Banking System, NPA & IBC
Economy Advanced · बैंकिंग प्रणाली, NPA और IBC · 18 facts
Bank Nationalization 1969: PM Indira Gandhi nationalized 14 major commercial banks on July 19, 1969 under Banking Companies (Acquisition and Transfer of Undertakings) Ordinance.
Second Round of Nationalization 1980: 6 more banks nationalized under PM Indira Gandhi; total 20 nationalized banks by 1980.
NPA (Non-Performing Asset): A loan/advance where repayment has been overdue for 90 days or more; principal or interest is overdue.
NPA categories: Substandard (up to 12 months), Doubtful (12-36 months), Loss Assets (beyond 36 months or identified by auditors).
SARFAESI Act 2002 (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest): Allows banks to recover secured loans without going to court.
IBC (Insolvency and Bankruptcy Code 2016): Single unified law for insolvency; IBBI (Insolvency and Bankruptcy Board of India) is the regulator; NCLT is adjudicating authority.
IBC Timeline: Insolvency resolution must be completed within 180 days (extendable by 90 days); liquidation if resolution plan not found.
NCLT (National Company Law Tribunal): Adjudicates insolvency cases under IBC; NCLAT is appellate authority; Supreme Court is final appeal.
ARC (Asset Reconstruction Company): Buys bad loans (NPAs) from banks at discount; tries to recover value from distressed assets; regulated by RBI.
Bad Bank (NARCL): National Asset Reconstruction Company Limited set up in 2021; government-backed; consolidates and resolves large NPAs of public sector banks.
Priority Sector Lending (PSL): Banks must lend 40% of adjusted net bank credit (ANBC) to priority sectors — agriculture, MSMEs, education, housing, social infrastructure.
PMJDY (PM Jan Dhan Yojana): Financial inclusion scheme launched August 28, 2014; zero balance accounts; 50 crore+ accounts opened.
JAM Trinity: Jan Dhan (bank accounts) + Aadhaar (identity) + Mobile (connectivity); foundation of India's Direct Benefit Transfer (DBT) system.
PMLA 2002 (Prevention of Money Laundering Act): ED (Enforcement Directorate) enforces PMLA; proceeds of crime can be attached and confiscated.
RBI's PCA (Prompt Corrective Action) Framework: Restricts activities of weak banks; triggered by high NPA, low capital ratio, negative ROA; banks placed under PCA can't expand.
Recapitalization of PSBs: Government infused Rs 3.5 lakh crore into public sector banks between 2015-2021 to tackle NPA crisis; through Indradhanush scheme.
Banking sector consolidation: Government merged 10 public sector banks into 4 in 2019; total PSBs reduced from 27 to 12 through mergers.
RBI's new bank licenses: Payments Bank (limited deposit taking, no lending), Small Finance Bank (focused on underserved segments), Universal Bank (full-service).