for LAP is pegged at Rs 10-13 million and up to 65 per cent of the book is estimated to have a ticket size of over Rs 10 million, which is the threshold for enforcement of security interest, it said.
The report further noted that large NBFCs having over Rs 100 billion in assets under management will be benefiting more through this decision while small and mid-sized ones will not as their average loan sizes are under Rs 2.5 million.
The report blamed poor underwriting and over-leveraging of borrowers for the rising 90+day delinquencies in LAP and SME loans of NBFCs, which rose to 2.8 per cent in March 2016 from 2.2 per cent a year ago.
The Sarfaesi law will result in some moderation in NPAs as proceedings towards possession and sale of the security can get completed in two years as against three years required for action under the provisions of the Negotiable Instruments Act.
The report, however, conceded that proceeding under the Sarfaesi Act can take longer because of delay in getting possession orders from district or chief metropolitan magistrates as also stay orders from various courts.
But fear of action under Sarfaesi laws is likely to act as a deterrent to wilful defaulters, curb extended litigation and lead to faster resolution, it hoped.
MUMBAI:The government has thrown new rules at state-owned banks, nudging them to salvage their junk loans, which have strained balance sheets and re-priced stocks of several lenders.The finance ministry, concerned that a mountain of loss assets could call for bigger fund infusion into banks, has stepped in as the junk loan market has been at a standstill since last year.A string of auctions by banks to sell non-performing assets has bombed with the lenders unwilling to accept the price asset reconstruction companies, or ARCs, who deal with sticky loans were willing to fork out.”The ministry must have felt that it was high time to lay down some ground rules and push the banks for quicker recovery of loss assets,” said a junk asset dealer who has handled just one transaction in the last one year.
In a recent communique to state-owned banks and ARCs sponsored by public sector institutions, the ministry has laid out broad parameters for recovering dud loan assets. It has also put in place an incentive structure to remunerate ARCs. As per the scheme, the lower the collateral value on a loan account, the higher is the upside for the ARC.
Banks’ loss assets, for which lenders have to make full provisioning equal to the loan amount, add up to more than Rs 30,000 crore out of the PSU banks’ total non-performing assets of Rs 1 lakh crore. Any recovery from loss assets adds to a bank’s net worth.
The ministry’s move to fix a commission and incentive structure will provide some relief to ARCs as a number of them are struggling to stay afloat since more and more banks are preferring to revolve bad loans on their own.
As per the incentive structure, if the recovery is more than the principal amount and the loan has tangible security worth more than the principal, banks should pay 5% of the recovered amount in excess of the principal to the ARC.
But if the recovery is less than 90%, then even if the security is more than the principal, banks need not pay any commission. In cases where the recovery is 90% or more than the principal but if the loan does not have tangible security, banks should pay commission as high as 10%.
A commission of 6% is fixed if recovery is 90% or more of the principal and tangible security is worth 50-90% of the loan. If recovery is over 90%, but the collateral is less than 50% of the principal, ARCs will be paid7%.
The finance ministry arrived at the commission framework after consulting PSU banks and ARCs like Arcil, ISARC and ASREC.
India’s 29 state-owned banks have written off a total of Rs 1.14 lakh crore between 2012-13 and 2014-15, a sum large enough to build more than 10,000 km of highways.
The Indian Express reported on Monday that “twenty-nine state-owned banks wrote off a total of Rs 1.14 lakh crore of bad debts between financial years 2013 and 2015, much more than they had done in the preceding nine years.”
Here are five things such an amount can do to push India up on the development ladder:
1. Build more than 11,000 km of national expressways at an average cost of Rs 10 crore per km, entirely funded by the government.
2. The current NREGA annual budget is Rs 34,699 crore. With Rs 1.14 lakh crore, the government can widen the scope of the rural job scheme by nearly four times. Conversely, with such an amount, the government will be able to fully fund the NREGA scheme for nearly four years without setting aside money in the annual budget.
