What poor recovery rate of NPAs says about public sector banks

According to the Reserve Bank of India, on an average, almost 90 per cent of the non-performing assets (NPAs) written-off by state-owned banks have not been recovered during the four financial years from 2014-'15 to 2017-'18. And the recovery rate for half of the 21 state-owned banks is reported to be even worse.

The state-owned UCO Bank stands the tallest in not having been able to recover even a single paisa of the Rs 6,087 crore of bad loans it has reportedly written-off in the past four fiscal years.

Not far behind, Indian Overseas Bank is reported to have recovered only Rs 10 crore of the Rs 10,470 crore of bad loans which were written-off, Allahabad Bank just Rs 257 crore out of a total of Rs 9,533 crore of bad loans or NPAs which were written-off in the past four years, a recovery rate of just 2.70 per cent. The IDBI Bank, which is learnt to be under consideration for being privatised, is reported to have recovered a meagre Rs 479 crore out of a total of Rs 16,568 crore worth of NPAs written-off - a recovery rate of again just 2.89 per cent.

Banks are understood to typically write-off NPAs after four years for a fully provisioned account, though they continue to pursue various recovery steps to get back whatever portion of the outstanding loan they can from the borrowers.

There is also another report that claims that such low recovery rates are recent only as after peaking at 61.8 per cent in 2009 and remaining well above 40 per cent in the earlier years, the recovery rate for all banks has declined steadily over the years only of late. In the last four fiscal years - 2014-15, 2015-16, 2016-17 and 2017-18 till December 31; all 21 public sector banks in aggregate could recover only Rs 29,343 crore out of Rs 2.72 lakh crore of bad loans that were written-off by the public sector banks (PSBs), a recovery rate of 10.77 per cent.

Of the 21 PSBs, 10 had a recovery rate of less than 10 per cent during the same period, with the rest 11 state-owned lenders having posted over 10 per cent recovery rate. The country's largest banker by assets, the State Bank of India, has recorded a recovery rate of 10.13 per cent only during this four-year period, having recovered Rs 10,396 crore out of a total of Rs 1.02 lakh crore of bad loans written-off during the same period.

The Syndicate Bank has reported the highest recovery per centage of 28.62 per cent, recovering Rs 1,535 crore out of Rs 5,365 crore which were written-off. This is followed by Canara Bank with a recovery rate of 23.34 per cent, Indian Bank with that of 22.57 per cent and the Punjab National Bank with a recovery rate of 22.54 per cent, though it earned the pioneering tag of maximum faultings due to the recent upsurge of cases of loot and scoot.

Elevated NPAs and increasing amount of write-offs put pressure on the exchequer to keep infusing capital in the banks to keep them afloat. In January, the government had allocated a bigger chunk of the capital of Rs 52,311 crore to 11 weak banks to maintain their minimum regulatory capital requirement while nine strong banks were given Rs 35,828 crore.

All this is public money collected on the basis of continuing cascading direct or indirect taxes and surely worry the common taxpayer - even not falling under income tax slabs by way of multiple GST and other taxes on the most basic services availed for a living.

If the details being shared with reference to the authenticity of RBI records in this regard are correct, the government needs to come down heavily on all underperforming banks and force them to sell their assets to make good for the losses to the public exchequer on account of unrecovered NPAs.

Such a huge deficit - of 80 to 90 per cent in the recovery of bad loans - for not one, two or three, but four years highlights connivance between banks and some "preferred customers". Laxity, incompetence, indifference, insincerity, inefficiency - all these factors can be the causes but even all of these put together cannot account for such huge siphoning off nation's current accounts.

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