New Delhi: Over the last five Financial Years (FYs), public sector banks (PSBs) have been infused with capital to the extent of ₹3.19 trillion, with recapitalisation of ₹2.5 trillion by the government and mobilisation of over ₹66,000 crore by PSBs themselves.
To strengthen the Public Sector Banks (PSBs), over the last four financial years, the government has taken comprehensive steps under its 4R’s strategy of recognising NPAs transparently, resolving and recovering value from stressed accounts through clean and effective laws and processes, re-capitalising banks, and reforming banks through the PSB Reforms Agenda, Finance Ministry informed the Lok Sabha on Monday.
“Over the last five Financial Years (FYs), PSBs have been recapitalised to the extent of ₹3.19 lakh crore, with infusion of₹2.5 lakh crore by the government and mobilisation of over₹66,000 crore by PSBs themselves”, the Ministry informed the House on Monday.
Many steps have been taken by the Government to improve the condition of banks, the Lok Sabha was informed. The key reforms were board-approved loan policies of PSBs, clearances/approvals and linkages before disbursement, scrutiny of group balance-sheet and ring-fencing of cash flows, non-fund and tail risk appraisal in project financing.
The use of third-party data sources for comprehensive due diligence across data sources has been instituted, thus mitigating risk on account of misrepresentation and fraud.
Monitoring now has been strictly segregated from sanctioning roles in high-value loans, and specialised monitoring agencies combining financial and domain knowledge have been deployed for effective monitoring of loans above ₹250 crore.
For faster processing of loan proposals, Loan Management Systems (LMS) have been put in place for personal segment and MSME loans. To strengthen governance at the board level, the position of Chairman and Managing
Director has been bifurcated into a non-executive Chairman and MD and CEO.
The reply by finance ministry stated that positive impact on PSBs of government’s 4R’s approach is now visible and includes, robust recovery of Rs. 3.59 trillion.
Assets quality has improved as reflected in 45% year-on-year reduction in slippage into NPAs in FY 2018-19, and 63% reduction in 31 to 90 days overdue (SMA-1 and 2) corporate accounts by March 2019 from their peak in June 2017.