There has been a substantial increase in bad loans and this is primarily because public sector banks have been very lenient on willful defaulters and on real estate sectors. The Reserve Bank of India (RBI) has asked banks to focus on recovery and follow a stringent credit appraisal procedure. The RBI has asked banks to remain cautious in the wake of a higher-than-expected rate hike that could have an adverse impact on the asset quality of banks. The RBI has directed the banks to monitor their asset qualities on a regular basis, especially with interest rates steadily inching upwards. This is the result of the recent downgrade of the country’s largest lender State Bank of India by credit rating agency, Moody’s Investor Services.

In the wake of surging NPA levels, banks have decided to get to tough on willful defaulters — borrowers who have not repaid their dues despite having the capacity to do so. An estimated Rs. 11,000 crore of funds are locked up with willful defaulters.

State-owned banks have witnessed a surge in the level of bad assets (loans) or NPAs in recent times. The gross non-performing assets (NPA) of public sector banks stood at Rs. 71,047 crore for the period ended March, 2011. A loan that stops earning interest after 90 days is defined as an NPA.

According to Crisil, the Indian arm of global ratings major Standard and Poor’s, a slowdown in economic growth and increases in equated monthly installments (EMIs) resulting from subsequent rate hikes by the RBI, would also increase banks’ NPAs. Rising interest rates would increase the EMIs of home loan borrowers alone by about Rs. 6000 crore annually,” the study said.


  1. RBI should have done this long before. The people who take loans are not needy but greedy people. They have multiple home loans on the same property.They are the ones into speculative buying,default make the bank auction and recieve the remaining money left over after enjoying and using and damaging the property. I have a person having three properties with loans not paying a pie to the bank enjoying all the rent as the owner.

  2. RBI turn heat on banks to check bad loans

    “Latest News emerged from meeting of Finance Minister with CEOs of banks:——-State-owned banks have witnessed a surge in the level of bad assets (loans) or NPAs in recent times. The gross non-performing assets (NPA) of public sector banks stood at Rs 71,047 crore for the period ended March, 2011. A loan that stops earning interest after 90 days is defined as an NPA. .An estimated Rs 11,000 crore of funds are locked up with willful defaulters.”

    It is totally false and incorrect to say that amount involved with willful defaulters is only Rs.11000 crores . As per figure given by officials of public sector banks to RBI, it may be correct to say so. As a matter of fact total amount involved in willful defaulters is not less than ten times of it i.e. Rs.110000 crores. Similarly total amount of Non Performing Assets in banks is not less than two lacs crores as on 30, 09, 2011.

    The fact is that wrong reporting is the tool which enables CEOs of banks to exhibit rosy picture before RBI and Ministry of Finance and get promotions and good posting. Flattery and bribery has spoilt the banking industry specially banks in public sector .Wrong reporting starts from field level under guidance from top level officials. It is fortunate or unfortunate that now banks have adopted CBS technology and RBI is constrained under public pressure to insist system generated figure for NPA from all government banks.

    RBI also uses to accept whatever information is provided to it by PSB officials. None of regulating officials wants to present bad picture and inclined to take credit from ministers for good performance even if it requires false reporting. If true picture is discovered through RTI act, the evil works of bankers and regulating agencies will be exposed.
    Result as of 31st March 2011 declared by star performer State Bank of India has exposed the reality of public sector banks. NPA amount declared by SBI has doubled in one year when they ignored the NPA in accounts with outstanding less than Rs50.00 lacs after taking permission from RBI. Gross NPA ratio of SBI is found to be more than 3.50% , higher among PSBs.

    Analysts point out that unlike in 2008, the slowdown is hitting at a time when banks are already weighed down by bad loans. The first quarter of FY12 saw the sharpest increase in banks non performing loans in the last five years.
    Here’s a bank wise analysis:
    SBI’s gross NPA’s rose 10% to Rs 27,768 crore from a quarter ago level. As a percentage of total assets, this is a jump from 3.3 to 3.5%.
    Punjab National Bank’s gross bad loans increased to 2% versus 1.79% as a percentage of total assets. A fresh addition of Rs 1,177 crore in NPA’s, took PNB’s gross bad loans to Rs 4,893 crore, up 11.7% from the previous quarter.
    Bank of Baroda’s gross NPA’s rose 8.7% to Rs 3,426 crore on a sequential basis.
    Bank of India’s gross bad loans jumped 20.4% Rs 5791 crore. As a percentage to total assets, its gross NPA’s increased to 2.69% versus 2.23%.
    Canara Bank’s gross bad loans rose 16.7% to Rs 3606 crore
    Central Bank saw a 20.4% jump in gross bad loans to Rs 2882 crore.
    Union Bank, Oriental Bank of Commerce, UCO Bank, Andhra Bank, Vijaya Bank, Corporation Bank too saw a rise in gross non performing loans in the first quarter of FY12.
    Private sector banks on the contrary, did better on asset quality. ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Yes Bank and ING Vysya Bank all saw a fall in gross NPAs as a percentage of total assets.

    If SBI declares entire NPA as per system, the emergent result will open the eyes of RBI and indicate how much malady is underlying the rosy picture of PSBs presented by clever bank officials.SBI has initiated the process of exposure of NPA and other banks will follow the task and true picture will be available when result for the current year will be declared by all banks in April or May 2012.

    It is pity that even officials of various rating agencies are managed by officials by bribe to give favourable and attractive ratings. CVC, CBI and all internal or external auditors are managed. The whole thing is that “sabse bara rupaiya” Bribe and Gift are able to manage all.

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