Stepping up their battle against bad loans, banks have filed suits against over 2,800 loan defaulters for recovery of around Rs 1,09,000 crore during the 12-month period ended September 2018.
With this, total suit-filed accounts of banks have gone up to 21,163 for the recovery of Rs 3,97,488 crore as of September 2018 as against 2,816 accounts to recover Rs 2,88,023 crore as of September 2017, according to data available from Transunion Cibil, a credit information company. However, this works out to just 38 per cent of the total non-performing assets (NPAs) in the banking system. Banks had filed 15,219 suits to recover Rs 2,18,220 crore as of September 2016 and 11,290 accounts for Rs 1,62,425 crore as of September 2015.
CIBIL publishes details of suit-filed accounts which owe more than Rs 1 crore to banks. The figure would increase sharply if defaults below Rs 1 crore are also taken into account. However, neither the RBI nor credit information companies disclose details of the full list of defaulters — including non-performing assets which are yet to be taken to the courts by banks — which include the who’s who of the corporate sector.
State Bank of India has filed suits against 3,498 borrower accounts to recover Rs 79,923 crore as of September 2018. Punjab National Bank filed 1,762 suits for the recovery of Rs 51,956 crore, Bank of India moved against 891 accounts to recover Rs 14,157 crore and Corporation Bank has suits against 744 borrowers for recovery of Rs 19,859 crore, according to the Cibil data. Public sectors banks, including SBI, have slapped suits against 16,824 borrower accounts for recovery of Rs 3,09,217 crore.
ICICI Bank has slapped suits against 647 accounts for recovery of Rs 29,577 crore. Private banks have filed a total of 3,276 suits for loans worth Rs 66,676 crore. Among foreign banks, Standard Chartered Bank has filed 177 suits against borrowers to recover Rs 6,471 crore.
According to the RBI, recovery of stressed assets improved during 2017-18 through the IBC and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act, 2002. Recoveries amounted to Rs 40,400 crore in 2017-18 as against Rs 38,500 crore in the same period of last year. Apart from vigorous efforts by banks for speedier recovery, amending the SARFAESI Act to bring in a provision of three months’ imprisonment in case the borrower does not provide asset details and for the lender to get possession of mortgaged property within 30 days, may have contributed to better recovery.
Banks seek to cut losses
Banks are firing on all the cylinders to recover the money stuck with defaulters and bring down losses. After struggling with a painful asset quality review and soaring bad loans in the last three years, banks are expected to show an improvement in stressed assets in the new year. They are using various options to get defaulters bring back depositors’ money.
Data from the Insolvency and Bankruptcy Board of India says a total of 1,484 cases have been registered under the insolvency process with NCLTs as of December 2019. This included 264 new cases which were admitted in the third quarter of FY19. However, banks suffered a 52 per cent haircut — or loss in the total loan value — in 34 (13 per cent) cases which were resolved.
Gross NPAs of the banking system shot up to Rs 10,39,700 crore, or 11.2 per cent of total advances, during the fiscal ended March 2018 as against Rs 791,800 crore (9.3 per cent of advances) in the same period of last year, according to the RBI’s ‘Report on trends and progress in banking’.
During 2017-18, the GNPA ratio reached 14.6 per cent for PSU banks due to restructured advances slipping into NPAs and better NPA recognition.