3. The written off debt amount of Rs 1.14 lakh crore, if made available to the government, will allow it to nearly fully fund the annual food subsidy bill of Rs 1.25 lakh crore.
4. India currently spends about Rs 14,000 crore to build rural roads. The written off bank debts is more than eight times the annual budget of the Pradhan Mantri Gram Sadak Yojana. With Rs 1.14 lakh crore, the government can expand the scope of the rural road scheme eight times.
5. India spends Rs 22,000 crore from the annual central budget to finance the Sarva Shiksha Abhiyan, a state-funded elementary and primary education programme. With Rs 1.14 lakh crore, the total amount written off as bad debts between 2013 and 2015, the government will be able to expand the scheme five fold.
That is the amount of bad loans waived in last three financial years, more than the write-off in the previous nine.
Twenty-nine state-owned banks wrote off a total of Rs 1.14 lakh crore of bad debts between financial years 2013 and 2015, much more than they had done in the preceding nine years.In response to an RTI application filed by The Indian Express, the RBI disclosed that while bad debts stood at Rs 15,551 crore for the financial year ending March 2012, they had shot up by over three times to Rs 52,542 crore by the end of March 2015.Asked about the details of the biggest defaulters, whether individuals or business entities, whose bad debts to the tune of Rs 100 crore or more had been written off, the RBI said: “The required information is not available with us.” Banks are required to report the bad debts on a consolidated basis, it said.
Even as the government has been trying to shore up public sector banks through equity capital and other measures, bad loans written off by them between 2004 and 2015 amount to more than Rs 2.11 lakh crore. More than half such loans (Rs 1,14,182 crore) have been waived off between 2013 and 2015. Only two banks, State Bank of Saurashtra and State Bank of Indore, have shown zero bad debts in the past five years. In other words, while bad loans of public-sector banks grew at a rate of 4 per cent between 2004 and 2012, in financial years 2013 to 2015, they rose at almost 60 per cent. The bad debts written off in financial year ending March 2015 make up 85 per cent of such loans since 2013.
The RTI reply also disclosed that bad debts have declined only four times since 2004. The last time was in 2011. An analysis of the information available with the RBI till 2012-13 also shows that between 2009 and 2013, both the advances by public sector banks to individuals and business entities as well as their amount of bad debts written off doubled. From 0.33 per cent of total advances in 2009, bad debts rose to 0.61 per cent in 2013. Bank-wise break-up shows State Bank of India, India’s largest bank, is way ahead of others in declaring loans as unrecoverable, with its bad debts shooting up almost four times since 2013 — from Rs 5,594 crore in 2013 to Rs 21,313 crore in 2015. In fact, SBI’s bad debts made up 40 per cent of the total amount written off by all other banks in 2015 and were more than what 20 other banks wrote off. In 2014 too, the bank’s bad debts alone comprised 38 per cent of the total of all banks. The figure of bad loans for 2014 and ‘15 combined, Rs 34,490 crore, was Rs 10,000 crore more than that for between 2004 and 2013, Rs 23,992 crore. The country’s second-largest public sector bank, Punjab National Bank, has also witnessed a consistent rise in bad debts since 2013. These grew by 95 per cent between 2013 and 2014 but climbed by 238 per cent between 2014 and 2015 — from Rs 1,947 crore in 2014 to Rs 6,587 crore in 2015. Reserve Bank Governor Raghuram Rajan has repeatedly expressed concern over the health of public-sector banks, and pushed for steps to ensure that banks classify certain stressed assets as non-performing assets (NPAs) and make adequate provisions to “strengthen their balance sheets”, besides working out schemes of merger. With public sector banks sitting on over Rs 7 lakh crore stressed assets, including NPAs and restructured loans, Rajan recently said the estimates of NPAs being 17-18 per cent are bit on the high side and that entities should be careful not to treat NPAs as total write-offs but see if they can change promoters and repay as the economy recovers. He also said that some banks would have to merge to optimise their use of resources. Gross NPAs of public-sector banks rose to 6.03 per cent as of June 2015, from 5.20 per cent in March 2015. RBI has asked banks to review certain loan accounts and their classification over the two quarters ending December 31, 2015, and March 31, 2016.
