The first ten days of the winter session of 2018, the parliament witnessed members asking wide-ranging questions related to the finance. These questions can broadly be divided into the following categories:

• Demonetisation
• Issues related to the health of the Public Sector Banks, which could, in turn, be sub-divided into:
  1. NPAs
  2. Wilful Defaulters
  3. Bank Frauds
  4. Recapitalisation of the banks
  5. Bank Charges
  6. Bank Mergers
  7. LIC’s buyout of the IDBI
• Autonomy of the RBI
• ATMs
• Disinvestment
• Diversion of cess

Demonetisation:

Citing RBI’s annual report the government told that the Parliament that government has not yet conducted any study or audit to identify the gains accrued from demonetisation. (As 3)

Answering a question whether corruption has reduced after the demonetisation, Finance Minister Arun Jaitley said, “There is no evidence to show that there is a rise in corruption after demonetization. On the contrary, demonetisation besides serving other objectives of eliminating fake currency, stopping terror financing, promoting formalization of the economy, promoting digital payments and also succeeded in unearthing black money.” He also told that the total value of Rs 500 and Rs 100 notes in circulation as on November 08, 2016, post verification and reconciliation, was Rs. 15,417.93 billion. The total value of Rs 500 and Rs 100 notes returned from circulation is Rs. 15,310.73 billion. (As 12)

In another question, the Minister cited a 2016 study done by the Indian Statistical Institute, Kolkata, which estimated that counterfeit currency worth Rs 411 crores of the denomination of Rs 500 and Rs 1000 were in circulation in 2014-15. (AS 68)

Answering a question on the blow to the economy by the GST and demonetisation, the Finance Minister listed positive impacts of the two decisions on the economy. (AS 62) In another question, the Minister cited GDP growth rates to put across his point. (AU 878)

On the question on the expenditure caused on printing new notes, the minister revealed Expenditure on the printing of new notes after demonetisation has not been shown separately by the Reserve Bank of India in its Accounts. The expenditure on the printing of notes during 2015-16 (the year prior to demonetisation) was Rs. 34.21 billion. Rs 79.65 billion and Rs 49.12 billion were spent on the printing of banknotes in the year 2016-17 and 2017-18 respectively. In addition, Rs.1.09 billion, Rs 1.47 billion and 1.15 billion were spent on remittance of currency in the year 2015-16, 2016-17 and 2017-18 respectively. The minister also informed the parliament that apart from the State Bank of India, no other bank reported any deaths during demonetisation. (AS 78)

Issues related to the health of the Public Sector Banks

Non-Performing Assets

The government informed the parliament, as per Reserve Bank of India (RBI) data on domestic operations, the aggregate gross advances of Public Sector Banks (PSBs) increased from Rs. 16,98,109 crore as on 31.3.2008 to Rs. 45,90,570 crore as on 31.3.2014. (AU 741) The minister also shared the data on the recoveries made by the PSBs in the last four years.

Answering a question on the number and details of corporate houses and farmers against whom loan is outstanding, the minister said, “RBI further informed that as per data on borrower groups excluding individuals/Government-PSUs submitted by Scheduled Commercial Banks (SCBs), as on 30.9.2018, there were 568 borrowers who had NPAs with SCBs, excluding individuals/Government-PSUs, involving an amount of Rs. 6,28,560 crore, of which 95 were borrowers with aggregate gross NPAs of more than Rs. 1,000 crore, involving funded outstanding amount of Rs. 5,57,110 crore. RBI has also apprised that gross NPAs in Agriculture and Allied Activities were Rs. 1,01,508 crore as on 30.9.2018.” (AS 76)

The MoS Finance P Radhakrishnan, informed the parliament: as per the Economic Survey 2017-18, out of a total outstanding credit of Rs 26041 billion as in November 2017, 82.6 per cent of the amount was lent to large enterprises. The MSME received only 17.4 per cent of the total credit outstanding. As per the National Sample Survey (NSS) 73rd round conducted during the period 2015-16, MSME sector has been creating 11.10 crore jobs. (AU 848)

In another question, the Minister of Finance shared the details of operating profit, provisioning and the net profit of the public sector banks. (AS 80)

