Banks have recovered over Rs 10 lakh crore from bad loans during the last nine financial years between 2014-15 and 2022-23, the government informed the Lok Sabha.

In a written reply in the Lok Sabha, Minister of state for finance Bhagwat Karad said that comprehensive measures have been taken by the government and the Reserve Bank of India (RBI) to recover and reduce non-performing assets (NPAs), including those pertaining to corporate companies. 

This has enabled an aggregate recovery of Rs 10,16,617 crore by scheduled commercial banks (SCBs) during the last nine financial years, he added. Karad was quoting RBI’s provisional data for FY2022-23.

The list of SCBs include 12 public sector banks, 22 private banks, 12 small finance banks, four payment banks (which act as agents in loan business), 43 regional rural banks and 45 foreign banks.

As of 31 March 2023, CRILC (central repository of information on large credits) data showed total outstanding loans of Rs 1.03 trillion classified as NPAs from corporate borrowers of scheduled commercial banks. The RBI doesn't maintain records of total loan amounts recovered from corporate borrowers identified as NPAs, according to the minister.

Karad said a change in credit culture has been effected, with the Insolvency and Bankruptcy Code, 2016 (IBC) fundamentally changing the creditor-borrower relationship, taking away the control of the defaulting company from promoters/owners, and debarring wilful defaulters from the resolution process. To make the process more stringent, the personal guarantor to corporate debtor has also been brought under the ambit of IBC.

The minister also credited the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act’s amendments and the setting up of the National Asset Reconstruction Company Limited (NARCL) for helping drive in recovery.

The NARCL has been set up as an asset reconstruction company to resolve stressed assets above Rs 500 crore each. The government has approved extending a guarantee of up to Rs 30,600 crore to back the security receipts issued by NARCL to lending institutions for acquiring stressed loan assets.

Public sector banks have created comprehensive and automated early warning systems to take note of bad loans. Karad also said CRILC’s  database system played an important role by gathering, storing and circulating credit data to lenders. Banks are required to submit reports on a weekly basis to CRILC, in case of default by borrowing entities with exposure of Rs 5 crore and above.

Karad also mentioned that wilful defaulters and their businesses are now barred from acquiring further capital market funds and floating new ventures for five years.