Need to Elimite NPAs

Over the years, many Indian banks have advanced loans that they should have known were bad loans unlikely to be repaid. Most of them actually turned out to be bad loans. The banks even coined the euphemism ‘non-performing assets’ (NPAs) for them. Today, the NPAs of Indian banks stand at over Rs 8 lakh crore. What passes the understanding of most people is why such loans were at all advanced to people whose bad records at repaying loans were known to the lending banks. There have been people like Vijay Mallya who owe several Indian banks sums exceeding Rs 9,000 crore. His reputation as a borrower and the very fact that he is a non-resident Indian should have made bankers think several times before giving him any loans at all. Now they are all turally very worried about recovering the huge loans because they are all answerable to their constituents. In any case, the very extent of the total non-performing assets has been a legitimate cause of serious concern for the Fince Ministry that has been asking banks to take tough action against borrowers who create non-performing assets and directed them to be ready to fight court cases as well. The fact that the Gujarat High Court has ordered a stay of the bankruptcy proceedings against Essar Steel does not seem to have unduly worried the Fince Ministry. There were 12 major insolvency cases including the one against Essar Steel. These 12 cases alone constitute a quarter of the over Rs 8 lakh crore of NPAs. Of the total amount, Rs 6 lakh crore (or 75 per cent) are borrowings from public sector banks. It is important that the Fince Ministry should be even more intolerant of the very culture of non-performing assets that has done the Indian economy incalculable harm. Most other countries of the world have the odd cases of bad debts. But nowhere else does one condone such huge amounts of bad loans and even find a euphemism for them as Indians have done. NPAs are created because the banker gives more importance to his persol equation with the borrower than the likelihood of the loan being repaid. That is why there are reasons to believe that bankers advance such undeserved bad loans knowingly because there is more persol profit to bankers from such loans than there is from good loans where all repayments are regular and above board.