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  • Category: Miscellaneous

    Increasing bad debts and RBI sitting pretty

    The bad debts burden on the banks which lend huge amount to various needs has been facing the problem of recoveries as nearly 11.2 percent of total lending of all banks put together has not be realized so far and the reason cited being Covid slowdown etc. Is that mean the banks may not recover those bad debts which are proving to be non recoverable even after situation limping back to normal. What should be the criteria for the banks to sanction loans and how to secure the recoveries without any future defaults ?
  • #735876
    Bad debts had been a big problem in our country since quite long and still we are suffering from it. I do not blame banks only for this disorder as there are many factors including the Govt governance and escape points in the existing laws that facilitate clever and intelligent persons take loans and make merry. There are so many cases pending where the persons simply flew out to the foreign countries and residing there luxuriously using those loan amounts. Our system of recoveries is very poor and is based on the traditional principles where there is no strict or rigorous punishment for the defaulters. RBI will simply keep the statistics of the amount defaulted and list of defaulters as there are no firm stipulations for catching the defaulters and making recoveries from them. Sometimes their assets are sealed but that is too little a proportion considering the huge loans advanced by banks for their business. In all these banks are the losers as their NPA increases hugely affecting their bottom line.
    Knowledge is power.

  • #735886
    I think there should be a radical change in the functioning of the banks. Many banks are sanctioning loans to big companies and the amounts are also very huge. They are not seeing the net worth of the company before sanctioning the loan. When a small company goes for a few lakhs of rupees loan, the bank is asking them many points and without proper security for their money, they are not sanctioning the loans. But when a big company approaches them, they are sanctioning loans without considering the repayment capability.
    There may be many reasons for this approach. I think the politicians and bureaucrats also play an important role in this. They pressurise the bank top people and see that the loan is sanctioned. If that is not possible privatisation of banks is the only solution. Private banks are very careful and they know how to manage the issues. But even in private banks also if the top bosses are corrupt, these problems may happen. Corruption is the main reason for these problems. How to remove corruption is the main question now. ,

    always confident

  • #735944
    Yes, Non performing Assets or bad debt is a very crucial issue for the Nationalized banks in india. Generally if any debt is non-moving condition for at least 90 days in the books of the bank then after 90 days it will be treated as NPA because there is no collection of interest and principal from that debt. After that there is specific guideline regarding recovery procedure of the loan but in most cases the bank only issue a notice only. Without proper care there is no collection and the NPA become a bad debt. However in case of private bank there is more care for collection and rate of NPA is less.
    Besides the system, there are various government scheme under which a major amount are distributed through banks to the needy people and a portion of that amount goes to bad debt in the hand of banks.
    In the FY 2018 there was maximum NPA amounting to Rs.895601.00 Crores. However during 9 months of 2020-21 the amount stood Rs.577137 Cr from Rs.678317 Crores against last year same period resulting Rs.100000 Crores reduction . While there is specific guideline for granting various loan, the bank always did not follow those criteria resulting such losses to the nation. Strict compliance of rules regarding sanction of loan and recovery procedures may reduced the losses only.

    Believe in the existence of God the super power.

  • #735945
    Why the bank auditors are keeping quiet and not pressurizing the banks to keep account clean ?
    K Mohan @ Moga
    'Idhuvum Kadandhu Pogum "
    Even this challenging situation would ease

  • #735952
    The author has made the right observation, often in such cases, when there is a disqualification, a huge load comes on the banks which shakes their financial position. This is what the government has been doing in most cases, sometimes due to inflation, sometimes epidemic, and sometimes due to loss of business, the problem of non-performing assets or bad debt is increasing. Due to this, when the condition of the banks is bad and the financial crisis persists for a long time, then measures like a merger of banks or privatization are adopted by the government. The direct effect of all these types of changes increases on the general household expenses and life of a common man. The country group belongs to the middle-class families and all these movements give their effect neither to the rich class nor to the poor class, always the first attack is on the middle class.

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