{"id":3533,"date":"2023-01-02T00:00:00","date_gmt":"2023-01-02T00:00:00","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/uncategorized\/02-01-2023\/bad-loans\/"},"modified":"2023-01-02T00:00:00","modified_gmt":"2023-01-02T00:00:00","slug":"bad-loans","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/02-01-2023\/bad-loans","title":{"rendered":"Bad Loans"},"content":{"rendered":"<p><span style=\"font-size:13pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>In News<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Recently, the <\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">Parliament has been informed by the Finance Minister that banks had written off bad loans worth ?10,09,511 crore during the last five financial years.<\/span><\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:13pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong><u>More about the news<\/u><\/strong><\/span><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">Out of the total ?10.1 lakh crore, only ?1.32 lakh crore has been recovered.\u00a0<\/span><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">This comes to only about 13% as a percentage of write-offs.<\/span><\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align:center\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><img decoding=\"async\" src=\"https:\/\/lh3.googleusercontent.com\/qzXeeBN2zAPizugtamsCx__s94RvpYVBOj7wS4O94Jq0T4--MgKBLjJ_l5_N0DJoac7jOZDHiSF0tib-z5g9eHlOw5_hXShm5DasECvQbXyHXgqJ7sCzHGXscpoq44xynm9Kvg0UsbPJo2i_41BaPPAVHjgcRAOeuaqt3BhGfEbB9VFRPuO7InzEb6APsA\" style=\"height:450px; width:520px\" \/><\/span><\/span><\/span><\/span><\/p>\n<p><span style=\"font-size:13pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong><u>Background\u00a0<\/u><\/strong><\/span><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>2009<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">: The RBI brought out norms that set out categories of NPAs and what banks must do as these bad loans age.<\/span><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">The RBI\u2019s master circular in 2009 started off the journey on NPA recognition.\u00a0<\/span><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">It states that if an asset has been \u2018doubtful\u2019 for a certain period, the value of that asset must be provided for in parts, as the asset ages.\u00a0<\/span><\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>2014-15:<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> India became more stringent in recognising loans as \u2018bad\u2019 in the 2014 to 2015 period.\u00a0<\/span><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">The periodic asset quality review was introduced.\u00a0<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">RBI stepped in to prevent evergreening of loans.<\/span><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">It means lending more to an already stressed asset in the hope that it could be brought back to its feet.\u00a0<\/span><\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>2021: <\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">There was a revision in 2021 which made recognition far more stringent.<\/span><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">Even if the asset is standard and there is no problem with it, banks are expected to make provisions depending on the risk element for that sector.\u00a0<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">Like home loans with teaser rates are at greater risk than those that are not. Hence provisions have to be made for such loans.<\/span><\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>A National Asset Reconstruction Company Ltd. (NARCL) <\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">was announced in the Union Budget for 2021-2022 to resolve stressed loans amounting to about ?2 lakh crore in phases.<\/span><\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:13pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>What is a Bad loan and NPA?<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>What is a Bad Loan<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">?<\/span><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">A bad loan is that which has <\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>not been \u2018serviced\u2019 <\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">for a certain period.\u00a0<\/span><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Servicing a loan is <\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">paying back the interest and a small part of the principal depending on the agreement between bank and borrower.<\/span><\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">Bad loans are where there is less certainty that the loan would be paid back in full.<\/span><\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>What is NPA?<\/strong><\/span><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">A non performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Types of NPA:<\/strong><\/span><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Sub Standard:\u00a0 <\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">A sub-standard asset is one that is classified as an NPA for a period not exceeding twelve months.<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Doubtful:<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> A doubtful asset is one that has remained as an NPA for a period exceeding twelve months.<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Loss<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">: A loss asset is one where loss has already been identified by the bank or an external institution, but it is not yet completely written off, due to its recovery value, however little it may be.<\/span><\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-size:13pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong><u>What is the need to recognise NPAs?<\/u><\/strong><\/span><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Health of the financial system<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">: In the banking system, the government and regulatory authorities need to have a good view of how healthy the financial system is.<\/span><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>A weak financial system<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> can eventually ruin lives and livelihoods.<\/span><\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-size:13pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong><u>Causes and challenges related to Non-Performing Assets (NPA)<\/u><\/strong><\/span><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Lack of SWOT analysis<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">: The bank lends to the corporations\/persons etc. whose creditworthiness is not guaranteed and thus taking a lot of high risks.<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Lack of understandability:<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> The banks are not able to diminish their losses by a complete understanding of the sufficiency of the bank in terms of the loan or capital loss at a specific time frame.