In response to the above story, published in The Indian Express on February 8, 2015, the Union ministry of finance, the Reserve Bank of India and the country’s largest bank, State Bank of India, have written back stating that the write-offs are an accounting entry to meet regulatory guidelines.
Ministry of Finance:
The fact of the matter is that write-offs are basically technical and are done within the framework of Income Tax Act, 1961 and RBI Guidelines regarding provisions for bad loans as per Standard Accounting Practices. Banks write-off advances at Head Office level as part of the balance sheet cleaning exercise and these loans continue to remain outstanding in the branch books. Recovery efforts continue to be made in the respective branches with respect to these bad loans. Write-off does not mean that recovery comes to a stop.
Reserve Bank of India:
‘Writing off’ of non-performing assets is a regular exercise conducted by banks to clean up their balance sheets. Substantial portion of this write-off is, however, technical in nature. It is primarily intended at cleansing the balance sheet and achieving taxation efficiency. In ‘Technically Written Off’ accounts, loans are written off from the books at the Head Office, without foregoing the right to recovery. Further, write offs are generally carried out against accumulated provisions made for such loans. Once recovered, the provisions made for those loans flow back into the profit and loss account of banks. The data published in the above news item is the total write-off made by banks, which includes a large portion of technically written off accounts where the recovery efforts continue as usual.
State Bank of India:
We would like to point that SBI has a loan book of Rs 13,70,701 crore and the net NPAs are Rs 28,592 crore as on September 2015, which represent 2.14% of the advances. Standalone figures may appear big, however if you look at the overall size of SBI and its net NPAs, it can be seen that we are amongst the most efficient public sector banks in India. Moreover, our NPA figures have been improving over the last few years. It is pertinent to mention that SBI is 2.8 times larger than the next largest bank in the country in terms of business. Writing off a bad debt is an accounting entry to meet the regulatory guidelines. Writing off an amount does not mean it is a total loss as our legal team continues the recovery process and in due course recoveries are effected in the written off accounts, which are then added to the profits of the bank for that year. During the year ended March 2015, our bank recovered Rs 2,300 crores from the written-off accounts. We would herein like to add that for recovery, our legal systems and processes are most robust and reliable in the entire banking system.
Our Correspondent replies:
The report is based on a response from the Reserve Bank of India to an RTI application filed after the December 16, 2015, Supreme Court judgment, which said the banking regulator was bound in law to give information regarding private and public banks under the Right To Information Act. “RBI is supposed to uphold public interest and not the interest of individual banks. We have surmised that many financial institutions have resorted to such acts which are neither clean nor transparent. The RBI in association with them has been trying to cover up their acts from public scrutiny,” said a bench of Justices M Y Eqbal and C Nagappan. The RBI has noted that the total write-offs includes a large portion of technically written-off accounts where the recovery efforts continue as usual. Therein lies the problem. After a technical write-off, there is no incentive for banks to pursue recovery, as noted by RBI’s former deputy governor KC Chakrabarty in the past. Given the humongous bad loan problem at hand, the write-offs cannot be seen as just housekeeping. The Rs 1,14,000 crore written off over just the last three years (2012-13 to 2014-15) is more than the write-off over the previous nine years. So acute is the problem that both the Union finance ministry and NITI Aayog have separately pitched for setting up a government-owned asset reconstruction company to take over banks’ bad assets. Most importantly, write-offs force the government to commit large dollops of capital so that banks continue to undertake normal lending operations in the coming years. The finance ministry has proposed to infuse Rs 70,000 crore over the next four years, which may not be enough. Capital infusion by the government is always at the taxpayers’ expense. Setting aside moneys from the Budget for this only precludes higher allocation for critical sectors such as health and education.