<\/p>\n
News:<\/span><\/b>\u00a0 Recently, the public sector banks (PSBs) had a huge amount of gross non-performing assets (NPAs) or bad loans. It peaked at\u202f\u20b98.96 trillion or around 14.6% of total loans in March 2018. However, the gross NPAs have fallen to\u202f\u20b95.59 trillion, or around 7.9% of total loans as of December 2021.<\/span>\u00a0<\/span><\/p>\n The PSBs have constantly been losing market share to private banks due to competition since 2010.\u00a0 <\/span><\/p>\n For example, the PSBs share in overall outstanding loans has been reduced from 3\/4th in 2010 to 55% in 2021. However, the share of private banks having risen.<\/span>\u00a0<\/span><\/p>\n There has been <\/span>writing off<\/span><\/b> of the bad loans, the <\/span>recurrent recapitalization<\/span><\/b> of PSBs by the government, the <\/span>recovery<\/span><\/b> of a few bad loans, and the RBI pushed the <\/span>prompt corrective action (PCA) framework<\/span><\/b>\u00a0<\/span><\/p>\n –<\/strong> Over the years, the bad loans of PSBs had been written off against their accumulated capital.\u00a0<\/span>\u00a0<\/span><\/p>\n Recapitalization<\/strong>: The government had regularly invested <\/span>fresh money<\/span><\/b> in them. From 2010-11 to 2017-18, the Centre infused\u202f\u20b91.12 trillion.\u00a0<\/span>\u00a0<\/span><\/p>\n In order to put fresh money into PSBs, the government has issued <\/span>recapitalization bonds<\/span><\/b> worth\u202f\u20b9<\/span>2.79 trillion<\/span><\/b> so far. The bank bought these bonds. The Centre took that money and re-invested it back in the bank. Such bonds <\/span>recapitalized<\/span><\/b> the banks which were running short on capital. It also <\/span>prevented<\/span><\/b> the government from spending any money from its budget.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n The RBI Governor asked the banks to strengthen their lending capacity<\/b> by raising capital. Banks are being encouraged to <\/span>raise capital<\/span><\/b> from sources other than the government. This is so because at present the government\u2019s shareholding in addition to LIC stands at 73% in PNB, 64% of Bank of Baroda and 80% of Indian Bank etc. However, the banks should not dilute the centre\u2019s share below the minimum requirement of 51%.\u00a0\u00a0 <\/span>\u00a0<\/span>\u00a0<\/span><\/p>\n The <\/span>Second Narasimham Committee 1998<\/span><\/b> recommended that the minimum shareholding of the government in PSBs be brought down to 33%. It will ensure that the PSBs stay in competition.<\/span>\u00a0<\/span><\/p>\n Source<\/span><\/b>: The post is based on an article \u201cPublic Sector banks must move beyond recapitalization bonds<\/strong>\u201d published in the Live Mint<\/strong> on 27<\/strong><\/span>th<\/strong> April 2022<\/strong>.<\/span>\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":" News:\u00a0 Recently, the public sector banks (PSBs) had a huge amount of gross non-performing assets (NPAs) or bad loans. It peaked at\u202f\u20b98.96 trillion or around 14.6% of total loans in March 2018. However, the gross NPAs have fallen to\u202f\u20b95.59 trillion, or around 7.9% of total loans as of December 2021.\u00a0 What are the challenges before… Continue reading Public Sector Banks must move beyond recapitalization bonds\u00a0<\/span><\/a><\/p>\n","protected":false},"author":10328,"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":[216,10501],"class_list":["post-181557","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-live-mint","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/181557","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\/10328"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=181557"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/181557\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=181557"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=181557"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=181557"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}What are the challenges before PSBs?<\/span><\/b>\u00a0<\/span><\/h5>\n
What factors have contributed to decline in the bad loans?<\/span><\/b>\u00a0<\/span><\/h5>\n
Way Forward<\/span><\/b>\u00a0<\/span><\/h5>\n