\u00a0<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Redirection of funds<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">: The funds are being redirected elsewhere by the promoters of the companies.\u00a0<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Investing in non viable projects<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">: The banks that try to fund projects that are not viable results in high NPAs.<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Lack of information:<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> Not enough means to collect as well as distribute credit information in between the commercial banks.\u00a0<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Non-efficient recovery of the debts<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> from the overdue borrowers.<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Delay in legal procedures<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">: Even if an NPA is fully recognised in a particular year, the fastest of legal processes may not resolve for full repayment.\u00a0<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Delays in post-haircut payments<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">: Not only do banks take significant haircuts when it comes to recovery but the amount to be repaid post-haircut may be delayed.\u00a0<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Provisioning:<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> The bad loans lead to banks having to save a part of their operating revenue to account for bad loans which is called Provisioning.\u00a0<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Downfall in the share markets:<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> Any reduction in the perceived valuation of the banks might lead to loss of share value of the banks, leading to general downfall in the share markets. This could result in wiping out shareholders&#8217; wealth from the financial markets.<\/span><\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:13pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>Impact of NPAs on Financial Operations\u00a0<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">This <\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>reduces the profits<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> of the banks.<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">This reduces a bank or financial institution\u2019s<\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong> capital adequacy.\u00a0<\/strong><\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">The banks have become averse to giving loans and taking risks of zero percent. Thus, the <\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>creation of fresh credit is debarred.\u00a0<\/strong><\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">The banks start <\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>concentrating on the management of credit risk<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> instead of the bank becoming profitable.\u00a0<\/span><\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:13pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong><u>Way forward<\/u><\/strong><\/span><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>The transparent recognition of NPAs<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> caused a rise in the percentage for gross loans from 4.1% in 2014 to 11.46% in 2018.<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>The government\u2019s strategy of recognition, resolution, recapitalisation and reforms<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> has helped NPAs to decline to 5.9% by 2022.<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Taking a person\/corporation\u2019s CIBIL score<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> before lending a loan or finance to the person\/corporation.\u00a0<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Usage of mechanisms for alternative dispute resolution mechanisms<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> for receiving the settlements faster like the usage of Debt Recovery Tribunals and Lok Adalats.\u00a0<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>The defaulters\u2019 information should be actively circulated<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> so that they cannot opt for any other loans\/finances from elsewhere.\u00a0<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">Using the <\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Asset Reconstruction Company\u2019s services.\u00a0<\/strong><\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">Taking <\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>strict action<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> against large NPAs. Legal reforms like the implementation of the Insolvency and Bankruptcy Code to be used.<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Other Steps:<\/strong><\/span><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">Proper implementation of <\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Indradhanush plan.\u00a0<\/strong><\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Strengthening of Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI Act)<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> and Debt Recovery Tribunals<\/span><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"><strong>Setting up of dedicated Stressed Asset Management Verticals (SAMVs)<\/strong><\/span><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\"> in banks for large-value NPA accounts etc.<\/span><\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><span style=\"background-color:#ffffff\">Source: <\/span><\/span><\/span><\/span><a href=\"https:\/\/www.thehindu.com\/business\/has-india-tided-over-the-problem-of-bad-loans\/article66327997.ece\" style=\"text-decoration:none\" target=\"_blank\" rel=\"noopener\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#1155cc\"><span style=\"background-color:#ffffff\"><u>TH<\/u><\/span><\/span><\/span><\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In News Recently, the Parliament has been informed by the Finance Minister that banks had written off bad loans worth ?10,09,511 crore during the last five financial years. More about the news Out of the total ?10.1 lakh crore, only ?1.32 lakh crore has been recovered.\u00a0 This comes to only about 13% as a percentage [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":3534,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[26,46],"class_list":["post-3533","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","tag-gs-3","tag-indian-economy-related-issues"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2023\/07\/7812051Screenshot_6.png","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/3533","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=3533"}],"version-history":[{"count":0,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/3533\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/3534"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=3533"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=3533"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=3533"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}