NARCL unlikely to resolve bad loans crisis: AIBOC

Excelsior Correspondent
JAMMU, Sept 17: All India Bank Officers’ Confederation (AIBOC) today said that formation of the National Asset Reconstruction Company Limited (NARCL) or the ‘bad bank’ is not an adequate step to mitigate India’s bad loans crisis, which has assumed very serious proportions.
“The record of the present Government in addressing the problem of burgeoning NPAs, particularly in the public sector banks, does not evoke much confidence. While the Insolvency and Bankruptcy Code was set up with much fanfare in December 2016, actual recovery of NPAs through the IBC mechanism so far has been grossly inadequate,” AIBOC said in a handout issued today.
The Confederation said that the data disclosed by the Insolvency and Bankruptcy Board of India shows that till June 2021, in 396 resolved cases with admitted claims amounting to Rs 6.82 lakh crore, recovery was only around Rs 2.45 lakh crore, i.e. 36% of total claims. The recovery rate has fallen to 25% in April-June 2021 quarter, implying massive haircuts being inflicted on the creditors, it added.
“NPA reduction under the present Government has occurred more through write-offs than actual recoveries, which have caused massive losses for the public sector banks (PSBs) in the past six years. The recapitalisation of PSBs by the Union Government to the tune of Rs 3.36 lakh crore in the last six years has actually acted as bail-outs for delinquent corporate debtors and defaulters,” the Confederation stated.
The AIBOC said that the NARCL by taking Rs 2 lakh crore worth of NPAs away from the banks may make their balance sheets look better in the short-term but if actual NPA recoveries fail to improve, the bad loans problem will persist and the PSBs as well as the central exchequer will have to bear the burden imposed by corporate loan defaults and crony capitalism will continue to flourish.
“In order to plug this drain of resources from the banks and the public exchequer to the crony capitalist defaulters, the need of the hour is an overhaul of the legal regime with regard to debt recovery and bankruptcy, facilitating speedy acquisition and auction of the defaulters’ assets by the public sector banks and/or the Government,” it asserted.