Banks' NPAs stable in June qtr, look manageable; IBC needs improvement: Das

Reserve Bank Governor Shaktikanta Das on Thursday said the stressed assets situation "looks manageable" as the stock of gross NPAs remained stable even after the second wave of pandemic

Reserve Bank Governor Shaktikanta Das on Thursday said the stressed assets situation "looks manageable" as the stock of gross non-performing assets (NPAs) remained stable even after the second wave of pandemic.

The banking system's gross NPAs were at 7.5 per cent while the same for non-bank lenders were even lower, Das said at a conference organized by The Indian Express and the Financial Times.

GNPAs of the system had stood at 7.48 per cent as of March, which was the first quarter when lenders had absorbed the post-moratorium impact. As per baseline projections in the RBI's bi-annual financial stability report published in July, the GNPAs are expected to rise to 9.80 per cent in March 2022.

"According to the numbers, which we have, currently the NPA levels look manageable. The last data, as at the end of June, for the banking sector its about 7.5 per cent GNPA and (for) NBFCs, it is little less than that," Das said.

He said banks have capital buffers of over 16 per cent while the same for NBFCs is at 25 per cent, which are much above the regulatory mandates, and will help fight with any stress.

The governor explained that the loan restructuring schemes for small borrowers introduced in August last year and May this year are not open ended, as they insist on having a starting and ending dates.

Additionally, they also ask banks to set aside money as provisions amounting to 10 per cent of the outstanding upfront, so that in case some asset goes back, they have the provisions to take care of it.

Meanwhile, addressing a question on the high haircuts taken by banks in resolution to some bankruptcy cases, Das said the Insolvency and Bankruptcy Code process needs some improvement which will include some legislative changes as well.

"Yes, I agree that there is scope for the improvement in the functioning of the IBC and framework. There is perhaps need to certain legislative amendments also," he said.

The RBI has certain suggestions which it has flagged to the government, he said, citing an example of the time taken before a case is admitted in a National Company Law Tribunal (NCLT) and comes up for resolution through court-directed measures and suggested that the same can be dealt with through legal amendments.

He said the overall recoveries from the IBC process used to be at 45 per cent at the aggregate level four years ago and have come down to 40 per cent in the pandemic year, and also acknowledged that in some cases, lenders have had to take deep haircuts of up to 90 per cent.

"There is scope for some improvement and the time taken in the entire process I entirely agree needs to be reduced by simplifying certain procedures and wherever necessary by carrying out legislative change," Das said.