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We need your ideas and inputs. Ideas on how we can inform many more people who are interested in policy about what they can access on the PRS website. The mission of PRS is to strengthen the legislative process by making it better informed, more transparent and participatory. The statement has three important components: (a) Better informed: This implies that legislators and citizens need to be better informed about the implications of legislation. For us in PRS, this implies producing easy-to-understand non-partisan analysis that can be made available to MPs and citizens. This also includes our continual efforts to personally brief MPs and political parties on the details and implications of each Bill. (b) Transparent: We mean that all proceedings of Parliament and the work of MPs in Parliament should be easily accessible to citizens. In an operational sense, this includes the effort we put into creating the Bill Track section on our website where every Bill that is pending in Parliament can be accessed, and the current status of the Bill can be tracked. It also includes the MP Track section in which we have up-to-date information about the engagement levels of MPs in Parliament. We also have a twitter page www.twitter.com/prslegislative and a Facebook presence. (c) Participatory: Which simply means that once citizens know the information, and would like to articulate a point of view, they should reach out to policy makers and get their point of view across to them. To promote this, we have had a number of workshops with NGOs and have produced a primer on "Engaging with Policy Makers". These are just some examples of what we are doing in each of these three areas. Our website has much more information. But we are increasingly of the view that we need to reach out many more people who are interested in policy -- even if it is sector specific. We would be grateful for any ideas that you might have, which you can post as responses to this post. If you also have specific ideas on what you like on our website and what can be better, do let us know. Thanks, in advance.
At noon today, the Finance Minister introduced a Bill in Parliament to address the issue of delayed debt recovery. The Bill amends four laws including the SARFAESI Act and the DRT Act, which are primarily used for recovery of outstanding loans. In this context, we examine the rise in NPAs in India and ways in which this may be dealt with.
I. An overview of Non-Performing Assets in India
Banks give loans and advances to borrowers which may be categorised as: (i) standard asset (any loan which has not defaulted in repayment) or (ii) non-performing asset (NPA), based on their performance. NPAs are loans and advances given by banks, on which the borrower has ceased to pay interest and principal repayments. 
In recent years, the gross NPAs of banks have increased from 2.3% of total loans in 2008 to 4.3% in 2015 (see Figure 1 alongside*). The increase in NPAs may be due to various reasons, including slow growth in domestic market and drop in prices of commodities in the global markets. In addition, exports of products such as steel, textiles, leather and gems have slowed down.[i] The increase in NPAs affects the credit market in the country. This is due to the impact that non-repayment of loans has on the cash flow of banks and the availability of funds with them.[ii] Additionally, a rising trend in NPAs may also make banks unwilling to lend. This could be because there are lesser chances of debt recovery due to prevailing market conditions.[iii] For example, banks may be unwilling to lend to the steel sector if companies in this sector are making losses and defaulting on current loans. There are various legislative mechanisms available with banks for debt recovery. These include: (i) Recovery of Debt Due to Banks and Financial Institutions Act, 1993 (DRT Act) and (ii) Securitisation and Reconstruction of Financial Assets and Security Interest Act, 2002 (SARFAESI Act). The Debt Recovery Tribunals established under DRT Act allow banks to recover outstanding loans. The SARFAESI Act allows a secured creditor to enforce his security interest without the intervention of courts or tribunals. In addition to these, there are voluntary mechanisms such as Corporate Debt Restructuring and Strategic Debt Restructuring, which These mechanisms allow banks to collectively restructure debt of borrowers (which includes changing repayment schedule of loans) and take over the management of a company.
II. Challenges and recommendations for reform
In recent years, several committees have given recommendations on NPAs. We discuss these below.
Action against defaulters: Wilful default refers to a situation where a borrower defaults on the repayment of a loan, despite having adequate resources. As of December 2015, the public sector banks had 7,686 wilful defaulters, which accounted for Rs 66,000 crore of outstanding loans.[iv] The Standing Committee of Finance, in February 2016, observed that 21% of the total NPAs of banks were from wilful defaulters. It recommended that the names of top 30 wilful defaulters of every bank be made public. It noted that making such information publicly available would act as a deterrent for others.
Asset Reconstruction Companies (ARCs): ARCs purchase stressed assets from banks, and try to recover them. The ARCs buy NPAs from banks at a discount and try to recover the money. The Standing Committee observed that the prolonged slowdown in the economy had made it difficult for ARCs to absorb NPAs. Therefore, it recommended that the RBI should allow banks to absorb their written-off assets in a staggered manner. This would help them in gradually restoring their balance sheets to normal health.
Improved recovery: The process of recovering outstanding loans is time consuming. This includes time taken to resolve insolvency, which is a situation where a borrower is unable to repay his outstanding debt. The inability to resolve insolvency is one of the factors that impacts NPAS, the credit market, and affects the flow of money in the country.[v] As of 2015, it took over four years to resolve insolvency in India. This was higher than other countries such as the UK (1 year) and USA (1.5 years). The Insolvency and Bankruptcy Code seeks to address this situation. The Code, which was passed by Lok Sabha on May 5, 2016, is currently pending in Rajya Sabha. It provides a 180-day period to resolve insolvency (which includes change in repayment schedule of loans to recover outstanding loans.) If insolvency is not resolved within this time period, the company will go in for liquidation of its assets, and the creditors will be repaid from these sale proceeds.
[i] ‘Non-Performing Assets of Financial Institutions’, 27th Report of the Department-related Standing Committee on Finance, http://164.100.47.134/lsscommittee/Finance/16_Finance_27.pdf. [ii] Bankruptcy Law Reforms Committee, November 2015, http://finmin.nic.in/reports/BLRCReportVol1_04112015.pdf. [iii] Volume 2, Economic Survey 2015-16, http://indiabudget.nic.in/es2015-16/echapter-vol2.pdf. [iv] Starred Question No. 17, Rajya Sabha, Answered on April 26, Ministry of Finance. [v] Report of the Bankruptcy Law Reforms Committee, Ministry of Finance, November 2015, http://finmin.nic.in/reports/BLRCReportVol1_04112015.pdf. *Source: ‘Non-Performing Assets of Financial Institutions’, 27th Report of the Department-related Standing Committee on Finance, http://164.100.47.134/lsscommittee/Finance/16_Finance_27.pdf; PRS.
