As per Reserve Bank of India (RBI)’s data on global operations, aggregate gross advances of Public Sector Banks (PSBs) increased from Rs. 18,19,074 crore as on 31.3.2008 to Rs. 52,15,920 crore as on 31.3.2014. As per RBI inputs, the primary reasons for the spurt in stressed assets have been observed to be, inter-alia, aggressive lending practices, wilful default/loan frauds/corruption in some cases, and economic slowdown. Asset Quality Review (AQR) initiated in 2015 for clean and fully provisioned bank balance-sheets revealed high incidence of Non-Performing Assets (NPAs).

As a result of AQR and subsequent transparent recognition by banks, stressed accounts were reclassified as NPAs and expected losses on stressed loans, not provided for earlier under flexibility given to restructured loans, were provided for. Further, all such schemes for restructuring stressed loans were withdrawn.

Primarily as a result of transparent recognition of stressed assets as NPAs, gross NPAs of PSBs, as per RBI data on global operations, rose from Rs. 2,79,016 crore as on 31.3.2015, to Rs. 8,95,601 crore as on 31.3.2018, and as a result of Government’s 4R’s strategy of recognition, resolution, recapitalisation and reforms, have since declined by Rs. 1,56,060 crore to Rs. 7,39,541 crore as on 31.3.2019 (provisional data on global operations for 31.3.2019 as reported by RBI on 2.7.2019).

Government has implemented a comprehensive 4R’s strategy, consisting of recognition of NPAs transparently, resolution and recovery of value from stressed accounts, recapitalising of PSBs, and reforms in PSBs and the wider financial ecosystem for a responsible and clean system. Comprehensive steps have been taken under the 4R’s strategy to reduce NPAs of PSBs, including, inter-alia, the following:

Change in credit culture has been effected, with the Insolvency and Bankruptcy Code (IBC) fundamentally changing the creditor-borrower relationship, taking away control of the defaulting company from promoters/owners and debarring wilful defaulters from the resolution process and debarring them from raising funds from the market.

Over the last four financial years, PSBs have been recapitalised to the extent of Rs. 3.12 lakh crore, with infusion of Rs. 2.46 lakh crore by the Government and mobilisation of over Rs. 0.66 lakh crore by PSBs themselves enabling PSBs to pursue timely resolution of NPAs. Key reforms have been instituted in PSBs as part of the PSBs Reforms Agenda, including the following:

Board-approved Loan Policies of PSBs now mandate tying up necessary clearances/approvals and linkages before disbursement, scrutiny of group balance-sheet and ring-fencing of cash flows, non-fund and tail risk appraisal in project financing.

Use of third-party data sources for comprehensive due diligence across data sources has been instituted, thus mitigating risk on account of misrepresentation and fraud.

Monitoring has been strictly segregated from sanctioning roles in high-value loans, and specialised monitoring agencies combining financial and domain knowledge have been deployed for effective monitoring of loans above Rs. 250 crore.

To ensure timely and better realisation in one-time settlements (OTSs), online end-to-end OTS platforms have been set up.

The Parliamentary Standing Committee on Finance (2003) in its 55th Report recommended that Government may consider the setting up of an apex body viz. National Rural Bank of India. Government has been receiving various representations from time to time in this regard.

Government examined the proposal in consultation with the State Governments and Sponsor Banks and in the Action Taken Report on the recommendations in the aforesaid Report of Parliamentary Standing Committee on Finance (2003), Government, inter alia, stated that “The proposal for consolidating the RRBs under a National Rural Bank or NABARD has not been favoured so far for various reasons. State Governments and sponsor banks were consulted in a meeting taken by Secretary (FS) on 1.5.2004 on the proposal made by the select Group of CMDs. Sponsor Banks were supportive of the proposal but most of the States favoured state level amalgamation without any additional financial support.”

The steps taken by the Government to strengthen the RRBs are as under: Government had initiated the process of structural consolidation of RRBs in 2004-05 by amalgamating RRBs of the same Sponsor Bank within a State. The amalgamation process brought down the number of RRBs from 196 to 82. With a view to enable RRBs to minimize their overhead expenses, optimize the use of technology, enhance the capital base and area of operation and increase their exposure, the process of amalgamation of RRBs was again carried out in the year 2011. During 2011-2014, the number of RRBs was brought down to 56 from 82. In the year 2018-19, amalgamation of RRBs has been carried out based on a roadmap proposed by NABARD and consultation with respective Sponsor Banks and State Governments. Accordingly, the number of RRBs has been brought down to 45 from 56, as on 01.04.2019. It is expected that amalgamation will bring about better efficiency of scale, higher productivity, improved financial health of the RRBs and greater credit flow to rural areas.

