Rbi Inter Bank Essay Competition

Rbi Inter Bank Essay Competition-34
Are there other factors as well contributing to the rise in NPAs?The wait and watch approach of banks have been often blamed as the reason for rising NPAs as banks allow deteriorating asset class to go from bad to worse in the hope of revival and often offer restructuring option to corporates.

Are there other factors as well contributing to the rise in NPAs?

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According to one of the estimates, the gross non-performing assets (NPAs) of listed banks rose 35.2% to Rs2.43 lakh crore during the first three quarters of the current financial year.

In absolute terms, the 40 listed banks added Rs63,386 crore to their gross NPAs during the nine months till December 2013, with State Bank of India (SBI), the largest lender in the country, leading with an accretion of Rs16,610 crore.

A Parliamentary panel, examining increasing incidents of NPAs, has observed that state-owned banks should stop “ever-greening” or repeated restructuring of corporate debt to check the constant accumulation of their non-performing assets.

Members of the panel were of the view that NPAs are the result of bad economic situation, but there were also management issue of every-greening of loans, which could be avoided by “not renewing loans, particularly of corporate”.

Also, banks, especially PSUs, should adopt a more rational approach and not lend to the sector carelessly. Ordinary borrowers often complain about difficulty in getting loans, while some large borrowers just get it very comfortably.

As they say banks lend money to those who already have enough of it . 😀 Non-performing assets (NPAs) of the banks, especially public sector banks (PSBs), have been going up sharply recently.

As a result, the Indian banking system has seen increase in NPAs and restructured accounts during therecent years.

Therefore, there is a need to ensure that the banking system recognises financial distress early, takes prompt steps to resolve it, and ensures fair recovery for lenders and investors.

RBI proposed to look into the possible legal issues involved and address the same.

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