24 thoughts on “NPA Crisis in India

  1. Ways to increase Financial Inclusion in INDIA

    In Developing country, like INDIA Banking system plays a significant role in growth and development of country. Availing banking services to each and every citizen of country without discrimination is essential element for the development of any nation. In India term financial inclusion used in 2005 in the thrust of economy. Financial Inclusion recommended by Nachiket mor committee for expanding Banking service in country under RBI governor Raghuram Rajan.

    Financial inclusion means to provide banking services to people who are deprived from banking facilities at affordable cost without segmentation in any scope of area to expand banking sector specially in rural area. Financial inclusion is done through increase in branches of Banks in rural area , providing banking services at door by Mobile banking and net banking, establishing institute for awareness regarding banking services.

    Through Financial inclusion banking facilities are reached to every citizen of country which has increased number of bank accounts in rural areas and which has resulted in improvement in banking sector as capital of banking industry also has increased. Government has introduced BSBD account with zero deposit and PMJDY (Pradhan Mantri Jan Dhan Yojna) by PM Narendra Modi on 25th January,2015 at zero balance . In these accounts no need to maintain balance and no more KYC norms are there so that it can reach to people who are deprived of it.

    Though through financial inclusion awareness regarding banking services has increased and number of bank accounts also has increased still India needs to do more in this area for making India world’s one of the leading nation. For this RBI has reduced KYC norms documentation within limit of 100000 rupees. Because of financial inclusion number of bank accounts are increased and this step is coming out as a success.

    In India many people are not educated in rural areas and many people are not aware of banking. So,RBI should take necessary steps to increase awareness through increasing awareness programs through door to door banking , increasing number of ATM services in rural area, developing net banking and for same education of using it should be provided and it should be simpler to open an account so that in real terms financial inclusion said to be have done.

    1. Word limit exceeded.
      You have made same mistake as your friend.
      Financial inclusion is not about banking only. Insurance, pension etc are also part of this.
      Your definition is incomplete.
      Financial inclusion is a very old concept. In 1969 lead bank scheme, bank nationalisation, they were done for increasing financial inclusion only.

      Before writing, take time and research on the topic. There are also grammatical mistakes. It will be resolved by practicing.
      You need to work harder on your writing skills.

      1. When you search a topic like this. Add upsc at the last on the search.
        You might be reading some articles which are not at related to the exam.

  2. Non performing assets as the name indicates, are the assets of the banks which don’t bring any return. The NPA crisis is the most pressing issue in the Indian banking sector today. It has turned out to be a big obstacle in the path of development of banking system. According to RBI’s financial stability report, they currently stand at 10.2% of all assets.

    During initial years of 21st century until global financial crisis, Indian economy was at its peak with the highest growth rates. During this phase, corporate sectors in India secured massive loans from banks and invested it in various projects. But they were not able to repay the huge amount of loans due to global financial crisis of 2008 that had a negative impact on the growth of Indian industries. Apart from this, there were also policy paralysis that led to scams like 2G, Coal which resulted in NPA crisis as these projects were stalled and the loans were not repaid. Recently, farm loan waiver, evergreening of loans and banking fraud cases of Vijay Malya, Nirav Modi and many others have also added to the NPA crisis.

    Tackling the NPA menace :
    NPA crisis affects the profitability and stability of banks. The potential borrowers will be deprived of the loans due to the credit crunch. In this regard, Government and RBI has taken many measures like setting up DRT, introducing SARFAESI act, Asset quality review, S4A, PCA framework, Mission Indradhanush, Insolvency and Bankruptcy code to curb the menace of NPA.
    Apart from this, efficient risk management and credit monitoring system with transparency in internal auditing is the need of the hour.

    All the existing measures are in the right direction and they are contributing for NPA resolution. However, instead of sticking to a single model, an innovative and flexible approach is necessary for each affected bank to bring down the NPA crisis in India.

    Word count – 315.

