An efficient and vibrant banking system is the backbone of the financial sector. The challenges facing the Indian banking industry could be classified under Four Cs Competition, Convergence, Consolidation and Capital Adequacy (NPAs). These Cs will be the key drivers of the banking sector in the days ahead.
Recently, the country’s biggest banking scam was unearthed, in which ABG Shipyard Company of Surat took a loan of about Rs 22,842 in a fraudulent manner. This fraud has happened with a consortium of 28 banks led by the State Bank of India (SBI).
These include big banks like ICICI, IDBI, Bank of Baroda, Bank of India and Punjab National Bank (PNB).
Also Read: ABG Shipyard: How it plunged into debt and defrauded 28 banks of Rs 22,842 cr
The biggest problem faced by Indian banks is that of Non-Performing Assets (NPA), which is affecting both private and public sector banks alike, Non-Performing Assets (NPAs) of banks mainly are due to bad loans of banks. Most of these are white-collar crimes committed by rich and powerful people.
Under severe stress conditions, the NPA level may rise from 7.5 per cent in 2021 to 11.2 per cent in March 2022. Corporate loans account for about 70 per cent of these bad loans, while retail loans, which include car loans, home loans and personal loans, account for only 4 per cent.
The point is clear that if banks have to be saved from NPAs, then banks have to be very careful in giving loans to big corporates.
Banks today…
