{"id":120192,"date":"2021-07-21T20:16:34","date_gmt":"2021-07-21T14:46:34","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=120192"},"modified":"2021-07-22T10:19:53","modified_gmt":"2021-07-22T04:49:53","slug":"hope-fades-for-psbs","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/hope-fades-for-psbs\/","title":{"rendered":"Hope fades for PSBs"},"content":{"rendered":"<p><strong>Source<\/strong>: <span style=\"color: #0000ff;\"><a style=\"color: #0000ff;\" href=\"https:\/\/www.business-standard.com\/article\/opinion\/hope-fades-for-psbs-121072001639_1.html\">Business Standard<\/a><\/span><\/p>\n<p><strong>Relevance<\/strong>: Resolving problems faced by PSBs<\/p>\n<p><strong>Synopsis: <\/strong>Govt cannot keep infusing capital constantly. Hence privatization of PSB\u2019s will be the ideal route.<\/p>\n<h5><strong>Background:<\/strong><\/h5>\n<ul>\n<li>Public sector banks (PSBs) are reported to have written off about Rs 8 trillion worth of loans over the last seven years.<\/li>\n<li>It is more than twice the Rs 3.37 trillion capital infused by the government in the same period.<\/li>\n<li>The last four years have been particularly bad for PSBs as they wrote off loans worth over Rs 1 trillion every year.<\/li>\n<li>This is clearly an unsustainable position, and the government cannot constantly keep infusing large sums of capital into the banking system.<\/li>\n<\/ul>\n<h5><strong>Why government need to recapitalize PSB\u2019s?<\/strong><\/h5>\n<ul>\n<li>Most PSBs command low valuations and are not in a position to raise capital from the market.<\/li>\n<li>This forces the government to keep infusing funds at a time when it needs to increase public spending to support the economy affected by the pandemic.<\/li>\n<li>Not infusing capital will affect the flow of credit to the productive sectors of the economy, which will delay full economic recovery.<\/li>\n<\/ul>\n<h5><strong>Increasing Bad loans<\/strong><\/h5>\n<ul>\n<li>Bad loans started rising during the early part of the last decade as a result of excessive lending, both before and after the global financial crisis.<\/li>\n<li>Owing to the impact of the Pandemic, the gross non-performing assets (GNPAs) for PSBs are expected to go up to 12.52 per cent by March 2022, according to the Reserve Bank of India (RBI).<\/li>\n<li>The government has taken several steps to improve the functioning of state-run banks, but they don\u2019t seem to have had any significant impact.<\/li>\n<li>The government has also put in place a bankruptcy law, which has strengthened the position of lenders though the recovery has been muted so far.<\/li>\n<\/ul>\n<h5><strong>Reasons for Bad loans<\/strong><\/h5>\n<ul>\n<li>The RBI conducted an <strong>asset quality review<\/strong> during 2015-16, which led to a surge in bad loans.<\/li>\n<li>One of the big reasons for higher stress in PSBs is their inability to properly evaluate businesses and track progress.<\/li>\n<li>Further, bankers in the public sector are reluctant to recognise bad loans in time because of the fear of investigative agencies.<\/li>\n<\/ul>\n<h5><strong>Way forward<\/strong><\/h5>\n<ul>\n<li>Since it is clear that there are limits to the extent PSBs can be reformed and are likely to remain a drag on government finances, the government should speed up their privatisation.<\/li>\n<li>The government intends to privatise two PSBs in the current fiscal year and the NITI Aayog has reportedly made its recommendations.<\/li>\n<li>Immediate steps must be taken to take this forward and make way for privatising more banks in the coming years.<\/li>\n<li>This will not only help strengthen the banking system but also allow the government to stop throwing good money after bad.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Source: Business Standard Relevance: Resolving problems faced by PSBs Synopsis: Govt cannot keep infusing capital constantly. Hence privatization of PSB\u2019s will be the ideal route. Background: Public sector banks (PSBs) are reported to have written off about Rs 8 trillion worth of loans over the last seven years. It is more than twice the Rs&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/hope-fades-for-psbs\/\">Continue reading <span class=\"screen-reader-text\">Hope fades for PSBs<\/span><\/a><\/p>\n","protected":false},"author":10316,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[8540,221,216],"class_list":["post-120192","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-bad-loans","tag-economy","tag-gs-paper-3","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":1700772709,"cached_date":1704784005},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/120192","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10316"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=120192"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/120192\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=120192"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=120192"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=120192"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}