NPAs recovered by banks via various channels improved in FY22: RBI report – The Hindu BusinessLine***

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Sales of stressed assets to asset reconstruction companies have gradually decreased over the years

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Non-performing assets (NPAs) recovered by scheduled commercial banks (SCBs) improved to 18.4 per cent of the amount involved in FY22 against 14 per cent in FY21, according to RBI.

SCBs recovered ₹89,661 crore via multiple channels — Lok Adalats, Debt Recovery Tribunals, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, and Insolvency and Bankruptcy Code (IBC) — in FY22 against ₹4,87,062 crore involved.

These banks had recovered ₹64,229 crore in FY21 against ₹4,56,274 crore involved, RBI said in its latest report on ‘Trend and Progress of Banking in India 2021-22’.

A breakup of the overall ₹89,661 crore recoveries made in FY22 shows that banks recovered 53 per cent via the IBC route, 30.5 per cent via SARFAESI Act, 13.5 per cent via DRTs and 3 per cent via Lok Adalats.

IBC mechanism

Although the number of cases referred under Lok Adalats and SARFAESI Act increased by 336 per cent and 335 per cent, respectively, the IBC mechanism was the leader in terms of the amount involved, RBI said in its latest report.

As fresh insolvency cases could be admitted after the one-year suspension during Covid-19, admissions under the IBC increased by 65 per cent during FY22 to 885 cases against 536 cases in FY21. The amount involved in the cases referred under IBC was 47 per cent higher at ₹1,99,250 crore (₹1,35,319 crore).

“Defying the lull in the interim years, SARFAESI and DRTs yielded recovery rates comparable to the IBC mechanism. The pre-pack insolvency resolution process, introduced for MSMEs in April 2021, is yet to gain traction and only two cases have been admitted under the channel so far (up to September 2022),” RBI said.

Sales of stressed assets to asset reconstruction companies have gradually decreased over the years, and in 2021-22, only 3.2 per cent of the previous year’s GNPAs (gross non-performing assets) were sold to ARCs, as per the report.

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