{"id":30999,"date":"2018-10-27T11:45:03","date_gmt":"2018-10-27T06:15:03","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=30999"},"modified":"2018-10-27T11:45:03","modified_gmt":"2018-10-27T06:15:03","slug":"can-banking-recover","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/can-banking-recover\/","title":{"rendered":"Can banking recover?"},"content":{"rendered":"<p><a href=\"http:\/\/www.thehindu.com\/todays-paper\/tp-opinion\/can-banking-recover\/article22853477.ece\"><b>Can banking recover?<\/b><\/a><\/p>\n<p><b>Context:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The Reserve Bank of India\u2019s (RBI\u2019s) attempt to purge the banking system of bad loans has begun to resemble the spring-cleaning of a long-neglected kitchen cupboard.<\/span><\/li>\n<\/ul>\n<p><b>NPA:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Indian banks recognise a loan as an NPA if its interest or principal repayments are overdue for more than 90 days.<\/span><\/li>\n<\/ul>\n<p><b>Statistics of Gross NPA:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Gross NPAs of Indian banks, after staying below the Rs. 1 lakh-crore mark between FY06 and FY11, began to gallop from FY12.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"> Jumping to Rs. 1.4 lakh crore in March 2012, gross NPAs proceeded to rise almost six fold over the next five years to Rs. 7.9 lakh crore by March 2017.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">In March 2017, they held Rs. 6.8 lakh crore of the Rs. 7.9 lakh crore bad loans; private sector banks held Rs. 91,900 crore and foreign banks the rest.<\/span><\/li>\n<\/ul>\n<p><b>Present situation:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Persisting losses pose a threat to continued operations for a bank because they <\/span><b>eat into its capital buffers.<\/b><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">RBI can stop worrying about capital adequacy, if only the <\/span><b>gross NPA ratios of Indian banks showed signs of peaking out.<\/b><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The <\/span><b>higher \u2018stressed advances\u2019<\/b><span style=\"font-weight: 400;\"> ratios of Indian banks hint at more bad news to come.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">While the gross NPA ratios of banks were at <\/span><b>10.2% as of September 2017, their \u2018stressed assets\u2019 were higher at 12.2%.<\/b><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">While the gross NPAs of Indian banks reflect overdue loans recognised in their books, <\/span><b>there\u2019s a whole bunch of dubious loans outside these,<\/b><span style=\"font-weight: 400;\"> known as \u2018stressed assets\u2019.<\/span><\/li>\n<\/ul>\n<p><b>Way ahead:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">As the Economic Survey noted, resurrecting Indian banks requires four <\/span><b>Rs \u2014 recognition, resolution, recapitalisation and reforms.<\/b><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It is also important that <\/span><b>newer bank loans<\/b><span style=\"font-weight: 400;\"> given out in the last three years <\/span><b>display good behaviour.<\/b><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">But <\/span><b>provisioning and losses from these NPAs are expected to stretch on<\/b><span style=\"font-weight: 400;\"> for the next year or two.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Depositors can take comfort from the fact that the <\/span><b>capital adequacy problem has been addressed by the Centre\u2019s mega recapitalisation package for public sector banks.<\/b><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Can banking recover? Context: The Reserve Bank of India\u2019s (RBI\u2019s) attempt to purge the banking system of bad loans has begun to resemble the spring-cleaning of a long-neglected kitchen cupboard. NPA: Indian banks recognise a loan as an NPA if its interest or principal repayments are overdue for more than 90 days. Statistics of Gross&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/can-banking-recover\/\">Continue reading <span class=\"screen-reader-text\">Can banking recover?<\/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-30999","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704922128},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/30999","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=30999"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/30999\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=30999"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=30999"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=30999"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}