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Material drop in NPAs of the banking system

January 27, 2023

Material drop in NPAs of the banking system
The Reserve Bank of India has told the Supreme Court that its “resolute efforts have resulted in material decline in the Non Performing Assets (NPAs) of the banking system”.

The central bank said this in response to a PIL by the Centre for Public Interest Litigations (CPIL) which sought directions to prevent NPAs, bank frauds, and to prosecute wilful defaulters.

Hearing the PIL on Wednesday, a bench of JusticEs S K Kaul and A S Oka asked the CBI to inform as to what can be done to implement the January 2017 recommendations made by a committee appointed following its directions in the case.

The RBI pointed out that in an earlier affidavit dated July 17, 2017, it had said that of the 23 recommendations of the Committee, it was in principle agreeable to seven.

It further said that recourse to the Insolvency and Bankruptcy Code (IBC), 2016, and the amended provisions of the Banking Regulation Act, 1949, introduced through the Banking Regulation (Amendment) Ordinance, 2017, “enabled the Reserve Bank to effectively introduce measures to address the resolution of stressed assets”.

Subsequently, an Internal Advisory Committee constituted by the RBI recommended all accounts with fund and non fund based outstanding amount greater than ₹5000 crores with 60% or more classified as NPAs by banks as of March 31 2016 for initiation of corporate insolvency resolution process under the IBC, it said adding that the central bank accordingly issued directions to certain banks in June 2017 for referring 12 accounts that constituted about 25% of gross NPAs of the banking system at that time for this.

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