RBI permits lenders to sell fraud loans to ARCs, paves way for resolution

What is the News? The Reserve Bank of India(RBI) has permitted lenders to transfer the loans that have been classified as fraud to asset reconstruction companies(ARCs). What is the current procedure? Currently, RBI norms require banks to make 100% provisions for the entire amount classified as fraud.  Note: As per RBI’s annual report, lenders have… Continue reading RBI permits lenders to sell fraud loans to ARCs, paves way for resolution

Bad bank will help clean up balance sheets, but credit culture must change for healthier financial system

Synopsis: Issues and challenges that may impact the performance of the National Asset Reconstruction Company Ltd. Introduction The balance sheets of banks show stressed loans worth Rs 2 lakh crore. To address this problem the government had envisaged the formation of National Asset Reconstruction Company Ltd (NARCL) referred to as the bad bank within a… Continue reading Bad bank will help clean up balance sheets, but credit culture must change for healthier financial system

Government sets up ‘bad bank’ to clear the NPA mess

What is the News? Cabinet has cleared a ₹30,600-crore guarantee programme for securities to be issued by the National Asset Reconstruction Company Limited(NARCL) for taking over and resolving non-performing assets(NPAs). What is NARCL? NARCL is India’s first-ever “Bad Bank”. It has been incorporated as an Asset Reconstruction Company (ARC) under the Companies Act. Purpose: It… Continue reading Government sets up ‘bad bank’ to clear the NPA mess

Union Cabinet clears decks for National Asset Reconstruction Company

What is the News? The Union Government has approved a proposal that requires the government to guarantee Security Receipts(SR) issued by National Asset Reconstruction Company Ltd (NARCL) when buying non-performing assets (NPAs) from banks. This will clear the path for the launch of National Asset Reconstruction Company (NARCL).  Note: Security Receipts (SR) are issued by ARCs… Continue reading Union Cabinet clears decks for National Asset Reconstruction Company

Reserve Bank flags rising bad assets from Mudra loans

News:The Reserve Bank of India (RBI) has expressed concern over rising bad loans from Pradhan Mantri MUDRA Yo­jana(PMMY). Facts: About Rising Bad loans in MUDRA Yojana: The RBI Deputy Governor said that MUDRA was launched with the objective of lifting many beneficiaries out of poverty. However,there have been concerns at the growing level of non-performing… Continue reading Reserve Bank flags rising bad assets from Mudra loans

Govt. asks PSBs to find out reasons for rise in NPAs in last 5 years

The Finance Ministry has initiated a comprehensive consultative process with public sector banks(PSBs). The consultative process will start from branch level upwards to the State-level and then to the national level. The process aims to find out the reasons for the sharp rise in bad loans in the previous five years apart from outlining national… Continue reading Govt. asks PSBs to find out reasons for rise in NPAs in last 5 years

Banks’ bad loans down at 9.34 lakh crore at FY19-end

Finance minister has informed the Parliament that Gross non performing assets(NPA) of scheduled commercial banks has declined by Rs 1.02 lakh crore to Rs 9.34 lakh crore in 2018-19. Non-performing assets(NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days. The decline in number… Continue reading Banks’ bad loans down at 9.34 lakh crore at FY19-end

Bank NPA

Union Minister of Finance informed Lok Sabha about the present state of Bank Non Performing assets(NPA) in India. The minister said that as per RBI provisional data on global operations, the aggregate amount of gross NPAs of Public sector banks(PSBs) and Scheduled Commercial Banks(SCBs) till 31st March,2019 were Rs.8 lakh crore and Rs. 9.5 lakh… Continue reading Bank NPA

MUDRA bad loans rise in FY19, even as NPAs decline across banking system

The government’s MUDRA scheme to finance small and micro borrowers has witnessed an increase in bad loans at a time when the system-wide non-performing assets(NPAs) have started showing signs of a decline. NPA is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days. The NPAs… Continue reading MUDRA bad loans rise in FY19, even as NPAs decline across banking system

RBI now uses divergence to compel banks to improve their loan-loss ratios

Recently,three state-run banks had reported divergence in bad loan recognition while announcing the results. Divergence takes place when the Reserve Bank of India (RBI) finds that a lender has under-reported (or not reported at all) bad loans in a particular year and hence asks the lender to make disclosures if under-reporting is more than 10%… Continue reading RBI now uses divergence to compel banks to improve their loan-loss ratios