Inefficient debt recovery leads to huge costs: Report

Inefficient debt recovery methods have resulted in costs to the tune of Rs 35,000 crore, said a report today.
Prepared by advocacy group CUTS International, the report offered solutions in the form of improving infrastructure, providing training to people concerned, along with the necessary statutory and regulatory amendments.
It singled out inadequate capacity and accountability mechanisms for the delay in decision making and consequent recovery of the due amount.
"... The cost of inefficient debt recovery scenario to the country is close to Rs 35,000 crore, and an initial investment of Rs 100 crore in infrastructure and training, along with necessary statutory and regulatory amendments, could go a long way in addressing the situation," the report said.

As per estimates, there has been an "opportunity cost" for about Rs 35,000 crore owing to delay in debt recovery of up to four years on a consolidated basis.
In addition, opportunity cost of litigation for 2013-14 has been estimated at around Rs 2,000 crore, the report noted.

According to the report, the social cost of loans written off by commercial banks in the past five years stood at Rs 1,61,018 crore, which is 1.27 per cent of GDP.
"India has been grappling with high levels of NPAs (non-performing assets) and sub-optimal debt recovery for quite some time now. Total stressed assets as of March 2015 stood at 11.06 per cent of gross advances," former finance minister Yashwant Sinha said in the foreword to the report.

"Unless radical steps are taken, the situation could exacerbate and go out of hand, causing serious injury to the economy.