A brawny banking sector is essential for a proliferate economy. In 2007, Where the United State and other Western Countries were facing the banking crisis and related global financial crisis, but the Indian economy was not affected by this global because our banking industry was robust. Till this time, our banking sector was unaffected, and the Reserve Bank of India has prudential guidelines, which have assisted the Indian banking sector to face this crisis.

These dark skies of crisis come when 11th five-year plan allocate 500 million, through banking or bank loans, only for the infrastructure development, where the GDP of India for 1 trillion. And the cause enormous delay in execution due to environmental concern, land-related problem, public-private partnership agreement related problem.

All this resulted in, the project is preventing the revenue, and entities doing this project. And the beauty of the bank loan is commenced from the date when it issues to the account and starts charging the interest.

So to cure this ailment the legislature passed a bill on 19th July 2018, the Fugitive Economic Offender Bill, 2018, to restrain the public and private banks from the economic offender. The act aims to provide measures to deter fugitive economic offenders from evading the process of law by staying outside the jurisdiction of the Indian Courts, to preserve the sanctity Rule of law in India. Under this act, stringent measures are provided to bring offenders to return to the country, and to recover the granted amount or criminal proceeding can be executed against them.
 

What is a Non-performing Asset & Fugitive Economic Offenders Bill, 2018?

According to the Narasimham Committee Report (1991), Non- performing Assets (NPA) is defined as an advance where payment of interest or repayment of instalment of principal or both remains unpaid for a certain period. Earlier the period was of four quarters (180) but, subsequently the interest has remained unpaid for 90 days were considered as NPAs.[1]

However, the Fugitive Economic Offender Act (FEO), 2018, contemplates action by attachment and confiscation of proceeds of crime associated with the offender and it includes even Benami properties of the offender and thereby deter the offender from evading Indian law by remaining outside the jurisdiction of Indian courts. Section 2(1)(f) of the act defines the term Fugitive Economic Offender (FEO), whereas, section 3 of the act provides that the provisions of this Act shall apply to any individual who is, or becomes, a fugitive economic offender on or after the date of coming into force of this Act. Moreover, whether the ingredients of the above definition are satisfied or not has to be determined by special court under the prevention of money laundering Act, 2002 after following the procedure outlined in section 4,5,10 and 11 of the Act.[2]
 

Present Scenario of NPAs & FEOs:

NPA is in front of banks has been identified in the headlines for several months. This is important because the non-performing asset has caused many decisions in the past due to call, which did not exactly prove efficient. However, several measures have been taken by the Government of India & Reserve Bank to deal with NPA and FEO, like Lok Adalat, O.T.S., and other compromise settlement but actually, recovery amount under these tracks was not satisfactory.

But Scheduled Commercial Banks (S.C.Bs.) managed to recover more from the non-performing loan in FY18 against FY17 due to vigorous efforts for speedy recovery via that IBC Act, 2016 & (SARFAESI) Act, 2002 routes.

According, to the RBI's Report on “Trend and Progress of Banking in India 2017-2018", the overall ratio of the amount recovered improved drastically to 41.3 per cent against 13.8 per cent previous year.

As per provisional data for 2017-18, banks recovered Rs.5.28 lakh crore (Rs.38,500 crore previous year), while the amount involved was Rs.12,78,600 crore (Rs.2,78,300crore).
 Moreover, in the reporting period, the maximum amount recovered was Rs.4,92,500 crore (Collection of 21 companies from financial creditors) through the route of Insolvency & Bankruptcy Code, while the amount was Rs.9,92,900 crore and the ratio of the amount collected in the case was 49 per cent to the amount involved.

In the previous year, when IBC was bringing into action, 37 cases ware come in front of the National Company Law Tribunal. But data about amount recovered and the amount involved has not been disclosed by the RBI.

Via SARFAESI Act, 2002 route, banks recovered 26,500 crores, this year, where the involved amount was 1,06,700 crore and the ratio of the amount recovered by this route raised to 24.8 per cent, from 18.3 per cent ( previous year). But at the same time, by Debts Recovery Tribunal route, bank recovery decreased to 7,200 crores where previously it recovered 10,300 crores.

NPAs, on 31st July 2018, after bundling of debates, FEO Act became law and allows for declaring a person as an offender after as an arrest warrant has been issued against the individual and the value of 100 crores.

And for this Judge M.S. Azmi said,
“the court was partly allowing the enforcement directorates application, through its counsel Hiken Venegavkar on June 22nd, 2018, which sought to declare Mr Mallya a fugitive economic offender and confiscate all his properties, estimated to the worth 12,500 crores."

Moreover, Mr Mallya, who left the country on March 2016, is arrested by the U.K. Metropolitan police's extradition unit on April 18, 2017. And finally, on 5th January 2019, Vijay Mallya, liquor Baron, become 1st person to be declared a fugitive Economic Offender by the special court hearing cases under the Fugitive Economic Offenders Act.
 

