Government: NPA of Commercial Banks Increased by Around 4% (Download PDF)

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Government announced the Non-Performing Assets (NPA) of commercial banks have increased around by 4 % in last year (March 2015 to March 2016) . Union Minister of State for Finance Santosh Gangwar has announced in Rajya sabha.

Key Details:

  • In March 2015 the NPA of bank was 5.43 % which has increased to 9.32 % in March 2016.
  • High occurrence of NPAs in mainly power, road, steel, textiles and other sectors.
  • The amounts of NPA are related to 417 stalled infrastructure projects, where public sector banks have over ₹ 66478 crore invested.
  • RBI (Reserve Bank of India) has also issued guidelines for restructuring of loans.
  • Government has taken many steps to recover these stalled projects.

What are Non-Performing Assets (NPA՚s) ?

  • Non-Performing Assets is a loan or advance for which the principle or interest payment remained past due for a specific period of time.
  • NPA is identified as a credit facility. Non-Performing Assets also called Non-Performing loans.
  • They used by financial institutions that refer to loan. These are loans made by a bank or finance company on which repayment or interest payments are not being made on time.
  • When the borrower has failed to make interest payment for a 90 days of period the loan to be considered as a Non Performing Assets.
  • NPA affects the profitability and liquidity of the bank.

Causes for NPA in Public sector banks:

Table Shows the Causes for an Account Becoming NPA
Causes for an Account becoming NPA
Those Attributable

to Borrower

Causes Attributable

to Banks

Other Causes
Longer growth periodToo inflexible attitudeLack of Infrastructure
Lack of expertiseUnhelpful in supervisionFast changing technology
Unwanted ExpensesLack of commitment to recoveryUn helpful attitude of Government
Mis managementPoor Credit appraisalTaxation laws
Diversion of FundsWrong selection of borrowerChanges in consumer preferences
Poor Credit CollectionDelay in sanctionGovernment policies
Poor Quality ManagementLack of delegation of workCredit policies
Over tradingNon inspection of UnitsChanges related to Banking amendment Act
Lack of Quality ControlLack of trained staffIncrease in material cost
Lack of proper planningSystems overloadedCredit policies
Heavy borrowingsLack of motivationPolitical hostility

- Published/Last Modified on: August 10, 2016

Economy

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