No plan to merge PSBs; recovery from written-off loans improved: Finance Ministry
No merger or amalgamation of Public Sector Banks (PSBs) is on the cards, the Finance Ministry informed Rajya Sabha on Tuesday. It also presented data showing an improvement in PSBs’ recovery from written-off loan accounts.
“Currently, there is no such proposal under consideration of the Government in this regard,” Minister of State in the Finance Ministry Pankaj Chaudhary said in a written response when asked whether the Government has plans to disinvest four PSBs with any foreign or private banks, or to merge with larger banks by 2026.
This statement is significant in the backdrop of the Budget announcement in 2021, when Finance Minister Nirmala Sitharaman had proposed to take up the privatisation of two PSBs. She had said that legislative steps would be taken to facilitate privatisation. Till date, however, there has not been any development on this front. At the same time, strategic disinvestment of IDBI Bank is yet to be completed.
As on date, there are 12 PSBs. The last consolidation had taken place in August, 2019, when the government had announced four major mergers of PSBs, bringing down their total number to 12 from 27 in 2017 – a move aimed at making State-owned lenders global-sized banks.
Wilful defaulters decline
Meanwhile, Chaudhary highlighted improved performance of PSBs in terms of gross non-performing assets (GNPA), which have declined to ₹3.39 lakh crore (GNPA ratio 3.47 per cent) in March, 2024, from ₹6.78 lakh crore (GNPA ratio 10.25 per cent) in March, 2020. Moreover, an increase in the number of wilful defaulters, having an aggregate exposure of ₹5 crore and above, has declined to 47 in March, 2024, from 193 in March, 2020, he said.
Talking about writen-off non-performing assets (NPAs), including those in respect of which full provisioning has been made on completion of four years, Chaudhary reiterated: “Such write-off does not result in waiver of liabilities of borrowers and therefore, it does not benefit the borrower.” Further, the borrowers continue to be liable for repayment and banks continue to pursue recovery actions.
“Banks evaluate/consider the impact of write-offs as part of their regular exercise to clean up their balance sheet, avail tax benefit and optimise capital, in accordance with RBI guidelines and policy approved by their Boards,” Chaudhary said.
No respite
He also highlighted that recovery in written-off loans is an ongoing process. Banks continue pursuing their recovery actions initiated against borrowers under the various recovery mechanism available to them, such as filing of a suit in civil courts or in Debts Recovery Tribunals, action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, filing of cases in the National Company Law Tribunal under the Insolvency and Bankruptcy Code, etc.
Data included in the response showed that significant amount is being written off by PSBs, and that recovery from such accounts have also improved. While, in fiscal year 2021-22, over 21 per cent as percentage of written-off loan amount could be recovered, it improved to around 28 per cent and 33 per cent in the following two years. Recovery ratio in the current fiscal is around 47 per cent.
