Bad Loans in Good Banks : Recent Experiences in India

One of the strong pillars of the Indian economic system is a banking structure with stability, solidarity and diversity with which it could withstand many challenging circumstances including the worldwide recession of 2008. In spite of these virtues it is now facing a widespread criticism that it is vitiated by alarmingly a large percentage of non-performing assets (NPAs) to total advances. The general belief that lending to priority sectors by PSBs is the main culprit causing NPAs is now disproved. Data published by RBI shows that lending to nonpriority sectors is the major cause to worry. The RBI and banks have been implementing several such as measures against will full defaulters which, among others include not granting them additional loan facilities, constitution of board level committee for monitoring recovery, review of NPA accounts of Rs. 1 crore and above by the board, the top 300 accounts by the management of the boards and formulation of guidelines for NPA management as part of an early warning system