Business Mantra News
Ratio of bad loans in Banks in India have been increasing day by day. Now at 9.85%, this ratio puts India on 5th position in the list of nations who have higher bad loans.
The countries who have almost similar bad loans are (EU) European Nations i.e. Portugal, Italy, Ireland Greece and Spain, commonly referred to as PIIGS.
Despite among PIIGS, Spain has a lesser ration of bad loans than India.
As per the report of rating agency CARE, India’s NPA ratio of 9.85% which excludes restructured assets is one of the highest in the group of those nations which have very high non-performing assets.
Only four nations i.e. Portugal, Greece, Italy and Ireland are having more NPA than India. These four European nations have been suffering from NPA since the end of 2009 multiyear debt crisis. Whereas whole of the Europe was reeling under economic slowdown during the period under reference.
Whereas India’s bad loans problem is self inflicted as Banks in India had given loans to companies and generally Indian companies do not adhere to financial discipline. Moreover, whether declared or not more and more NPA accounts are willful defaulters. There has been an increased in NPAs since RBI had introduced Asset Quality Recognition (AQR) in 2015, as the banks have adopted trend of recognizing these stressed loans.
The increase of NPSs in India lead to shortage of capital in Banks and due to which banks capacity to lend more money is also drastically affected.
Other developed nations like Australia, UK and Canada’ NPAs are 2% which is comparatively lower than India.
The continuous surge in bad loans is really a serious threat to the growth of the economy. Hence, India must take initiative to reduce its bad loans as India’s Economy is going to be largest economy.