Shiv Pratap Shukla, Minister of State in the Ministry of Finance, informed the parliament that  RBI was collecting data of wilful defaulters up to September 2014. After December 2014 onwards this information is being collected and disseminated by Credit Information Companies (CICs), and that some part of the information is, however, received by RBI as reported by banks in the Central Repository of Information on Large Credits (CRILC) database. (AU 28)

Answering a question on the banks under the Prompt Corrective Action framework, the MoS revealed: Currently, 12 banks are placed under PCA viz., Allahabad Bank, Bank of India, Bank of Maharashtra, Central Bank of India, Corporation Bank, Dena Bank, IDBI Bank Limited, Indian Overseas Bank, Oriental Bank of Commerce, UCO Bank and United Bank of India. Dhanlaxmi Bank is the only private sector bank under PCA. (AU 30) The minister also tabled the Capital to Risk Weighted Assets Ratios (CRAR) of PSBs placed under the PCA framework. (AU 68)

The MoS also informed the parliament that the aggregate amount of reduction in NPAs of PSBs due to write-offs (including compromise) in the first half of the current financial year 2018-19 was Rs. 76,313 crore. (AU 46) The minister also apprised the parliament of the losses in PSBs due to non-repayment of loans with details of operating profit, provisioning and net profit. (AU 82)

Answering another question, the MoS revealed that the audit of Public Sector Banks and RBI does not fall within CAG’s audit mandate. (AU 47)

Wilful Defaulters

MoS Finance Shiv Pratap Shukla informed the parliament that former governor did not submit a list of wilful loan defaulters to Government. (AU 877)

Citing RBI data, Arun Jaitley said: as per data reported by Public Sector Banks (PSBs) for September 2017 quarter, as on 7.12.2018, there were 7,562 borrowers with suit-filed wilful defaults, with the amount outstanding of Rs. 93,355.32 crore. With regard to wilful defaulters having exposure of Rs. 100 crore and above, RBI has apprised that there were 185 borrowers in the suit-filed wilful defaulters’ category with a total exposure of Rs. 42,978.78 crore, as on quarter ending September 2017. (AS 80)

Bank Frauds

In a question on the bank frauds, MoS Finance Shiv Pratap Shukla shared the details of the number of fraud cases of Rupees one lakh and above reported by Public Sector Banks (PSBs) to the Reserve Bank of India (RBI), along with the amount involved in fraud in the Area of Operation – ‘Deposit – Savings’, as reported during the last three years. As per the data, the amount of fraud doubled in FY 2017-18 as compared to the previous year. (AU 23)

Answering a question on the enquiries against bank officials who used managerial discretion without due diligence in issuing loans, MoS said Central Bureau of Investigation has intimated that a total of 273 (268 Regular Cases and 05 Preliminary Enquiry cases). The minister also tabled the bank-wise data on the number of staff side action initiated/taken against bank employees involved in frauds above Rs 1 Lakhs. (AU 834)

The MoS also shared the multiple steps taken by the government to prevent bank frauds in future. (AU 699). Some more actions taken were listed here. (AU 701)

Recapitalisation of the Banks

The Nationalised banks made aggregate provision for NPAs and other contingencies of Rs. 4,05,456 crore during the last four financial years, resulting in net loss of Rs. 81,009 on an aggregate basis over the period. Whereas, In the last four financial years, Government has infused capital amounting to Rs. 1,07,543 crore in nationalised banks to help them meet capital requirements. (AU 821)

Since October 2017, when the government announced its plan to infuse Rs. 2.11 lakh crore through the infusion of capital by the Government and raising of capital by banks from the markets, till November 2018, PSBs have been recapitalised to the tune of Rs. 1,28,861 crore through infusion and mobilisation of capital from the market. (AU 767)

Some of the benefits of recapitalisation mentioned by the government are: increasing access to banking services from home and mobile through digital banking and enhanced customer ease; an increase in the World Bank’s Ease of Doing Business Index. (AU 875)

Bank Charges

Reserve Bank of India (RBI)’s Master Circular on “Customer Service in Banks” dated July 1, 2015, banks are permitted to fix service charges on various services rendered by them, as per their Board approved policy, while ensuring that the charges are reasonable and not out of line with the average cost of providing these services. (AU 781)