    1. Good essay.
      You could have mentioned the 4Rs- resolution, recapitalise, reform, Recognition. Or you could have included some data about IBC success. Also, global financial crisis was not the only cause, delay in various clearances by gov like environmental clearance was also one of the major reason.

      Minimal grammatical errors. Precise.
      Keep practicing.

  3. Non-Performing Asset (NPA) is defined as those assets or debts on which interest or installments of principle amount is pending for a period of time, or has completely stopped. Rise in the NPA of a country hampers its growth and jeopardize its banking sector. India is suffering from increasing NPAs for a long time now and was reported to have second highest ratio of NPAs among major economies of the world. In 2017 a lot of banks in India were reported to have huge sum of bad loans and NPA, in which SBI, PNB and IDBI were having the highest sum of NPA. Infrastructure, automobile and construction industry are some of the major defaulters for NPAs. Also some of the biggest banking scams were reported in the recent years which too contributed to the problem of rising NPAs. As the banking sector of a country is the backbone of its economy, it became very important for the RBI and the Indian government to take strict actions to reduce the NPA levels. Capital was infused into the banks, mortgage assets of defaulters were sold, different laws were passed and asset quality review are now done in order to reduce the amount of NPAs. Many banks with very high NPA were put under Promote Corrective Action (PAC) framework. Also government is planning to amalgamate Bank of baroda, Dena bank and Vijay bank to deal with the failure of Dena bank and Vijay bank to maintain NPA level, though experts say it will hamper the performance of Bank of baroda. All these steps taken by the government have shown positive results and current statement by RBI claims that worst phase of NPA problem is over now, and also recent report by Moody says that the asset quality of banks have improved which is a good sign for our growing economy.

    1. Again, you have not used paragraphs.
      It’s pca not pac. Try to avoid names in your essay
      And write latest NPA figure from the latest financial stability report.
      Do not mention about bank amalgamation, NPA was one of the reason but not the only reason.
      You could have mentioned about IBC framework.
      Asset quality review was used to know the exact NPA, not to reduce it. Also, capital infusion is done by public fund so avoid writing it like that it is helping in reducing NPA. Keep practicing.


    Non performing asset refers to classification of loan or advances that are default or are in arrears on schedule payment of principal or interest not been made for period of 90 days or more. Npa can be categories as substandard asset,then doubtful asset and then, loss asset

    Due to global economic boom,banks are lends more to corporate lucratively more than financial credit ability of the company but effect of financial crisis the demand for goods in the market slowdown.it leads to corporate not able to repay their debt to bank,the projects are funded by banks not able to complete because of environmental clearances,Delay in key economic decision,double leverage by corporate,selective lending by banks to specific sector increase the risk of banks and political interference in loan disbursement are those factors leads to high non performing asset.
    Low cost of borrowing is panecea for growth of nation .Because of npa,the credit availability to banks for lending is decrease which leads to high cost of borrowing.Due of high cost borrowing,borrowers are reluctanted to borrow from market,which will affect growth of nation and employment.
    For this reason government takes various step to reduce npa such as DEBT RECOVERY TRIBUNAL,SAFERESI ACT,SDR,S4A,ARC,4R,IBC and public credit registery. Recent introduction of Ibc,the npa shows declined in banking sector,the government expected that gross npa will be reduced from 10.8%(mar-2018) to 8%(FY-20).
    Reduction of npa is not a one time process,it could be continuous process.In future we need to careful about disbursing loans to creditors like cross verification of document .have a eye on the end use of fund,diversification of lending base and less political interference in disbursing loan.and effective implementation of IBC is needed.

    1. Your content is good. But there are lot of grammatical and spelling mistakes. You have to work on that first. Else your content will be of no use. Your sentences could have been better.
      Practice on your grammar first. And keep writing.

  5. The main business for banks is accepting deposits and lending money. For Banks the money they are lending is their assets. An asset will become a Non-Performing Asset(NPA) if it is not giving any return for a period of 90 days. In Agricultural sector, for short term corps the period will be 2 crop seasons and for long term crops the period will be 1 crop season.

