Material drop in NPAs of the banking system: RBI read full article at

The Reserve Financial institution of India has informed the Supreme Courtroom that its “resolute efforts have resulted in material decline in the Non Performing Assets (NPAs) of the banking system”.

The central financial institution mentioned this in response to a PIL by the Centre for Public Curiosity Litigations (CPIL) which sought instructions to forestall NPAs, financial institution frauds, and to prosecute wilful defaulters.

Listening to the PIL on Wednesday, a bench of JusticEs S Okay Kaul and A S Oka requested the CBI to tell as to what will be completed to implement the January 2017 suggestions made by a committee appointed following its instructions within the case.

The RBI identified that in an earlier affidavit dated July 17, 2017, it had mentioned that of the 23 suggestions of the Committee, it was in precept agreeable to seven

It additional mentioned that recourse to the Insolvency and Chapter Code (IBC), 2016, and the amended provisions of the Banking Regulation Act, 1949, launched by means of the Banking Regulation (Modification) Ordinance, 2017, “enabled the Reserve Bank to effectively introduce measures to address the resolution of stressed assets”.

Subsequently, an Inside Advisory Committee constituted by the RBI really useful all accounts with fund and non fund based mostly excellent quantity larger than Rs 5000 crores with 60% or extra categorized as NPAs by banks as of March 31 2016 for initiation of company insolvency decision course of beneath the IBC, it mentioned including that the central financial institution accordingly issued instructions to sure banks in June 2017 for referring 12 accounts that constituted about 25% of gross NPAs of the banking system at the moment for this.

The RBI, it identified, issued one other set of instructions advising banks to finalise and implement a viable decision plan in respect of one other 29 debtors by December 13, 2017. Nevertheless, a viable decision plan might be carried out solely in respect of 1 borrower and functions to provoke insolvency decision course of beneath IBC had been filed by the banks in respect of the remaining 28 debtors, the affidavit mentioned.

The RBI mentioned that “the regulatory experience thereon enabled” it “to envisage a generic Framework which was issued on February 12, 2018 under ‘Resolution of Stressed Assets —Revised Framework’… the Framework prohibits restructuring of borrowers who have committed frauds/ malfeasance/ wilful default. However, in cases where the existing promoters are replaced by new promoters, and the borrower company is totally delinked from such erstwhile promoters/management, lenders may take a view on restructuring such accounts based on their viability, without prejudice to the continuance of criminal action against the erstwhile promoters/management. This effectively disincentivises any form of mala fide intent by the borrowers by preventing any sort of accommodation by the banks”.

The affidavit mentioned that “various other measures have also been undertaken by the Reserve Bank in the recent past in pursuit of ensuring prudent lending by banks” together with to make sure credit score self-discipline amongst the debtors in addition to to facilitate higher monitoring by the lenders and forestall diversion of funds.

It identified that “the recently issued Financial Stability Report of the Reserve Bank on December 29, 2022 indicates that the gross non-performing assets (GNPA) ratio of banks has been steadily trending down to a seven-year low of 5.0 per cent in September 2022, while net non performing assets (NNPA) have dropped to a ten-year low of 1.3 per cent of total loans. The Reserve Bank continues to monitor the situation and would assure to take prudent measures in discharge of its statutory mandate, to ensure a sound and resilient financial system, in the interest of all the stakeholders”.

On the plea for motion towards Anil Dhirubhai Ambani Group (ADAG) OVER financial institution defaults, it mentioned “classification of the accounts of Reliance ADAG companies as fraud is under litigation”.

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