With trillions of rupees being seized under the jurisdiction of the Debt Recovery Tribunals (DRTS) and the National Company Law Tribunal (NCLT), the government has asked heads of state-run banks (PSBs) to personally monitor the top 20 defaulting loan accounts for faster recovery. The move is expected to boost revenues of banks as bad loans have already been fully provided for.
After the gross non-performing assets (GNPA) of state-run banks reached a high level of 14.5% as of March 2016, the government took a series of measures, including strengthening the banking regulatory framework, amending the reconstruction law, enacting a comprehensive insolvency code and setting up the Public Sector Asset Reconstruction Company. These measures have helped restore the credit sector to health and reduced the GNPA ratio to 2.8% as of March 2024.
“PSBs’ balance sheets have improved through technical write-offs. MDs have been directed to review the top 20 books of each bank every month. These recoveries will be net profit,” a senior official told FE.
Financial Services Secretary Vivek Joshi, Insolvency Commissioner of India Ravi Mittal and Corporate Affairs Secretary Manoj Govil are also reviewing the top 20 insolvency cases every month to speed up the recovery process. These top cases include Jaiprakash Associates and Amtek Group, among others.
Currently, there are 220,000 cases pending before the DRT, with the total amount of DRT cases amounting to Rs 16.27 trillion, most of which are owed to PSBs. Similarly, 2,431 cases amounting to Rs 1.52 trillion are pending before the Debt Recovery Appellate Tribunal (DRATS). In both cases, staff shortage is cited as the main reason for the high number of pending cases.
Currently, there are 39 DRTs and five DRATs. Acknowledging the manpower shortage in DRTs, Finance Minister Nirmala Sitharaman announced in the Budget that the government will take steps to reform and strengthen these courts. Additional courts will be set up to hasten rehabilitation, she said.
In the last five years, an average of 1,500 cases were filed with each DRT. But, on an average, they were able to adjudicate 843 cases. The recoveries made by the DRTs were Rs 12,879 crore in FY22, Rs 7,669 crore in FY23 and Rs 11,117 crore in FY24.
The minister also said that appropriate amendments to the Insolvency and Bankruptcy Code (IBC), reforms and strengthening of courts and appellate tribunals will be initiated to speed up insolvency proceedings. Additional tribunals will be set up. Some of them will be notified to decide only cases under the Companies Act, she added.
In the eight years since 2016, 31,394 corporate debtors totalling Rs 13.9 trillion have been disposed of under the IBC as of March 2024 (including pre-sanction case disposals).