    In India major portion of the NPA is due to corporate sector and the amount of NPA from Retail sector is comparatively low and most of the corporate sector loans are given by Public sector banks compared to private sector banks. Before 2007-08 Indian economy was growing in a steady phase, due to sudden global economic crisis during 2007-08 our economic growth become stagnant. Most corporate entities and Industries not able to cope up the situation. Banks on the other hand, based on the past growth in mind started giving loans and over a period of time most of these corporate loans becomes NPA. RBI and Government has taken many measures like Debt Recovery tribunal, Strategic debt restructuring, Asset management company, SARFESI Act, Insolvency and Bankruptcy code, Joint Lenders forum, Credit rating agencies etc… to curb the menace of NPA. The NPA problem will not only affect the profitability of banks but also it will stop the money flow into the economy slowly. If all the RBI guidelines is in place before giving any loans, the percentage of loans becomes NPA will be reduced to a large amount.

    The banks should do the appropriate Customer due diligence before giving any retail or corporate loans and they should monitor the end use of funds, CREDIT score should be evaluated before giving any loans and there should not be any political influence. Finally if all the appropriate procedures/guidelines are followed before giving any loans the amount loans becomes NPA in future will be reduced greatly.

    1. Your essay is good. You should have mentioned the latest NPA figures as per rbi. Financial crisis was not the only reason, there was also a lot of delay from government’s side to give various clearance to the corporates.
      You can also mention the latest ibc data.
      Rest is good. Keep practicing.

  6. NPA or Non Performing Assests are defined as the loans,on which the interest remain overdue for a period more than 90 days.Its been a severe headache for Indian Banking System and this year it is in the league of major economies like Italy,Turkey and Brazil having a major chunk of their GDP as NPA.In India,NPA problem is a outcome of its unique complex nexus of various socio-political outreach.For example,In India most of the banks having facing the heat of NPA are Government owned banks which are due to political pressure often ignores the credit risk associated with the assets.Apart from it,Political freebies like Loan waiver in CG,MP and Rajasthan are creating long term distorted image of a healthy banking system to “take loan but not be serious to repay”.
    Slowdown in Indian economy in last decade,distressed telecom and Aviation sector having Air India,KingFisher Airlines default,lack of proper laws to recover loans are too contributing a hefty share to this NPA problem.It was a common perception that priority sector loans are major contributor to these outstanding loans.But a recently constittuted standing committee has found that NPAs in Corporate sector are the main Devil in disguise.
    Due to above hocus pocus,Government has taken some major restructural steps to address this issue.Many laws like insolvency and Bankruptcy code act,Sarfaesi act amendment,Mission Indradhanush and Bank Board Bureau constitution are made up for tackling this issue.
    Indian Banking system should try to review the NPA by the help of ARCs in short term redressal and in long term,measures like a robust analytical method for any credit risk,sound contigency plan as well as an Independent Banking governance without any political interference for this problem.

    1. Lot of grammatical and spelling mistakes. Please work on them now. Matter is one thing but your writing skills should also be good.
      Your content is also not focused. In starting paragraph you should introduce NPA, no need to compare it with any country.
      Next tell what are the problems, write the latest data, do not blame government.
      Last give some suggestions by you are actions taken by rbi or gov.
      You have done the same but you have also written some points which are not needed at all.
      Please see the essay submitted by others.
      Keep practicing

  7. NPAs(non-performing asset) are one of the biggest challenges threatening the stability of the Indian banking system. NPAs means when the assets of Financial Institutions cease to generate Income for entity. Meticulously NPA is a loan or advance for which principal or interest payment remained overdue for specific period, ordinarily for 90 days. NPAs are classified as sub-standard, Doubtful and Loss Asset.

