Banks have recovered Rs 34,267.23 crore worth of bad loans through the debt recovery tribunals (DRT) in 2017-18, making it more than double the loans sold to asset reconstruction companies (ARCs).
They managed to recover only Rs 15,920.44 crore through loan sales to ARCs, according to data submitted by the Reserve Bank of India (RBI) to the parliamentary committee on finance last week.
According to the central bank, the losses on account of frauds equaled the recoveries through the DRTs.
During 2017-18, a total number of 5,904 fraud cases were reported involving Rs 32,361.27 crore.
RBI in a submission to the parliamentary panel on finance last week said the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 -- popularly know as the Sarfaesi Act -- continues to be an important tool of recovery outside the Insolvency and Bankruptcy Code (IBC) 2016 as it enables the banks to enforce the security interest.
"As compared to the Rs 10 lakh crore of non-performing assets (NPAs) piled up with banks, this is only a very miniscule portion. But the Sarfaesi Act is an important tool to recover smaller loans specially from individuals and smaller enterprises that are backed by a collateral," said a banker who is in charge of recovery.
Under the Sarfaesi Act, banks are auctioning off cars from delinquent auto loans, while houses are put on auction as home loans turn sour. In several cases, banks push for auctioning of land parcels as smaller borrowers continue to default on their payments. Commercial premises like shops are also coming under the hammer.
RBI said in its written response to the panel's queries on NPAs that that even under the IBC process, a secured creditor can choose to realise its security interest under the Sarfaesi Act, in such cases where a liquidation order is passed by the adjudicating authority. "Therefore the recovery under the Sarfaesi Act has not become redundant," RBI said in its replies to questions put forward by the parliamentary standing committee on Finance which is taking stock non-performing assets in the system.
Banks have put for e-auctions about Rs 60,000 crore worth of loans from smaller borrowers and individuals during the first quarter of 2018-19. More are expected to hit the auctions in the coming months.
Some of the RBI-initiated restructuring schemes tried to restructure debt through special restructuring mechanism but it did not bear fruit. According to the RBI data collected from banks, strategic debt restructuring (SDR) was invoked in 142 cases but it was implemented only in 1 case. The Scheme for Sustainable Structuring of Stressed Assets (S4A) was invoked in 29 cases, but withdrew seven of them while implementation has taken place in 22 cases. Most banks have both the SDR and s4A in the NPA category on a case by case basis.
