(a) the details of the projected earned and loss incurred by public and private sector banks during each of the last three years and the current year, bank-wise;
(b) whether any effective measures are being taken to check improve financial State of the loss making banks, both public and private banks and also to irregularities/ fraud in various financial activities of the banks; and
(c) if so, the details thereof?
THE FINANCE MINISTER
(a) to (c): A statement is laid on the Table of the House.
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Statement as referred to in reply of Lok Sabha Starred Question no. †*409 for answer on 23rd March, 2020/ Chaitra 03, 1942 (Saka) regarding “Performance of Banks” by SHRI SUKHBIR SINGH JAUNAPURIA, Hon’ble Member of Parliament
(a) to (c): As per Reserve Bank of India (RBI) data on global operations, aggregate gross advances of public sector banks (PSBs) and private sector banks increased from Rs. 23,44,919 crore as on 31.3.2008 to Rs. 65,76,172 crore as on 31.3.2014. As per RBI inputs, the primary reasons for the spurt in stressed assets have been observed to be, inter-alia, aggressive lending practices, wilful default/loan frauds/corruption in some cases, and economic slowdown. Asset Quality Review (AQR) initiated in 2015 for clean and fully provisioned bank balance-sheets revealed high incidence of non-performing assets (NPAs). As a result of AQR and subsequent transparent recognition by banks, stressed accounts were reclassified as NPAs and expected losses on stressed loans, not provided for earlier under flexibility given to restructured loans, were provided for. Further, all such schemes for restructuring stressed loans were withdrawn. As a result, though public and private sector banks posted aggregate operating profits during financial year (FY) 2017-18 and FY2018-19 of Rs. 2,67,515 crore and Rs. 2,78,344 crore respectively, yet primarily due to continuing ageing provision for NPAs, they made aggregate provision for NPAs and other contingencies of Rs. 3,11,102 crore and Rs. 3,17,359 crore during the respective financial years, resulting in aggregate net loss of Rs. 43,587 crore and Rs. 39,015 crore respectively. With legacy NPAs recognised and as a result of comprehensive measures taken by Government through resolution, reforms and PSB recapitalisation for improving the financial position of banks. , for the first nine months of the current financial year, public and private sector banks have posted aggregate profit of Rs. 21,673 crore. Further, gross NPAs of public and private sector banks have declined by Rs. 89,572 crore by December 2019, after peaking in 31.3.2018, and have effected record recovery of Rs. 2,68,012 crore in FY2018-19 and in the first three quarters of the current financial year. Bank-wise details of profit earned / loss incurred by public and private sector banks during the last three financial years and in the first three quarters of the current financial year are at Annex.
Comprehensive measures taken for improving financial position of banks include, inter alia, the following:
(i) Change in credit culture was effected, with the Insolvency and Bankruptcy Code, 2016, fundamentally changing the creditor-borrower relationship, taking away control of the defaulting company from promoters/owners and debarring wilful defaulters from the resolution process and debarring them from raising funds from the market.
(ii) Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act) has been amended to make it more effective, six new Debts Recovery Tribunals have been established and recovery systems in banks have been improved by systemic improvements in banks through PSB Reforms Agenda, with PSBs setting up Stressed Asset Management verticals for focussed recovery, segregating pre- and post-sanction follow-up roles for clean and effective monitoring, creating technology- and data-driven systems for risk scoring, early warning signals and recovery, reforming loan consortiums, instituting risk-based pricing of loans, creating online one-time settlement platforms and monitoring large-value accounts through specialised monitoring agencies.
(iii) PSBs have been reecapitalised through infusion of capital by the Government and mobilisation of capital from the market.
(iv) For enforcement of auditing standards and ensuring the quality of audit, the National Financial Reporting Authority has been established as an independent regulator.
Comprehensive measures have been taken to check irregularities/frauds in banks, with the result that the amount involved by year of occurrence of fraud (where the amount is Rs. 1 lakh and above) in public and private sector banks has reduced sharply from a peak of Rs. 48,943 crore in the FY2013-14 to Rs. 5,186 crore in the first three quarters of FY2019-20 (as per RBI data). The measures taken include issuance by the Government of a “Framework for timely detection, reporting, investigation etc. relating to large value bank frauds” to PSBs, enactment of the Fugitive Economic Offenders Act, 2018, freezing of accounts of 3.38 lakh inoperative companies, empowerment of heads of PSBs to issue requests for issue of look-out circulars, setting up of Central Fraud Registry, and comprehensive action against wilful defaulters by PSBs, with registration of FIRs in 3,515 cases, filing of recovery suits in 9,967 cases, and initiation of action under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 in 7,895 cases.
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