The only exception in the above-mentioned circular are Basic Savings Bank Deposit Account, including accounts opened under Pradhan Mantri Jan Dhan Yojana. There are, however, the limit on the free transactions. More details on the free transactions, capping and state-wise number of Savings Bank Deposit Account accounts, and Pradhan Mantri Jan Dhan Yojana accounts are provided here. (AU 824)

Bank Mergers

Taking note of the recommendation of the Narasimhan Committee (1998) constituted by RBI, Leeladhar Committee (2008) chaired by RBI Deputy Governor, and Nayak Committee (2014) constituted by RBI, and the potential benefits of consolidation, Government after consulting RBI, in its meeting held on 17.9.2018, approved that Bank of Baroda, Vijaya Bank and Dena Bank may consider amalgamation of the three banks. The government intends to create strong and competitive banks, serving as catalysts for growth, with the improved risk profile of the bank, approved an approval framework for proposals to amalgamate PSBs. In the same answer, the government also revealed the total income in each of the PSBs and private sector banks in FY 2017-18. (AU 51)

LIC’s buyout of the IDBI

The government informed the parliament that LIC invests in commercially viable and good performing companies to generate reasonable returns for the policyholders. As per LIC, its equity portfolio for 2017-2018 was more than Rs. 4,00,000 crore on a Book Value basis with profits booked for the year is more than Rs. 25,400 crores which reflect the strength of the equity portfolio. (AU 81)

Autonomy of the RBI

The autonomy for the central bank, within the framework of the Reserve Bank of India (RBI) Act, is an essential and accepted governance requirement. (AU 872)

The Government further told the parliament that it had asked RBI for a review of its Economic Capital Framework (ECF) adopted in 2016. As per press release by RBI on 19.11.2018, the Board has decided to constitute an Expert Committee to examine the ECF. (AU 813)

In a question related to the transferring surplus funds to the government, MoS Radhakrishnan cited Section 47 of the Reserve Bank of India Act, 1934 which provides: “After making provision for bad and doubtful debts, depreciation in assets, contribution to staff and superannuation fund and for all matters      for which provision is to be made by or under the Act or which are usually provided by bankers, the balance of the profits shall be paid to the Central Government.” He also shared the details of RBI’s profit, reserves, and surplus transferred during the last five years. (AU 838)

The government categorically denied that it has asked funds from RBI’s surplus reserves to meet fiscal deficit. (AU 856)

ATMs

As reported by the Scheduled Commercial Banks (SCBs), Small Finance Banks (SFB), Payment Banks (PBs) and White Label ATM Operators (WLAOs), 2.21 lakh ATMs are deployed in the country as on 30.9.2018. The government also said that the PSBs do not have any plan to shut down their ATMs. (AU 892)

Disinvestment

The government has given in-principle approval for strategic disinvestment of 24 CPSEs including subsidiaries, Units and Joint Ventures with the sale of a majority stake of Government of India and transfer of management control. List of CPSEs, Subsidiaries, Units and Joint Ventures for which Government has given in-principle approval for strategic disinvestment is given here. As per the Budget Estimates 2018-19, the target under disinvestment is Rs. 80,000 Crore. As on 10.12.2018 Rs. 34,004 Crore has been received from disinvestment. (AU 866)

Answering a separate question, the government shared the present account status of PSUs and their Government sharing in comparison to year. (AU 884)

On the question related to the efforts made by the Government to restructure and re-finance the undertakings to revive before taking a decision of disinvestment, the government shared that the Department of Public Enterprises (DPE) had issued guidelines on 29.10.2015 on revival/ restructuring of CPSEs. As per these guidelines, the Administrative Ministries/ Departments concerned are responsible for all matters relating to the revival/ restructuring/closure of CPSEs in consultation with stakeholders and after obtaining the approval of the competent authority, they implement such plans. (AU 835)

Diversion of the cess

The amount of cess collected, its utilization and the differences for the financial years 2015-16, 2016-17 and 2017-18 are as under: (Rs. in crore)

The government also shared various provisions relating to the transfer of cesses. (AU 870)