{"id":28678,"date":"2018-10-24T14:19:09","date_gmt":"2018-10-24T08:49:09","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=28678"},"modified":"2018-10-24T14:19:09","modified_gmt":"2018-10-24T08:49:09","slug":"the-two-facets-of-npa-management","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/the-two-facets-of-npa-management\/","title":{"rendered":"The two facets of NPA management"},"content":{"rendered":"<p><a href=\"http:\/\/www.thehindu.com\/business\/Economy\/the-two-facets-of-npa-management\/article24247265.ece\"><span style=\"font-weight: 400;\">The two facets of NPA management<\/span><\/a><\/p>\n<p><b>Article:<\/b><\/p>\n<ol>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Santsoh Kumar Das and Divya Sharma of Institute for Studies in Industrial Development discusses various measures for an effective NPA management<\/span><\/li>\n<\/ol>\n<p><b>Important Analysis:<\/b><\/p>\n<p><span style=\"font-weight: 400;\">2. The steady rise of non-performing assets (NPAs)\u00a0and wilful defaults highlights the concerns over effectiveness of NPA management in India<\/span><\/p>\n<p><span style=\"font-weight: 400;\">3. Until recently, the measures taken by government and Reserve Bank of India have primarily focussed on managing existing NPAs. However, there needs to be equal focus on preventive measures<\/span><\/p>\n<p><span style=\"font-weight: 400;\">4. Measures to be taken for effective NPA management:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The government and RBI should play a greater role for ensuring effective NPA management<\/span><\/li>\n<\/ul>\n<p><b>Preventive measures:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Creation of a framework to ensure transparency in the operation and management of Scheduled Commercial banks (SCBs), primarily public sector banks<\/span><\/li>\n<\/ul>\n<p><i><span style=\"font-weight: 400;\">The framework should be based on four parameters:<\/span><\/i><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Project appraisal:<\/span><span style=\"font-weight: 400;\">\u00a0It is of utmost necessity to create a robust credit appraisal mechanism<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Monitoring:<\/span><span style=\"font-weight: 400;\">\u00a0Technical capabilities should be enhanced to facilitate project monitoring<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Accounting:<\/span><span style=\"font-weight: 400;\">\u00a0Emphasis on ensuring transparency and efficiency in the accounting system<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Auditing:<\/span><span style=\"font-weight: 400;\">\u00a0Audit system of the banks should be strengthened<\/span><\/li>\n<\/ul>\n<p><b>Bad Bank<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A public funded asset management company-\u00a0<\/span><b><i>bad bank\u00a0<\/i><\/b><span style=\"font-weight: 400;\">should be created to deal with stressed assets of public sector banks<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A resolution mechanism should be formulated in order to facilitate recovery. This would reduce the burden on banks or the government<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Best practice: The Swedish Model of Bad Bank<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Swedish Bad Bank \u2018Securum\u2019 operated for 15 years. It was fully government-owned<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The bad bank in Sweden bought the stressed assets from the affected banks. This was then sold it at a higher price during an economic expansion when asset prices increased. This facilitated maximum recovery on the bad loans<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Similarly, a fully government-owned bad bank can be created in India. Managerial staff can be outsourced to ensure better operational and managerial efficiency. The bad bank should remain accountable to the government.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Given the financial constraints, the government can partly finance the proposed \u2018bad bank\u2019 by issuing equity shares. The government should hold the majority of the shares.<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>The two facets of NPA management Article: Santsoh Kumar Das and Divya Sharma of Institute for Studies in Industrial Development discusses various measures for an effective NPA management Important Analysis: 2. The steady rise of non-performing assets (NPAs)\u00a0and wilful defaults highlights the concerns over effectiveness of NPA management in India 3. Until recently, the measures&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/the-two-facets-of-npa-management\/\">Continue reading <span class=\"screen-reader-text\">The two facets of NPA management<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-28678","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704911181},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/28678","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\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=28678"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/28678\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=28678"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=28678"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=28678"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}