War On NPAs: Government Set To Overachieve Its Recovery Target Thanks To IBC
War On NPAs: Government Set To Overachieve Its Recovery Target Thanks To IBCUnion Finance Minister, Arun Jaitley (Photo by Sonu Mehta/Hindustan Times via Getty Images)

The government expects recoveries of Non-Performing Assets (NPAs) to exceed the its target of 1.8 lakh crore in the current financial year (FY19), Press Trust of India has reported .

A senior Finance Ministry official told the that while some big accounts were already in the process of getting resolved at the National Company Law Tribunal (NCLT), many more are lined up for resolution. The banks recovered Rs 74,562 crores in the previous financial year (2017-18). In the first quarter of 2018-19, the banks have recovered Rs 36,551 crores.

Commenting on the success of Insolvency and Bankruptcy Code (IBC), Union Finance Minister, Arun Jaitley talked about how IBC has acted as a deterrent to potential defaulters.

"The unintended consequence was that potential defaulters started realising that the moment you cross the red line, at least you will go out, and never get back. And if you have seen the last quarter or two, potential defaulters are begging, borrowing and stealing and paying back. And that's why the banks have started getting monies even outside the NCLT system from potential defaulters not wanting to cross the red line," he said.

The success of continuing resolutions of Essar Steel and Bhushan Steel have contributed to the favourable perception of IBC in corporate India. In June 2018, NPAs in the banking sector had reached the unprecedented levels of Rs. 10 lakh crores.

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