The Finance Ministry has taken a proactive stance, instructing the managing directors of public sector banks to conduct monthly reviews of the top 20 insolvency cases, as conveyed by financial services secretary Vivek Joshi during a press briefing on Friday. This directive follows concerns regarding delays in admitting cases into insolvency courts.
Highlighting the urgency to address these issues, Joshi mentioned that Finance Minister Nirmala Sitharaman will personally oversee the operations of the National Asset Reconstruction Company Ltd (NARCL). The objective is to streamline the acquisition of distressed loans, as there have been setbacks in this aspect.
In pursuit of resolution, the government convened a meeting on Friday involving public sector banks and NARCL management to tackle these challenges head-on.
NARCL's primary mandate involves taking over and disposing of stressed assets from commercial banks, facilitating a clean-up of their books and unlocking additional funds to bolster economic growth.
Recent data shared by the Union Finance Ministry in Parliament revealed that by November 2024, NARCL had acquired Rs 11,617 crore of bad debt from public sector banks. This figure falls short of the original Rs 2 lakh crore target set by the Union Cabinet in September 2021.
Moreover, the recovery process for these accounts is impacted by various factors. Some accounts are under the Insolvency and Bankruptcy Code (IBC), wherein recovery hinges on the approval of resolution plans by NCLAT. As of November 30, 2023, NARCL had only recovered a modest Rs 16.64 crore from these accounts.
Compounding these challenges are delays within the IBC cases, taking over a year merely for admission into tribunals, and often exceeding the stipulated 360-day resolution timeline.
Official figures also underscore the substantial challenge posed by bad debts, with public sector banks writing off over Rs 7 lakh crore between 2019 and 2023. Of the Rs 6.5 lakh crore stuck in these assets, a mere 15% (Rs 94,000 crore) has been recovered in 2023, with more than half of the recovered amount attributed to the IBC route.
(With Agency Inputs)
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