Recapitalization support is provided to RRBs to augment their capital so as to comply with regulatory capital requirements. Periodic review of financial performance of RRBs, including business diversifications, profit planning, revenue management and NPA management through conduct of national level meetings by NABARD and through Empowered Committee (EC) meetings at state level.

Regular Capacity building efforts are undertaken by NABARD like training at Bankers Institute of Rural Development (BIRD), conduct of Organizational Development Initiative (ODI), exposure visits, etc.

NABARD provides regular policy support to RRBs in matters relating to human resources and an arrangement has been made for redressal of grievances through Joint Consultative Committee (JCC).

Reserve Bank of India (RBI) has informed that the Complaint Management System (CMS) was launched on June 24, 2019. The total number of complaints received against banks and NBFCs as on July 05, 2019 are given below:-

CMS is an application for filing of complaints with RBI against any of the regulated entities. The complaints falling under the grounds of complaints of the Banking Ombudsman (BO) Scheme, 2006 and Ombudsman Scheme for NBFCs, 2018 are resolved as per the provisions of Schemes.

Clause 7(2) of the BO Scheme reads as ‘The Banking Ombudsman shall receive and consider complaints relating to the deficiencies in banking or other services filed on the grounds mentioned in clause 8 irrespective of the pecuniary value of the deficiency in service complained and facilitate their satisfaction or settlement by agreement or through conciliation and mediation between the bank concerned and the aggrieved parties or by passing an Award as per the provisions of the Scheme.’

Clause 7(2) of the Ombudsman Scheme for NBFC reads as ‘The Ombudsman shall receive and consider complaints relating to the deficiencies in services filed on any one or more of the grounds mentioned in Clause 8 and facilitate their satisfaction or settlement by agreement or through conciliation and mediation between the non-banking financial company concerned and the aggrieved party or by passing an Award in accordance with the provisions of the Scheme.’

In order to provide short term crop loans upto `3.00 lakh to farmers at a concessional interest rate of 7 per cent per annum, the Government of India in the Department of Agriculture Cooperation and Farmers Welfare (DAC&FW) implements an interest subvention scheme which provides interest subvention of 2% per annum to lending institutions viz.

Public Sector Banks (PSBs), Private Sector Commercial Banks (in respect of loans given by their rural and semi urban branches only), Regional Rural Banks (RRBs) and Cooperative Banks on use of their own resources. Besides, additional 3% incentive is given to the farmers for prompt repayment of the loan, thereby reducing the effective rate of interest to 4%.

Under Pradhan Mantri Jan Dhan Yojana (PMJDY), account holders are provided banking services free of charge and without any requirement of maintaining minimum balance. As per the information provided by banks, district-wise number of accounts opened under PMJDY in Gujarat as on 03.07.2019 is at Annexure I. State-wise details of deposit balance in PMJDY as on 03.07.2019 is at Annexure II.

Reserve Bank of India (RBI) has rationalized its Branch Authorisation Policy and granted general permission to domestic Scheduled Commercial Banks (excluding Regional Rural Banks), including Public Sector Banks, to open banking outlets (a fixed point service delivery unit, manned by either bank’s staff or its Business Correspondents) at any place in the country, without seeking prior approval of RBI in each case, subject to at least 25 percent of the total number of banking outlets opened during a financial year being in unbanked rural centres (Tier 5 and Tier 6 centres ie. having population less than 10,000). For this purpose, banking outlets opened in any centre having population less than 50,000 in North Eastern states and Sikkim and also Left Wing Extremism (LWE) affected districts as notified by the Government of India are also considered as equivalent to opening of banking outlets in unbanked rural centres.

Under PMJDY scheme all villages were mapped into 1.59 lakh Sub-Service Areas (SSAs) where one SSA catering to 1,000 to 1,500 households. As informed by banks, while 0.33 lakh SSAs have been covered with bank branches, 1.26 lakh SSAs have been covered by deployment of interoperable Bank Mitras.

As per RBI, since the launch of PMJDY in August 2014, the number of rural branches of Scheduled Commercial Banks (SCBs) has increased from 41,823 in March 2014 to 51,653 in March, 2019. Further, number of Branch less mode / Business Correspondents (BCs) of Scheduled Commercial Banks (SCBs) in rural areas has also increased from 3.37 lakh in March, 2014 to 5.15 lakh in March, 2018