As per RBI data on global operations, aggregate gross advances of Public Sector Banks (PSBs) increased from Rs. 18,19,074 crore as on 31.3.2008 to Rs. 52,15,920 crore as on 31.3.2014. As per RBI inputs, the primary reasons for 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 Further, all such schemes for restructuring stressed loans were withdrawn. With the recognition of stress since 2015, the adverse impact of the hidden stress became manifest as weakness in financial indicators of PSBs.
To strengthen the financial position of PSBs, over the last four financial years, Government has invested Rs. 2,45,997 crore in PSBs as a part of comprehensive 4R’s strategy that comprises recognising NPAs transparently, resolution and recovering value from stressed accounts through clean and effective laws and processes, recapitalising PSBs and reforming banks through the PSB Reforms Agenda. Steps taken under this strategy include, inter-alia, the following:
Positive impact on PSBs of Government’s 4R’s strategy is now visible and includes, inter-alia¸ the following:
Thus, by addressing the underlying causes behind the build-up of stress in PSBs through comprehensive reform to change credit culture and tighten discipline in the financial system, institutionalising robust underwriting and monitoring, governance reforms, and leveraging technology, PSBs have emerged stronger.
Note: Figures cited above for PSBs include those for IDBI Bank Limited, which was recategorised as a private sector bank by RBI with effect from 21.1.2019
This was stated by Shri Anurag Thakur, Minister of State for Finance & Corporate Affairs in a written reply to a question in Lok Sabha today.