What are NPAs?
A Non-performing asset (NPA) is defined as a credit facility in respect of which the interest and/or installment of Bond finance principal has remained ‘past due’ for a specified period of time. NPA is used by financial institutions that refer to loans that are in jeopardy of default.
Rs.1.14 lakh Crore worth of bad loans have been written off the books by PSU banks between 2013 and 2015. The Supreme Court has ordered the RBI to name all the defaulters who owe more than Rs. 500 Crores.
The cumulative amount of gross NPA of 24 Public Sector Banks stood at around INR 3.93 lakh crore as on December 2015
Why should we care?
Well, the answer is very simple. It is OUR money.
Why are NPAs in the limelight?
Whenever the PSU banks want fresh capital they ask the government and then the government provides them with this fresh capital. This process of investing fresh capital into the PSU banks by the government is called CAPITAL INFUSION.
But recently, instead of recapitalizing the banks, government has asked the PSU banks to clean up their balance sheets if they want to get recapitalized.
This made the banks write off such huge amounts of bad loans just to clean up their balance sheets so as to get fresh capital from the government.
Who to hold responsible for this mess?
- The defaulters
- The incompetent PSU banks
- The irregularities shown by the RBI in maintaining a check over these banks
- The deadly nexus between—The “Industrialist”—the “Babu”/”Neta”/”Politician” —the “Banks”
This NPA scam is being carried out right in front of our eyes and yet no charge sheet has been filed against those responsible.
Are we so blinded by the idea of a double digit economic growth that such scams are allowed to happen?
Is this a price that India a mixed economy has to pay to reap the benefits of both a capitalist and a socialist economy?