Table of Contents
What is the reason for increase in NPA?
Low earnings affected their ability to pay back loans. This is the one of the most important reason behind increase in NPA of public sector banks. Another major reason of rising NPA was the relaxed lending norms for corporate houses. Their financial status and credit rating were not analysed properly.
How do you tackle the menace of NPAs in banks?
Post facto NPAs can also be dealt with by the following measures: a) The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (Sarfaesi) enables the banks to deal with the NPAs without the court intervention by resorting to (1) Asset Reconstruction, (2) Enforcement of …
What is bank OTS?
The One-time Settlement (OTS) tool is used by lenders to recover dues from individuals with a default payment history. The lender agrees for a one-time settlement amount which will be lower than the total amount due. As a borrower, you need to repay the agreed amount at once within the time you are given to do so.
How has the rising NPA affected the Indian economy?
The increasing NPAs not only reduce the profitability of banks but also affect its credibility. In fact the massive amount of NPAs with commercial banks is threatening to erode half of the capital base of public sector banks.
Why are NPAs increasing in private sector banks?
On the contrary, the NPAs of private sector banks have shown a decline. A reduction in NPAs shows that banks have strengthened their credit appraisal processes over the years. The increase in NPAs shows the necessity of provisions, which bring down the overall profitability of banks.
Who is responsible for NPA in a bank loan?
IN the ultimate analysis, it is Officer who sanctioned the loan will be responsible. However, in reality both the banker and the borrower contribute to the NPAs. In addition to this , external forces, like earthquake, floods, drought, etc., do contribute to the NPAs. 1. Poor Credit Evaluation.
What are non-performing assets (NPA) in banks?
A bank’s Non-Performing Assets (NPA) is a sign of its health. Loans that do not receive their installments within 90 days of the due date are required to be declared as Non-Performing Assets. Although the loan is deemed as non performing, the bank still holds claim over that loan and interest.
What is the problem of private sector banks?
However, the only problem of these banks is the increasing level of non- performing assets, year by year. On the contrary, the NPAs of private sector banks have shown a decline. A reduction in NPAs shows that banks have strengthened their credit appraisal processes over the years.