Essay on NPA in India 2018
Answers
Answer:
Here is why the NPA problem is such a big problem to Indian banks, especially PSBs.
- In March 2018, non-performing assets (NPAs) at commercial banks amounted to ₹10.3 trillion, or 11.2% of advances.
- Public sector banks (PSBs) accounted for ₹8.9 trillion, or 86%, of the total NPAs.
- The ratio of gross NPA to advances in PSBs was 14.6%.
- These are levels typically associated with a banking crisis.
- For example, in 2007-08, NPAs totalled only ₹566 billion (a little over half a trillion), or 2.26% of gross advances!
In that period, commercial credit (or what is called ‘non-food credit’) doubled. It was a period in which the world economy as well as the Indian economy were booming. Indian firms borrowed furiously in order to avail of the growth opportunities they saw coming.
Most of the investment went into infrastructure and related areas — telecom, power, roads, aviation, steel.
Businessmen were overcome with exuberance and they believed, as many others did, that India had entered an era of 9% growth.
But soon after, as the Economic Survey of 2018 notes, many things began to go wrong.
There were problems in acquiring land and getting environmental clearances and several projects got stalled. Project costs soared.