Asset Quality Review (AQR) carried out in 2015 for clean and fully provisioned bank balance-sheets revealed high incidence of non-performing assets (NPAs). Expected losses on stressed loans, not provided for earlier under flexibility given to restructure loans, were reclassified as NPAs and provided for. Nationalised banks initiated cleaning up by recognising NPAs and provided for expected losses. Further, during the fourth quarter of the financial year (FY) 2017-18, all such schemes for restructuring stressed loans were withdrawn under RBI’s Revised Resolution framework for Stressed Assets issued in February2018. As a result, while nationalised banks posted aggregate operating profits during the last four financial years (2014-15 to 2017-18) of ₹ 3,45,180 crore many had net losses primarily on account of continuing ageing provision for NPA recognised as a result of AQR initiated in 2015 and subsequent transparent recognition by banks including under RBI’s Revised Resolution framework for Stressed Assets issued in February2018. Nationalised banks made aggregate provision for NPAs and other contingencies of ₹ 4,05,456 crore during the last four financial years, resulting in net loss of ₹ 81,009 on aggregate basis over the period.

Government has infused capital amounting to ₹ 1,07,543 crore in the last four financial years in nationalised banks to help them meet capital requirements.

This was stated by Shri Shiv Pratap Shukla, Minister of State for Finance in a written reply to a question in Lok Sabha today.

Asset Quality Review prompts reclassification of stressed loans as NPAs, driving provisioning and government capital infusion to banks. Asset Quality Review measures and the withdrawal of restructuring schemes under the Revised Resolution Framework required nationalised banks to reclassify stressed loans as non-performing assets and make substantial provisions for expected losses, producing aggregate operating profits but net losses after provisioning; the Government infused capital to meet resultant regulatory capital requirements.