    NPAs are that evil of economy which imperil health of Financial Institutions. If NPA trends to increase then it will brings a scarcity of funds in the Indian security markets. The rising incidence of NPAs has been generally attributed to the domestic economic slowdown. Because of the global economic slowdown and accretion in rate of interest, corporates have been finding it difficult to repay loans and interest there on. Thus as a result NPAs increased. Non-Availability of proper infrastructure, government restrictions and external factors impacted the performance of corporate sector. And even PSL(primary sector lending) has contributed substantially to the NPAs. Indiscriminate lending in high growth period(2004-08), lack of rigour in loan appraisal etc. are reasons for accretion in NPAs.

    To cope up with NPAs government has been taking several steps such as SARFAESI Act, DRT Act, lok adalats, IBC, SDR, S4A, CDR, PCA, mission Indradhanush, credit Information Bureau etc. Because of corrective steps taken by government NPA ratio may decline from 10.8% in September 2018 to 10.3% in march 2019 and 10.2% in September 2019, RBI said in biannual Financial stability report. New RBI governor Shaktikanta Das cited that an improvement noticed in the reduction of NPA level.

    Various initiatives taken by government have yielded favorable outcomes but there is much more to do to curb the problem of NPA. “ THIS IS BEGINNING OF A BIG BANG FOR INDIA”

    1. Your content is good. There are minor grammatical mistakes.
      Avoid writing the statements like rbi governor said that or rbi said that . You are not writing an article for an editorial.
      Rest is good. keep practicing

  8. Every financial institutions be like banks or NBFCs tends to utilize their assets in best productive way to earn maximum profit. But it’s not necessary that every asset may prove productive and NPAs are one of them. Non performing assets are nothing but those which have stopped performing and leads to the loss of institution. Asset is classified NPA when the principle or interest amount is due for more than 90 days. NPAs are further classified as sub standard asset, doubtful asset and loss asset.

    So the question arises why does this happens? How to stop this or how to secure oneself from such defaults?
    Person or a company defaults for many reasons like:-
    – country’s economy is not in a good state or it is a recession period so company in not performing well hence failed to pay the borrowed money.
    -Willful defaulting, these are those who doesn’t want to pay the borrowed money though they are capable to. For example:- MR Vijay Malya.
    – Subprime lending is also the cause of high NPA as due to this The USA’s economy faced a great depression in 2008 which further affected whole world.
    Following are some of the reasons for NPAs.

    So now what to do is the next question. Government has come up with various plans and strategy to curb the issue of npa which is affecting financial system. Some of the reforms are SARFAESI ACT, establishing DRT, 4R- resolution, recapitalization, reform, recognition, IBC, setting PCR on the recommendation of MR Y.M.Deosthale committee etc. Government has also announced to infuse capital of approx 48000 crore in the banks for their revival and to compliance with the BASEL norms of maintaining CRAR at 9% according to RBI.

    Solution for NPAs is necessary as country’s economy depends on its financial institutions and healthy financial institutions leads to build prosperous Nation.

    1. Your introduction is good.
      Do not ask questions in your essay. No need to include USA point as the essay is asking about India only and that problem has not caused NPA in India.
      You should write the latest NPA figures and ibc data.
      In your last paragraph, give some suggestions to tackle the issue

    In 2019 public sector banks in India are facing some major challenges while maintaining their services. One of the biggest challenge among those is the challenge of NPA.

    Bank’s main income generates from the loan. Bank gives loan to a higher interest rate to a borrower and after gaining that interest bank pay a small amount of interest to it’s customer. The remaining interest is termed as the profit of the bank. Now what will happen if the borrower did not pay the loan amount after a specified time. How can bank generate profit ? Well this is the case from where the term NPA arrived which is the acronym of Non Performing Asset.

    NPA generally occurred when a bank lend a money to a borrower without taking proper co-lateral security from him or without checking the borrower’s financial status. Generally an asset is termed as NPA when the borrower failed to make the payment for 90 days after the due date. Now who is to blame for that ? borrower or the bank ? Blame should go to the both sides as the borrower unable to make the payment and bank did not maintain proper follow up to recover the loan.

