Banking industry and the government has been harping on recovery of loans rather than finding the cause for inability of buyer to pay. There are two types of defaulter:
1. Willful defaulter – who manipulates the things to take advantage of the banking system's weakness in monitoring the loan and loopholes the law governing the banking loans and recovery.
2. Defaulters who have incurred the losses. One major cause of entrepreneurs losing money is economic instability causing unexpected fluctuations in demand and supply and in costs. In such cases banks need to make a realistic assessment of situation to evaluate if there is any scope of recovery by further funding and do the need based funding instead of short funding or undesirable liberal funding . In such cases banks start focusing on recovering their loans rather than helping the borrower thus pushing the borrower in a corner resulting in increasing the volume of bad loans.
3. As Director of State Financial Corporation, I noted two more factors of loans going bad:
a. Every project has a kind of critical factor to ensure the success of project. Assessing authority need to identify such critical factor of the project and evaluate if this critical factor for the particular project is favorable and will continue to be favorable for a reasonable time till the projects' limbs are fully grown instead of focusing on DSCR and DE ratios or Margin Money availability.
b. Liaison is one tool that has been used by big and mighty to influence this decision making where instructions are passed from top to bottom to find ways to oblige instead of critically examining the requirement and possibility of its recovery – one will find this factor in case of almost all the large loans gone bad.
Regards
Virendra Goel
From: join_mtc@googlegroups.com [mailto:join_mtc@googlegroups.com]
Sent: Sunday, October 26, 2014 6:42 AM
Subject: [MTC Global] Increasing Bad loans in the banking sector in India
Dear friends,
Good morning.
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BAD LOANS
'At a time when the Government is trying their best to push through their various efforts and proposals to implement banking sector reforms like privatisation, mergers, etc., what is really required today is to address and tackle the problem of alarming increase in the bad loans in the Banks. The so called reform measures recommended by Committee after Committee are retrograde and regressive but recovery of the huge bad loans will alone make our Banks more viable, vibrant and effective.
In order to highlight this issue, AIBEA and AIBOA have decided to observe an exclusive All India Day on 25th September, 2014.
The following figures will reveal how alarmingly the bad loans in the Banks are increasing.
31.03.2008 | 39,030 crores |
31.03.2009 | 44,954 crores |
31.03.2010 | 59,927 crores |
31.03.2011 | 74,664 crores |
31-03-2012 | 117,000 crores |
31-3-2013 | 1,64,461 crores |
30-9-2013 | 2,36,000 crores |
31-3-2014 | 2,50,000 crores |
Fresh Bad Loans - Rs. 4,95,000 crores in 7 years in PSBs
Fresh/new NPAs during 2009-10 | 44,818 Crores |
Fresh/new NPAs during 2010-11 | 58,226 Crores |
Fresh/new NPAs during 2012-13 | 92,808 Crores |
Fresh/new NPAs during 2012-13 | 1,19,613 Crores |
Fresh bad loans in the last 4 years (2009 to 2013 ) | 3,15,465 Crores |
Fresh bad loans in the last 7 years (2007 to 2013 ) | 4,94,836 Crores |
Bad Loans restructured & shown as good loans (June 2014) | Rs. 2,51,000 cr |
Fresh Bad loans in the last 7 years | Rs. 4,95,000 cr |
Profits adjusted for provisions towards bad loans (2008 to 13) | Rs. 1,40,000 cr |
Bad loans written off in the last 13 years | Rs. 2,04,000 cr |
RESTRUCTURING OF LOANS & SALE OF BAD LOANS/NPAs:
As on | No. of A/cs Restructured under CDR | Total Loans restructured |
31-3-2009 | 184 | 86,536 cr |
31-3-2010 | 215 | 104,299 cr |
31-3-2011 | 242 | 111,914 cr |
31-3-2012 | 292 | 150,515 cr |
31-3-2013 | 401 | 229,013 cr |
31-3-2014 | 476 | 330,444 cr |
30-6-2014 | 486 | 348,502 cr |
Live cases under CDR today:
31-3-2014 280 accounts Rs. 242,259 crores
Sr. No. | Industry | LOANS GIVEN (Rs. Crore) |
1 | Infrastructure | 57,906 |
2 | Iron & Steel | 40,783 |
3 | Textiles | 21,990 |
4 | Power | 20,253 |
5 | Ship-Breaking/Ship Building | 16,792 |
6 | Construction | 16,062 |
7 | Telecom | 10,785 |
8 | Pharmaceuticals | 9,249 |
9 | NBFC | 6,976 |
10 | Engineering | 5,668 |
Total Loans restructured under CDR in above 10 sectors | 2,06,464 | |
30-6-2014 281 accounts Rs. 251,611 crores
(Source:AIBEA/AIBOA)
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==========================================================================
With regards,
Dr. K. Sampath Kumar, B.A. (Economics), BGL, M.Com., M.Phil., Cert. A.I.I.B.,
MBA (Finance), MBA (HR & Marketing), ACS, FCMA, Ph. D.,
Professor, SSN School of Management
C/o. SSN College of Engineering
Rajiv Gandhi Salai (OMR)
KALAVAKKAM - 603110
Kancheepuram District, Tamil Nadu, India
Landline : 044-24860668
Mobile : 9094405733
Success consists of getting up
just one more time than you fall
-- Oliver Goldsmith
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MTC GLOBAL- Educate, Empower, Elevate
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