And, with indications that the creation of non-performing assets (NPAs) is lower than anticipated, especially among large companies, the government believes the state-run lender is ready to meet the credit requirements. , given that they are sufficiently capitalized .
Further, government sources argued that with a provision coverage ratio of 83.7%, public sector banks were adequately protected against any potential hit.
“Overall, despite the pandemic, the turnaround for public sector banks is remarkable. The recent reforms and the proposed asset reconstruction will help the company further clean up their balance sheets and provide fresh capital from the sale of bad assets, which will again drive credit growth,” said a senior finance ministry official. The “write-offs” of over Rs 8 lakh crore during the last seven years, the government believes, are technical in nature and are actually meant to bring transparency in bank balance sheets. “This is done as per the provisioning norms prescribed by RBI that potential losses are recognized in the books. Even if a loan has been written off, banks make every effort to recover it,” the high-ranking official said.
These efforts have resulted in recovery of Rs 99,996 crore from such written-off loan accounts, which includes some major recovery through the IBC process, the source said. Bhushan SteelBhushan Power & Steel, Essar Steel, among others. Separately, banks have managed to recover money from other write-off cases such as Neelkanth. Since March, 2018, the government-owned lenders have recovered Rs 3.1 lakh crore.
Sources said that the banks have used several sources- Internal Procurement, raising funds from the market and capital infusion by the government – to comply with regulatory requirements.
“Internal earnings and market mobilization account for 70 per cent of the provision made during the last few years,” an official said.
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