    But now a days RBI and Government decided to take some stringent steps to reduce the amount of NPA. They implemented various laws like SARFAESI act , implemented loan restructuring schemes , amendment to banking law , formation of Credit Information Bureau etc. All these efforts have worked successfully as the latest RBI reports stated that the amount of NPA came down to 10.2% on Sept 2018 from 11.5% on Mar 2018. These shows that if we follow the rules properly , take adequate action in proper time then the so called NPA crisis will no longer be a crisis for Indian banks in future.

    1. Do not write in 2019, the banks are facing this problem for a long time.
      You have used 3 paragraphs just to describe what NPA is. Write it in first paragraph itself.
      You can also write about the reasons why npas are so high in India.
      Your last paragraph is good.
      Keep practicing.

  10. NPA stands for Non Performing Assets. An account is classified as an NPA if the payment of principle or interest or both is due for 90 days. The account is marked as non performing as banks have stopped receiving any profit from these assets.

    The problem of NPA has plagued Indian banks in the last few years. According to the Economic Survey 2017-18, the Gross Non Performing Advances (GNPA) ratio of scheduled commercial banks has increased to 10.2% between March 2017 and September 2017. The performance of public sector banks has been even worse with their GNPA at around 13.5% during the same period. NPA has several negative effects on the banks and the entire economy. The profitability of the banks take a huge hit. It also reduces the lending power of the banks due to additional provisioning and banks have a hard time maintaining capital adequacy requirements. This in turn reduces investments and growth of the country. NPA also indicates weak management and a loss of shareholder confidence. Lastly, the prestige and trust in the bank also falter drastically.

    The Government and the RBI have taken many steps to tackle the problem of NPA. These include SARFAESI Act 2002, S4A, Corporate Debt Restructuring and Strategic Debt Restructuring. In 2016, the Government enacted the Insolvency and Bankcruptcy Code (IBC) to enable faster and efficient resolution process for both individuals and companies. This is definitely the step in the right direction and IBC is currently helping banks recover their loans. Project Sashakt under the Sunil Mehta committee has also been constituted for banks to work together to reduce their NPAs. Inspite of this, there is a dire need for banks to keep better vigil on their lending and ensure better management practices to avoid getting sucked into the hole of NPAs.

    (Words – 300)

    1. Your essay is good. The spelling of bankruptcy is not correct.
      You have mentioned the eco survey data, that is old. You should cite the latest NPA figures from the rbi financial stability report. Rest is good.
      Keep practicing

  11. Loan and advances are lend to the customer are known as assets of banks. When these assets are stop generating return for banks at least last 90 days then these assets are known as non-performing assets of banks.

    Rising level of NPA is harmful for the entire economy micro as well as macro level. Due to this high level of NPA bank will not able to lend anymore. So the credit growth down and investment is also goes down. And as a result of this production capacity and employment is down. And it will impact on growth and ultimately growth will down. On macro front the foreign investment goes down. Because of declining in growth and the bank’s share on declining mode and bank’s shareholder’s suffers. Accords to IMF financial soundness indicator India is on first place of NPA level with the no. of 10.4% of NPA in India.

    There are various measures or step taken by the RBI and the Government to tackle NPA level. Some of these are DRT-1993, Lok Aadalat-2001, SARFAESI act 2002, ARC, CDR-2005, Joint Ledger Forum 2014, SDR-2015, AQR, S4A-2016, Insolvency and bankruptcy code-2016 and Mission Indradhanush etc. In recent the public sector bank will recover 3 lac. Cr. NPA. With the help of IBC-2016 3 banks are come out of PCA and lending further. These are B.O.I, B.O.M. and O.B.C. It is possible with the implementation of “Mission Indradhanush”.
    According to RBI financial stability report the gross non-performing assets ratio is on declining from
    11.5% in March 2018 to 10.8% in September 2018. And it will further decline from 10.8% in September
    2018 to 10.3% in March 2019.

    “Prevention is better than Cure”It is easy to prevent the blunder in first place than after the damage
    has happened.so the Govt. and RBI will take further measure to curb this.
    WORD -305

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