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Thursday, July 23, 2015

Corporate Loans of Public Sector Banks (PSBS)

Shri Anand Sharma raised a question (No. 69) in the Rajya Sabha about the corporate loans of PSBs.
Shri Jayant Sinha, the Minister of State in the Ministry of Finance provided answers for the questions related to the issue on 1.07.2015.
The total amount of outstanding corporate loans of the Public Sector Banks (PSBs) and the bank wise details of the number of corporate loans exceeding the sum of 5000 crore were the first and second questions that were raised. Shri Jayant Sinha said that the outstanding corporate loan of the Public Sector Banks (PSBs) as on 31.03.2015 is Rs. 23,52,246.86
crores. As an answer to question (b) he provided the PSB wise data on the number of borrowers with outstanding loans above Rs.5,000 crore at end March of 2015. As per the data, Bank of Baroda has 15,642 borrowers, Bank of India 1, 10,034, Canara Bank 2,22,604, State Bank of India 39 4,42,267, Union Bank of India 16,975. The total number of borrowers in all the banks is 4,44,87,522. (Source: RBI)
For the question on the steps taken by the Reserve Bank of India (RBI) and PSBs to recover these debts, he replied that the following steps are being taken by the Government & RBI for Containment of NPAs in Banks:
i) The Government has decided to establish six new Debt Recovery Tribunals (DRT) (at Chandigarh, Bengaluru, Ernakulum, Dehradun, Siliguri, Hyderabad) to speed up the recovery of bad loans of the banking sector.
ii) RBI has released guidelines (dated 30 January 2014) for “Early Recognition of Financial Distress, Prompt Steps for Resolution and Fair Recovery for Lenders: Framework for Revitalizing Distressed Assets in the Economy” suggesting various steps for quicker recognition and resolution of stressed assets:
  • Creation of a Central Repository of Information on Large Credits (CRILC) by RBI to collect, store, and disseminate credit data to banks on credit exposures of Rs. 5 crore and above,
  • The Framework for formation of Joint Lenders Forum (JLF), Corrective Action Plan (CAP),and sale of assets outlines formation of JLF and corrective action plan that will incentivise early identification of problem cases, timely restructuring of accounts which are considered to be viable, and taking prompt steps by banks for recovery or sale of unviable accounts
iii) RBI has issued guidelines on July 15, 2014 and December 15, 2014 on Flexible Structuring of Loan Term Project Loans to Infrastructure and Core Industries. Long term financing for infrastructure has been a major constraint in encouraging larger private sector participation in this sector. On the asset side, banks will be encouraged to extend long term loans to infrastructure sector with flexible structuring to absorb potential adverse contingencies, (also known as the 5/25 structure).
iv) RBI now has come out with new category of borrower called Non-Cooperative borrower. A non-cooperative borrower is a borrower who does not provide information on its finances to the banks. Banks will have to do higher provisioning if they give fresh loan to such a borrower.
v) Taking further steps in the area of Asset Reconstruction Companies, RBI has tightened the norms for Asset Reconstruction Companies (ARCs),vide guidelines dated August 5, 2014, where the minimum investment in Security Receipts should be 15% which was earlier 5%.
vi) Stalled Projects: on 28.04.2015, a meeting at Mumbai to resolve the stalled project’s issue was convened.

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