| Pub. Date | : October, 2021 |
|---|---|
| Product Name | : The IUP Journal of Accounting Research and Audit Practices |
| Product Type | : Article |
| Product Code | : IJARAP321021 |
| Author Name | : Koya Raghunath* and Manish Agarwal |
| Availability | : YES |
| Subject/Domain | : Finance |
| Download Format | : PDF Format |
| No. of Pages | : 15 |
The case discusses the issue of high Non-Performing Assets (NPAs) in the Indian banking system in the first two decades of the 21st century. It covers in detail the various steps taken by the central bank of India and the Government of India (GoI) to bring down the NPAs, and how Gross Non-Performing Assets (GNPAs) went down by 1 tn in the financial year 2019 when compared with the previous financial year. Although the GNPAs had gone down by close to 1 tn in FY19, bad loans were still very high. Some experts opined that the high number of bad loans would continue as long as the Public Sector Banks (PSBs) remained under the shadow of the government. They commented that the RBI and the GoI should take more stringent steps to clean up the balance sheet of banks.
The important thing that concerns RBI when it comes to financial sector
intermediation in general and banks in particular, is risk management. If banks get
this right, most of the problems are not likely to be there.1
- N S Vishwanathan, Deputy Governor of the Reserve Bank of India, November
2019
In July 2019, Nirmala Sitharaman (Sitharaman), Union Finance Minister of India, stated that the bad loans in the Indian banking industry had gone down in FY19 compared to FY18. The Gross Non-Performing Assets (GNPAs) had decreased from 10.5 tn in FY18 to 9.24 tn in FY19. Similarly, Non-Performing Assets (NPAs) had also come down from 5.27 tn in FY18 to 3.52 tn in FY19. Experts stated that various factors such as bad loan write-offs by banks, change in the credit culture, prohibiting willful defaulters from raising funds from the market,