Home » Are banks on their way to come out of NPA mess?
Subscribe for News letter
Fetching Data...
Site Map Why Finalaya
Financial Blog

Are banks on their way to come out of NPA mess?

21 Sep 2016 |By: Team Finalaya

Bank NPA India


Before finding an answer to the question whether the Indian Banks are finally set on a course to overcome theNPA mess, we need to appreciate that the problem itself is deep rooted.  There is no magic wand that can remove this tumor from the Indian banking system. The process would essentially be slow and painful though everyone in authority now agrees that it must start, sooner than later.

The root causes of NPA

Legal cobwebs, systemic infirmities, consortium lending, political nexus, fudging, and everyone’s responsibility becoming nobody’s responsibility are at the root of the NPA mess. One should also delve deeper into the circumstances that prompted bank nationalization. Even granting for once, that the objectives of bank nationalization were laudable, time and again, the political bosses had the ability to dictate terms to the banks.

The role of chartered accountants

The Satyam computers episode dealt a body blow to the ineptitude these esteemed professionals who were expected to be the guardians of public wealth. How some of the best names in the profession failed to uphold their professional integrity is now etched in the financial history of the nation. Thankfully, the incident has apparently helped in putting enhanced levels of responsibility into the profession.

Reckless lending

The reckless pursuit of competition and weak autonomy in lending decisions has also contributed in a significant measure to the current imbroglio. The corporate political nexus promoted this attitude among the lenders and exploited it to the hilt to their own advantage.

Roll call

Here is an interesting article from “The Hindu” outlining public debt owed by some of the biggest names in Indian corporate fraternity and how they plan to liquidate some of their precious assets to bring down their debt burden. The entire article, though long, is worth every word and anyone concerned with the subject of NPAs must give a close reading to understand the enormity of the situation.

The story of once the biggest name in the Indian airspace must be fresh in the minds of most readers. The debacle grounded not just the aircraft but also the future of scores of ancillary businesses and the distraught employees of the airline as well as these supporting enterprises.

Political will is the need of the hour

The Modi government has thrown enough hints to indicate that the old ways of borrowing must change and borrowers have to find the means to start the process of cleaning up their balance sheets, sooner than later. Thankfully, the political will to catch the bull by its horns, appear to be in place. The days to come will show how this translates into the desired results.

The Reserve Bank of India has initiated a slew of measures to stem the rot

The Reserve Bank of India has put in place a series of measures to contain this cancerous ailment. Restructuring stressed assets, taking control of ailing businesses by converting part of the loan into equity are among these measures. Nevertheless, in a majority of the cases, the stressed assets can cover only a fraction of the debt and that will present the biggest hurdle for the Central Bank. Going forward, the patient will need major surgery than cosmetic surgery if the Indian banking system is to claw back to good health.

Inevitable consequences

The process of cleaning up the Indian banking system is bound to have its share of pains.  Large projects do need large scale funding and this can come only from the banking system. While the borrowers would be expected to evidence a significantly higher level of responsibility in meeting their repayment obligations in time, the lenders will improve their control and mechanism, to arrest the onset of fresh tumors.

As the Indian banking system goes through a metamorphosis, growth on the expected trajectory will be a casualty and that is a price the nation has to pay.


Recent Blogs


Is Indian economy resilient enough to sustain Donald Trump onslaught?


Demonetization & long-term economic outlook


What’s in store for Indian equities in FY2018?


How Reliance Jio is changing telecom landscape?


Will IPOs reward investors in 2017?


Five Hidden Benefits Of Having Health Insurance


BYE BYE 2016, WELCOME 2017


Planning to start an SME? These tips can help your SME on its growth trajectory


Planning to buy an expensive home? Here are the things you should know


Lending institutions may become wary of large loans


The dark and bright side of ULIPs


Are banks on their way to come out of NPA mess?


US Presidential elections and the Indian economy


Ache din continues to elude the aam aadmi


Is gold losing its sheen – demand slowing down in India and China?


Who needs Professional Liability Insurance & Why?


What if oil climbs back to the $80 or $100 a barrel?


Top 5 Financial Lies You Need to Stop Telling Yourself


GST – How does it affect different sectors?


How to leverage Workmen Compensation Insurance Policy for labor injuries and disputes?


Union Budget 2016 – What the street expects from the FM


Child Insurance, Protect what you have


What Advantages Are There in Investing in the Indian Commodity Market?


India Needs To Brace Itself For a Predicted Currency War


January & Sensex: What is the Saga?


The Importance of Home Insurance


Secure Your Wealth – An Investment Guide for Beginners


Making a Travel Insurance Claim: Questions to Ask Yourself


Why have bonus shares nearly died out in the Indian capital markets?


10 ways to diligently invest your money


Are you still in love with Fixed Deposits?


How systematic are your SIPs?


Would Shanghai trigger another global economic meltdown?


How the Chinese market turmoil has impacted the Indian Rupee


The Fed interest rate hike factor has dimmed again – but has it become laughable?


Trading vs. investing in Indian stock markets


Job loss insurance – Your cover for potential pink slips


How simmering global events can affect Indian capital markets in the coming days


Is Nifty eyeing 10,000 by the third quarter?


Union Budget 2015 - Sector Watch


Budget Day: Why markets need to remain open on Saturday?


Who gains the most from lower oil prices?


At $1200 an ounce, is gold a safe bet compared to Indian equities?


Wondering about the relevance of ULIPs? Probably it is time to rethink!


Is there a fed rate hike looming over the markets?


Are the markets heading for a deep correction?


49% FDI in Insurance Sector: Mixed reactions


How does the Modi government impact the real estate!


Sector Prediction for next 5 years: Real Estate


10 things about coal block allocation that you should know


In the context of stock markets, what do we mean by long-term?


Sensex at 27000; Nifty at 8000 - Does D-Street actually justify these big levels?


5 Safe Post Office Saving Schemes: Safe Zone For Investors


Afraid of credit card penalties? No more penalties now in 5 simple steps!


Getting married and worried about financial planning? Drop all worries now!


Not shopping online? Know what you are missing out!


5 schemes that are going to save your tax expenditures


Do you have idle money in your bank account? Opt for Auto FD


5 reasons that make Maruti cars the most suitable for Indian needs


The Ukraine Crisis – All that you need to know


5 major events that pulled Nifty above 8000 mark


Want to buy a refrigerator or TV? Manage your money by opening a Recurring Deposit account


10 Incidents That Prove Global Events Impact Indian Markets to a Great Extent


5 Intelligent Ways To Invest in Mutual Funds


5 reasons why you should invest in Gold


A few basic tips to invest wisely in stocks


SIP –Proxy to Equity Investing?

Page  of 
First Page Previous Page Next Page Last Page
Go to