Recently a meeting was organized between the bankers and the Parliamentary Standing Committee on Finance, headed by Lok Sabha MP Verappa Moily to discuss the issue of mounting bad loans and various aspects of NPA’S and banking frauds. This was also attended by the former Prime Minister Manmohan Singh.
Some Congress members present in the meeting forthrightly admitted to the fact that “aggressive lending” during the successive UPA governments was the reason for the mounting NPAs in the banking system, especially in State-owned lenders. Many committee members present there gave their consent saying that this is one of the prime reasons for the escalating NPA’s.
Non-performing assets (NPAs) touched ₹8.31 lakh crore at end of December 2017, out of which gross NPAs of state-owned banks had crossed ₹7.77 lakh crore at the end of December 2017, according to official data. Members wondered why public money was being used to recapitalize the state-owned banks which are losing money due to frauds and defaults by corporates. They further speculated whether ‘nepotism’ by private banks was also the reason for this growing problem of NPAs.
A parliamentary panel on Monday asked the Indian Banks’ Association (IBA) to prepare a roadmap for addressing this issue. During this meeting between the bankers and the Parliamentary Standing Committee on Finance, it was emphasized that corporates should not be painted with the same brush as all are not wilful defaulters.
Banks usually categorize loans as Non-performing assets (NPA) after 90 days of nonpayment of interest or principal, which can occur during the term of the loan or at maturity.
Banks are required to classify non-performing assets in one of three categories according to how long the asset has been non-performing:
- sub-standard assets: an asset classified as an NPA for less than 12 months.
- doubtful assets: an asset that has been non-performing for more than 12 months.
- loss of assets: assets with losses identified by the bank, auditor, or inspector and have not been fully written off.
Last year the RBI Governor Urjit Patel had blamed the UPA regime, describing high performing assets as a ‘legacy issue’, as long gestation projects funded before 2011-2012 were responsible for it.
The Parliamentary standing committee had sought a forensic audit of restructured loans and suggested constituting empowered bodies like the RBI to keep an eye on loans of larger volumes.