Friends
As is widely known that the NPA in our country are still increasing day by day ( Rs. 8.06 lakh Crs. as on 31.3.2019) and the banks continue to bleed. Recently there have been three different news from different sides erupted which can be inter linked :
a) RBI reduced Repo rate by 0.25%; b) Increase in willful defaulters by 86%; and c) Banking credit growth (non-food) is further down to 11.9% on year on year basis.
If we analyse the above clippings, it would be very clear that the actual level of NPA is yet to be reported by the Bankers. Still huge amount is not come out as NPA. Current level of NPA is marginally lower than the actual net worth of all the banks taken together. This situation is after so many good things happen in banks which went silently unreported. Banks could have performed better but they lost the opportunity. Some of the major benefits to banks occur in following manner:
a) RBI has reduced the lending rate by 2.75% sofar in last 4 ½ years out of which not more than 1% is passed on to the borrowers whereas the deposit rates are reduced to the fiull extent. It means 1.75% rate benefit is sucked by the Banks which is equal to Rs. 5-6 lakh crores ;
b) Rupee dollar is in range bound area and there is no risk to the bankers ;
c) Crude Oil prices are still below USD 60 / barrel and had touched $40 also. This should have fuelled credit growth substantially; and
d) Insolvency & Bankruptcy Code 2016 has become very effective tool to recover the Bank dues. Infact , under waterfall arrangement, payment to financial creditors has been on top even much ahead of the statutory dues.
Long back I had mentioned in one of my post that the NPA can be controlled only by change in loan appraisal & monitoring methods but there has been no major improvement in this segment.
IBC has been blamed off late for delay and hair cuts. This is absolutely incorrect considering the legal set up of our country. IBC has been able to resolve the issue with 342 days as against 2000 days in previous laws. As far as the hair cut is concerned, it is subjective matter because if lending is faulty every thing else will be cascading only.
This blog and earlier posts can be read at cpjain63.blogpost.com
CP
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