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Rising public sector bank NPAs
Jun 28, 2013

For those hoping to see some signs of recovery in economic data there is bad news. The latest Financial Stability Report released by the Reserve Bank of India (RBI) has some stern warning signs. The central bank has not minced words with regard to the possibility of asset quality in Indian banking sector going from bad to worse!

At the end of March 2013 the gross NPAs in the sector stood at already steep level of 3.4%. This is expected to inch up to 3.8% by September 2013. By the end of FY14, in a worst case scenario, the gross NPA levels could go up to 4.4%! A level that was earlier seen only a decade back... The chart of the day shows the aggregate net NPAs of public sector banks.

Construction and agriculture, followed by iron and steel sectors will be the main contributor to bad loans. The RBI has therefore warned depositors and investors to brace for substantial volatility in the sector. Since the choice is limited, depositors and investors need to be very cautious about the entity they bank with or invest in.

Data source: DNA

This Chart Of The Day was published in The 5 Minute WrapUp - Gas price hike: You lose, they gain?

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2 Responses to "Rising public sector bank NPAs"


Dec 10, 2013

The main reasons for deterioration in asset quality of Advances in PSU banks are external pressures in sanctioning the Advances, unrealistic targets and poor pre sanction appraisal. Again once the accounts are showing delinquencies they are restructured without undertaking viability study. Once account becomes NPA no action is taken for recovery , even if there is security to fall back, but to go compromise and write off.

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Nov 20, 2013

There is conspiracy between the borrowers and the Bank employees who sanctioned loans. Borrowers paid commission/bribes to the bank officers to get loans sanctioned , and again they paid commission/bribes for not enforcing recovery. Central Vigilance Commissioner should start investigation against these bank officers and recover bad loans from their salaries and retirement benefits.

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