Fear of action by banks, along with signs of improvement in the economy, has helped state-run lenders recover over £3.65 billion of bad and sticky assets during the first quarter of the current financial year - which is almost half the recoveries made from loan defaulters in the whole of 2017-18. Data available with the finance ministry shows that in the last financial year, recovery of bad debt added up to £7.46 billion. If the current pace sustains, lenders will end the year with twice the amount recovered in 2017-18.
At least two banks - Punjab National Bank and Indian Bank - saw NPA recovery during the first quarter overshoot the figure for 2017-18. Others such as State Bank of India, Bank of Baroda and Bank of India, too, saw a sharp improvement. For instance, loan recovery for SBI during the first quarter of the current financial year was almost three and a half times higher at £242.6 million compared to a year ago. For BoB and Bank of India, it was twice the level seen in the June quarter of 2017-18.
Indian banks, particularly those in the public sector, were weighed down by non-performing loans although the latest quarter’s numbers indicate that the pile of bad debt decreased for the first time in five quarters - from £102.5 billion at the end of March to a shade over £100 billion in June-end.
“Resurgent PSBs (public sector banks), the nation’s growth engines, after cleaning put worst behind,” financial services secretary Rajeev Kumar tweeted. Bankers said the fear of invoking the Insolvency and Bankruptcy Code, where the promoter is barred from bidding, has prompted a change in mindset. “There is fear that everything will be lost and that is driving many promoters to pay up before a case is admitted in the National Company Law Tribunal,” a government official added.
Recovery of loans from insolvency cases that have been resolved, such as Bhushan Steel and Electrosteel Steels, have helped banks show higher recovery. Banks have set ambitious recovery targets for the year with SBI looking at £5 billion and PNB setting its sights on £2 billion.