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 Rs. 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

Showing image of causes for an Account becoming NPA

Causes for an Account becoming NPA

Those Attributable

to Borrower

Causes Attributable

to Banks

Other Causes

Longer growth period

Too inflexible attitude

Lack of Infrastructure

Lack of expertise

Unhelpful in supervision

Fast changing technology

Unwanted Expenses

Lack of commitment to recovery

Un helpful attitude of Government

Mis management

Poor Credit appraisal

Taxation laws

Diversion of Funds

Wrong selection of borrower

Changes in consumer preferences

Poor Credit Collection

Delay in sanction

Government policies

Poor Quality Management

Lack of delegation of work

Credit policies

Over trading

Non inspection of Units

Changes related to Banking amendment Act

Lack of Quality Control

Lack of trained staff

Increase in material cost

Lack of proper planning

Systems overloaded

Credit policies

Heavy borrowings

Lack of motivation

Political hostility

- Published/Last Modified on: August 10, 2016


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