Growth of Non-performing Assets (NPAs) in India's Banking System
Dr Raghuram Rajan, the outgoing governor of RBI while addressing the 10th Statistics Day conference at the RBI headquarters said “As with inflation, it was the duty of the central bank to press for bank clean-up earlier, when few among the public support the central bank's activism " 1 indicating the need to for bank to clean bad loans should have started earlier. NPA is defined as “a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.”The RBI in December 2015 released a list of 150 truant borrowers and directed banks not to sweep their bank accounts under the carpet.RBI has also set an ambitious deadline of March 2017 to clean up bad loans. The proactive approach of RBI raises a pertinent question as to “Why the cleanup of bad loans is central to RBI and What implication does it have on the Indian economy?” The answer lies in the scale of accrued NPA over the past year and banks ability to provide capital. I...
