On Tuesday, a Parliamentary panel on finance also questioned the RBI governor Urjit Patel on the rising Non-performing assets.
The public sector banks are dealing with a problem of mounting bad loans . On Tuesday, a Parliamentary panel on finance also questioned the RBI governor Urjit Patel on the rising Non-performing assets. Replying to panel's queries, Urjit Patel expressed confidence that RBI would be able to resolve the bad loan crisis that prsently plaguing the Indian banking system, he also told the parliamentary panel that the RBI needed more powers to oversee public sector banks (PSBs).
But if you are wondering that what is an NPA crisis and how it is being problematic for the state-owned banks, then below is a step-wise guide to make you understand the NPA issue.
1. A non performing asset (NPA) is referred to a loan amount for which the principal/ interest payment remained overdue for a time span of 90 days. But in case, a borrower fails to repay the loan (interest/principal/both) that loan becomes an NPA for the bank.
2. Banks classify NPAs into three categories, which are Substandard assets, Doubtful assets and Loss assets.
3. Substandard assets are the ones which remained NPA for 12 months or less than that. If the asset crosses the 12-month time frame, it comes under the category of doubtful asset. And the loss assets are the ones that had become of less value with the minimum recovery rate.
4. There are 21 state-owned banks, including State Bank of India and their combined losses crossed a whopping Rs 87,300 crore in 2017-18 fiscal, topped by scam-tainted Punjab National Bank which took a hit of nearly Rs 12,283 crore.
5. Only two banks, Indian Bank and Vijaya Bank, posted profits during 2017-18. Indian Bank posted the highest profit of Rs 1,258.99 crore and Vijaya Bank's profit was Rs 727.02 crore in the fiscal.
6. Punjab National Bank, which is reeling under more than Rs 14,000-crore scam allegedly perpetrated by Nirav Modi and associates, posted a net loss of Rs 12,282.82 crore last fiscal. In 2016-17, the Delhi-headquartered bank had posted a profit of Rs 1,324.8 crore.
7. PNB was followed by IDBI Bank, whose net loss widened to Rs 8,237.93 crore in the fiscal ended March 2018 from Rs 5,158.14 crore in the previous year.
8. India's largest bank State Bank of India too added hugely to the combined losses of PSBs. SBI's net loss in 2017-18 stood at Rs 6,547.45 crore as against a net profit of Rs 10,484.1 crore in 2016-17.
9. The NPA in the banking sector stood at Rs 8.31 lakh crore as of December 2017.
10. Weak financials due to mounting bad loans have already pushed 11 banks, out of 21 state-owned banks, under the Prompt Corrective Action (PCA) framework of the Reserve Bank.
(With inputs from agencies)
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