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Sectors That Have Caused The NPA Menace
Mar 14, 2016

One of the issues that we have often been writing about, is the poor quality of credit appraisal in most Indian banks. And amongst the key sectors that have caused trouble for banks are infrastructure, power and metal.

Today's chart of the day highlights how loans to select sectors grew at a disproportionately high rate compared to loans to industries as a whole.

Such excessive lending has done no good. On one hand, government mandate led to high lending to these sectors. On the other poor execution of projects have plagued the financial position of the companies. Further, falling commodity prices have too led to deteriorating financial position of metal companies. The growth in these sectors is necessary. But the same should not be at the cost of asset quality of banks.

The government and RBI are working together to take appropriate measures to improve the asset quality of the banks. But, at the same time banks on their part need to take credit appraisal of large industrial loans very seriously. Else, we will again be facing the same issue in few years.

Data source: Mint

This Chart Of The Day was published in The 5 Minute WrapUp - Small-Cap Company CONFIRMS Threat to 'Make in India'

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