State-Run Banks’ Losses Fell In FY19 As NPAs Declined, Says Finance Minister
Net losses posted by state-run banks in the year ended March 2019 declined over the preceding fiscal, the finance minister said.
The net loss posted by state-run banks in the year ended March 2019 declined over the preceding fiscal, according to Finance Minister Nirmala Sitharaman.
The minister, citing Reserve Bank of India data, said net loss of public sector banks for 2018-19 was Rs 80,084 crore—down nearly six percent over the previous fiscal.
The government’s 4Rs—recognition, resolution, recapitalisation and reforms—have helped strenghten public sector banks by through various recovery mechanisms and by curbing bad loans, the minister said in a Lok Sabha reply.
Gross non-performing assets of the entire commercial banking system grew due to aggressive lending practices, wilful defaults and loan frauds from Rs 3.23 lakh crore in 2014-15 to Rs 10.36 lakh crore by the end of 2017-18, Sitharaman said.
During the same period, the outstanding bad loans of state-run banks grew from Rs 2.8 lakh crore to Rs 8.95 lakh crore, Anurag Singh Thakur, minister of state for finance and corporate affairs, said in a Lok Sabha reply.
Growing strength of PSBs is also evident from the fact that all PSBs meet minimum regulatory capital requirement, six PSBs are now out of lending restrictions on account of placement under Reserve Bank of India’s Prompt Corrective Action framework balance-sheets of PSBs have been substantially cleaned up through transparent recognition of NPAs and their provision coverage ratio is at its highest level in seven years.Nirmala Sitharaman, Minister of Finance
Gross non-performing assets of public sector banks and scheduled commercial banks reduced by nearly Rs 1.06 lakh crore and Rs 1.02 lakh crore, respectively, over the last fiscal, Thakur said.
The Reserve Bank of India’s Financial Stability Report, published in June, noted that the growth of bad loans has decelerated, which according to Thakur, signals a turnaround in the NPA cycle.
“Further decrease in the gross NPA ratio of SCBs and PSBs (in their domestic operations) from 9.3 percent and 12.6 percent, respectively, in March 2019 to 9 percent and 12 percent, respectively by March 2020 is projected,” he said.
A total of Rs 3.12 lakh crore was infused into public sector banks, the minister of state said, with around Rs 2.46 lakh crore coming from recapitalisation bonds and Rs 66,000 crore from capital raising by the banks themselves.
Both the replies cited examples of how the government’s “4R” approach has had a positive impact:
- The banking sector recovered around Rs 3.16 lakh crore in the last four years with over Rs 1.27 lakh crore recovered in 2018-19 from the resolution of NPA accounts through internal banking mechanisms and Insolvency and Bankruptcy Code.
- Improvement in asset quality is reflected by reduction in quantum of slippages of standard accounts into NPAs by 45 percent year-on-year, in FY19.
- There has been a 63 percent reduction in 31-90 days overdue corporate accounts as of March 2019 from their peak in June 2017.
- Provision coverage ratio rose from 49.31 percent in 2016 to 74.22 percent as of March.
- Cleaning up of public sector banks accompanied by their re-capitalisation has pushed domestic credit growth of PSBs to 10.2 percent in FY19.