In India, children between the age group of 6 and 14 years have the fundamental right to free and compulsory education. This right is implemented through the Right of Children to Free and Compulsory Education Act, 2009 (RTE Act). The Act is applicable to all categories of schools (government and private). According to recent media reports (see here and here), many schools (including government schools) are flouting norms laid down in the RTE Act. Unaided schools have criticised state government over norms related to religious and linguistic status of minority schools (see here and here). The government has also faced flak over unclear norms on neighbourhood schools and reimbursement of money to private schools (see here, here and here). Most Acts ‘delegate’ the power to make rules and regulations for operationalising the law to the executive (Ministry). We provide an overview of the Rules notified by the state governments. The central government notified the RTE Rules 2010 on April 9, 2010, which are applicable to all schools under the central government, and in the five Union Territories without legislatures. Most of the states have notified similar Rules with a few variations. The Rules define the limits of a neighbourhood and make it mandatory for the local authority to maintain list of children within its jurisdiction. They also prescribe the composition of the School Management Committee to be formed in government schools. Private schools shall reserve 25% of the seats for disadvantaged children. These schools shall be reimbursed for either their tuition charge or the per-student expenditure in government schools, whichever is lower. All private schools have to be recognised before they can start operation. Recognition is contingent upon meeting the minimum standard laid down in the Act Existing private schools have to meet the norms within three years of commencement of the Act. If they are not compliant after three years, they shall cease to function. Government schools under the central government have to meet only two conditions: the minimum qualification for teachers and the student-teacher ratio. For all state government schools and un-adided schools, the power to make rules is delegated to the state government. The central government circulated Model Rules for the RTE Act to the states. All state governments, except Goa, have notified the state RTE Rules. Delhi and Puducherry have also notified them. Most of the states have notified similar Rules with a few variations. We list some of the variations. Andhra Pradesh: The break-up of the 25% quota among the various disadvantaged groups have been included in the Rules. Scheduled Castes: 10%; Scheduled Tribes: 4%; Orphans, disabled and HIV affected: 5% and children with parents whose annual income is lower than Rs 60,000: 6%. Rajasthan: Private schools either have to be affiliated with a university or recognised by any officer authorised by the state government. Karnataka: In addition to the minimum norms under RTE Act, private schools have to comply with the Karnataka Education Act, 1983. Gujarat: If an existing recognised school is unable to meet the infrastructure norms it may be given the option of demonstrating that it achieved certain learning outcomes, both in terms of absolute levels and as improvement from previous years. Uttar Pradesh: The government shall pay per child reimbursement to the school after it gives a list of children with their Unique Identity Number and other details. Kerala: The local authority has to maintain a record of all the children (0-14 years) within its jurisdiction. It shall also maintain the Unique Identity Number of every child, as and when issued by the competent authority, to monitor his enrolment, attendance and learning achievements. Haryana: Defines textbooks, uniform and writing material. It states that Hindi is to be the preferred medium of instruction in all schools. For using other language, permission of Director, Elementary Education Dept is required (to be given within 45 days or deemed to be granted). West Bengal: The Rules give detailed definition of the appropriate age for each class. They require schools to be set up in a relatively noise-free and pollution-free area with adequate supply of drinking water and electricity. Existing schools (which are already recognised or affiliated with a Board) may get the local municipal authorities to provide infrastructural support including relaxation of building rules to comply with the requirements of the Act. Additional sources
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.