The disaster of 2018 and 2019 which enhance the NPA

In FY18 the recovery is of good amount but not satisfactory because the non-performing loan shot one trillion and raising more. As this year RBI comes with lots of reform to recover the NPA and to control the economic offence. But the causes come via bypass to raise the NPA.
The new causes follow:

 

1. Farm Loan Waivers.-
   In the latest round of agricultural loans announced by states like Madhya Pradesh, Chhattisgarh, Rajasthan and Assam only stream of loan has been streamed in the agricultural sector, while many have the effect of a wave, due to non-payment of agricultural loans in 2019 Run-up for a general election. Since this loan will affect credit culture, banks can be the leading conservative in the agricultural sector.
    
2. IL and FS Crisis.-
   The total consolidated loan near the infrastructure lender is close to one lakh crore, and it missed out on the time limit on its debt obligations starting from August 27, 2019. It has already vanquished on around Rs.450 crore worth of inter-corporate deposits to small industries Development Bank of India (SIDBI)
    
3. Fraud in Banking Sector.-
   According to the RBIs “Report on Trend and Progress of Banking in India 2017-18â€, as of march-end 2018, the amount involved in frauds escalated to Rs.41,168 crore from Rs.23,934 crore.
   
   The Report said,
   "Incidentally large value frauds involving Rs.50 crore & above constitute about 80 per cent of the frauds during this year. Ninety-three per cent of the fraud in term of amount of more than Rs.1 lakh occurred in public sector bank, while private sector bank accounted for six per centâ€.
    
4. The Survey of Bankers by FICCI (Jan-July, 2019),
   “Most banks thought setting up Development of Financial Institution (DFI) would help and promote the flow of credit in the infrastructure sector. DFI will better understand the structure and funding requirements for the complex and will help to ensure project and underwriting standard. Establishing DFI will help resolve asset-liability mismatch issues by banks. Some banks expressed apprehension over the given DFI model low access does not require sufficient fiscal space to support DFI Cost fund. Additionally, it will boost the concentration of high-risk assets, which Higher NPAs may occur in the future.â€

 

Need for reform for the economic offender and non-performing asset:

1. Insolvency and bankruptcy code, 2016
i. in the term of law.-

 

1. For any reason, the moratorium should not be allowed for more than 270 days.
2. DRTs as adjudicating authority for Partnership firm/ Proprietary concern is yet to be notified, which once done will improve recovery from these segments.
3. Extend loan tenure for companies that have viable businesses but are currently suffering from a moratorium as well as over-leveraged balance sheets.

 
ii. For the credit building:

1. The judicial and legal systems should be strengthened. This can be done by increasing the number of NCLT courts/benches.
2. Similar to other global markets to attract additional funds at an additional and international level. Tax concession for capital invested in companies under IBC can be considered.

2. Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002.-
SARFAESI is the golden weapon, but the provisions of Act have to be carefully applied. The competent Authorized officer shall be appointed to serve the notice under this Act.

3. Fugitive Economic Offenders Bill, 2018:

1. The S.14 of Chapter II of the Fugitive Economic Offenses Act, 2018, has been declared as an FEO to defend any citizen's claim in any court against those people. It embeds the right of justice into the right of life and does not consonance to international laws.
2. This bill should include limited liability partnership within the definition of the word individual' used in 2(1)(f) of this act.
3. This act never exhibits how any bank can get his loan to repay from this.
4. This act needs to be speedy justice provider.
5. Instead of emphasizing the extradition, an emphasis should be on preventing the criminal from becoming a fugitive.

4. Mislenious

1. Banks need to improve their credit monitoring and risk management strategies to increase their capital base to defend against future balance sheet tensions and to support inclusive growth in the developed financial scenario.
2. Lok Adalat and Debt Recovery Tribunal arrears must enforce effectively.
3. In delay due to flood, or other natural disasters, then the banker should restructure the debt keeping in view the real difficulty of borrowers.
4. Irregularities in spot visits also increase the NPA, due to non-travel of the bank official on the customer point, the interest and principles collection on the loan decreases. Therefore NPA can be collected by regular travel.
5. RBI should instigate a provision of no objection certificate (NOC), form the bank. In this NOC, it shall be stated that the bank gave him loan earlier has no objection if he takes loan another loan from other bank or the same with the same amount of salary.
6. Special Courts have become the panacea of our country. So, the number of judges should be increased against turtles in the justice delivery syste

Conclusion
The Non-Performing Assets have always engendered a snag before banks and Financial Institutions. Money locked up in NPAs has a great knock-on the profitability of the banks.

Government of India has been taking various measures to tackle the problem of non-performing assets but still, a lot needs to be done to suppress this problem. The bank management should speed up the recovery process and among the various recovery tracks, the bank should select any of them as per the suitability of the account. Proper documentation, pre and post loan appraisal policy, proper inspection, timely initiating action against the defaulters, proper implementation Recovery Act etc help in curing the piles of NPAs.

The government should make more provisions for speedy disposal of pending cases. Apart from this, the government should take measures also to heal the viral of fugitive offenders. This somewhere helps the government itself to ameliorate the shape of the economy.

End-Notes

1. Rajeev, M. & Mahaesh, HP. (2010) Banking Sector Reform & NPA: A study of Indian Commercial Banks. [Online] (252). Available from: https://ideas.repec.org/p/sch/wpaper/252.html.
2. Srinivasan, Anand G. (2018) Guide to Fugitive Economic Offenders Act 2018. New Delhi. Taxmann Publication