DS

Dr. Sachin B L· 2023

Question 7Elaborate on factors and measures with special reference to NARCL and IDRCLGS3GS1

Rising NPAs coupled with twin balance sheet issues have been the most pressing problem of India's economy in recent times. What are the factors responsible for rising NPAs? Elaborate on the measures that can be undertaken to address this problem giving special reference to the potential of newly formed NARCL and IDRCL

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Introduction

Non Performing Assets (NPAs), commonly referred to as bad loan style to loans that are

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Main Body

i) in default → debtor unable to meet his repayment obligation

ii) in arrears → when principal or interest payments are missed

[Diagram showing]: Bank lend loans → Private sector poor performance → Inability to pay haul → Twin balance sheet problem of both banks & private sector

Factors responsible for rising NPAs:

1Continued poor performance of certain sectors due to high U-shaped recovery
Sectors like power, construction, real estate still under pressure
2Covid-19 impact on economy - 'Blitzkrieg' wont that standstill economic activity along the globe
3Supply chain constraints & other major global headwinds - Russia Ukraine confl, etc have reduced global demand
4Better recognition in Bad loans - Due to high alert by RBI for tighter recognition norms - revealed unsorted bad loans from coffer
5Role of easy credit by banks & growth of Digital loan by growing fintech companies, etc

However, NPAS guarding to RBI's Financial Stability report, Indian banks Grown NPA has fallen to a 10 year low of 3.9%, indicating effectiveness of measures Taken by RBI & Government

2Covid-19 Impact on economy - 'blitzkrieg' wont that standstill economic activity along the globe
3Supply chain constraints & other major global headwinds - Russia Ukraine confl, etc have reduced global demand
4Better recognition in Bad loans - Due to high alert by RBI for tighter recognition norms - revealed unsorted bad loans from coffer
5Role of easy credit by banks & growth of Digital loan by growing fintech companies, etc

However, NPAS guarding to RBI's Financial Stability report, Indian banks Grown NPA has fallen to a 10 year low of 3.9%, indicating effectiveness of measures Taken by RBI & Government

Measures that can be undertaken

1National Asset Reconstruction Company (NARCL) & India Debt Repolution Company (IDRCL) was announced by government in Budget 2021
2NARCL will first purchase bad loans from banks - 15%) in cash, 85%) in security switch guaranteed by government
3Assets are then sold with help of BCCL & commercial banks are paid back the year.

Other Measures:

[Diagram showing]: RBI → Prompt Invictive Article Framework, Scheme for Debt Restructuring (CX) CAA, Asset Quality follow, etc

Government → FHC Strategy (Recognize, Penalize, Demote, Liqu), Infrastructu am plan, IBC code, 2016

Therefore for Indian Bank to be Global bank as viewed by Economic survey, issue of NPAs must be resolved early.

— Dr. Sachin B L

398 words11 paragraphs1 bullet points

Conclusion

Therefore for Indian Bank to be Global bank as viewed by Economic survey, issue of NPAs must be resolved early.

20 words

  • Structured explanation with diagram
  • Multiple factors identified
  • Reference to RBI Financial Stability Report

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Topper

Dr. Sachin B L

2023

Subject & Paper

GS3GS1

Topic

Economic Issues

Banking and NPAs

Non-Performing Assets

Writing Stats

433

Total words

11

Paragraphs

1

Bullets

Linked PYQ

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