Updated By: LatestGKGS Desk
Non Performing Assets (NPA) in Indian Economy History, Details, Impact on Banking
What are Non Performing Assets (NPA) in Indian Economy, Impact of NPA on the Banking sector growth
The moves are vital for the slowing economy, as private investments remain elusive in the face of the “twin-balance sheet problem” afflicting corporate India and public sector banks reflected in slow bank credit growth.
The Government has decided to take a massive step to capitalise PSBs in a front-loaded manner, to support credit growth and job creation.
The government’s capitalisation package for public sector banks will provide a strong booster dose of relief for the capital-starved public sector banks.
A loan is an asset for a bank as the interest payments and the repayment of the principal amount create a stream of cash flows.
Banks usually treat assets as non-performing if they are not serviced for some time.
The higher is the amount of non-performing assets (NPA) the weaker will be the bank’s revenue stream.
Indian Banking sector has been facing the NPA issue due to the mismanagement in the loan distribution carried by the Public sector banks.
As the NPAs of the banks will rise, it will bring a scarcity of funds in the Indian markets. Few banks will be willing to lend if they are not sure of the recovery of their money.
The price of loans, interest rates will shoot up badly. The shooting of interest rates will directly impact the investors who wish to take loans for setting up infrastructural, industrial projects etc.
