INDIA'S STRESSED ASSETS CONUNDRUM - SUGGESTED WAY-OUT by Prahalad Rao

 About the book

 Dawn of Twenty First Century sighted the Stressed Assets {NPAs}, These banks and
financial institutions came under tremendous pressure for financing the projects in
the various sectors that perforce became necessary with the Economic Reforms in
1991 that enabled the private participation in a wider sense in the economic
development process followed by the Financial Sector Reforms 1991-1992 onwards
that blurred the functional lines hitherto existed between the commercial banks and
the DFIs.
Because of rising Non-Performance Assets (NPAs) of the major private participants
from the later part of the first decade of the new century, the banks and financial
institutions were not able to maintain their level of profitability in their operations
which further constrained due to enforcement of Prudential Norms by the RBI. The
NPAs reached peak sometime in 2006-07 that led to increasing uneasiness in the
Financial Sector.
This entailed amendment of the Banking Regulations Act, 1949.Then came IBC
which opened up a newer route to escape from honouring the NPAs resulting in write
off of large public money. This is going on; the catastrophic outcome of which is
telling upon the economic slowdown. The Prudential Norms Circular of 12 February,
2018 issued by the RBI was struck down by the Supreme Court.
The PSBs having been working under invisible political interventions from the time
they were nationalized way back in 1969 aided more in building up the NPAs. The
PSBs having found themselves in a fixed situation due either because of policy or
political considerations were unable to act according to the loan covenants for
recovery of NPAs. IBC route had not been beneficial to the PSBs who ultimately had
no option but to make provision for Bad Debts/Doubtful Debts and write them off in
their books of accounts.This is the Work-in-Progress {WIP}

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