Non-Performing Assets (NPA) are the loans and advances which are in arrears for a long time in the scheduled payment of principal or interest. These are considered defaults according to the terms and conditions of the contract.
The problem name NPA is not of recent origin. Few years back India suffered from a huge
infrastructure gap and the banking sector was encouraged to get themselves into a lending spree
for companies willing to undertake various projects.The financial stability report released by the Reserve Bank of India has warned that the gross non-performing assets (GNPAs) of scheduled commercial banks in the country could rise from 11.6% in March 2018 to 12.2% in March 2019 which would be the highest level of bad debt in almost two
decades.The problem name NPA is not of recent origin. Few years back, India suffered from a huge
infrastructure gap and the banking sector was encouraged to get themselves into a lending spree
for companies willing to undertake various projects. After 2008, there was international financial crisis. The prices have fallen significantly in the international market.
In last two years the commodity market is very bad for ex example the Sugar industry and steel industry. People had extended their business beyond their means and higher interest was creating more problem.
In certain cases, the money has been diverted by entrepreneurs they did not bring in promoters, did over invoicing of expenditure and took out money from that.So all kinds of speculations are there which led to increase in NPAs.
In certain cases, the money has been diverted by entrepreneurs, they did not bring in promoters, did over invoicing of expenditure and took out money from that. So all kinds of speculations are there which led to increase in NPAs. There are many who get repeated in the defaulters list. So some long term solution is required.
They can’t be allowed to benefit on their own fault. There should be certain benchmark on the performance. If they are not able to perform, then entire debt can be converted into equity or part
of the debt can be waived and bring in other promoters.
-PULKIT BHALLA