RE: [MTC Global] Increasing Bad loans in the banking sector in India

Goel saab, as a former development banker my take is that some how we tend to stress more on assessing the project thus neglecting in the process about the need to assess the person behind the project. 

Further , not getting timely and adequate working capital is one of the main reason for the sickness of projects.  Regular monitoring and timely help will prevent the units from becoming sick. I vaguely remember about SBI initiative in granting technology up gradation loans to the entrepreneurs in Rajasthan thereby helping them to turn around. 

DrA Jagan Mohan Reddy

Sent from Samsung Mobile

-------- Original message --------

From: Virendra Goel

Date:26/10/2014 09:22 (GMT+05:30)

To: join_mtc@googlegroups.com

Subject: RE: [MTC Global] Increasing Bad loans in the banking sector in India

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.

 

 

================================================================

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 25^th 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