ZEE Business
ZEE BUSINESS
हिंदी में पढ़ें  हिंदी में पढ़ें
Live TV
Live TV
  • Home
  • Budget 2023
  • Adani Saga
  • Markets
    • Stocks
    • Global Markets
    • IPO
    • Companies
    • Currency
    • Commodities
  • My Money
  • Calculators
    • Income Tax Calculator
    • Home Loan/EMI Calculator
    • Mutual Fund Returns Calculator
    • Personal Loan Calculator
    • Car Loan Calculator
    • SIP calculator
    • Lumpsum Calculator
    • SWP Calculator
  • Videos
    • M Se Market
    • Jeb Zindagi Zaroorat
    • Light Camera Stocks
    • Tech Takes
    • Big Bulls Ka Nishana
    • Paisa Wasool
    • Commodity Ke MrityunjayMantra
    • The Right Property Show
  • Economy & Infra
    • Policy & Initiatives
    • Agriculture
    • Telecom
    • Aviation
    • Railways
    • Retail
    • Roadways
    • World Economy
  • Exclusive
    • Wealth Guide
    • Interviews
  • Auto
    • Cars
    • Bikes
    • Electric Vehicle
    • Commercial Vehicles
  • Tech
    • Mobiles
    • Gadgets
    • Reviews
    • Tips and Tricks
    • Apps
  • Real Estate
    • Home Buyers
    • Builders
  • Axis MF
  • Trending
    • Entertainment
    • Politics
    • Lifestyle
    • Travel
    • Sports
    • Viral
    • Education
    • Jobs
Read in App
Business News » India News

Deputy RBI Governor Viral Acharya: Modi brings back focus on banks' NPA issue?

Considering Acharya's major interest, does that mean with his appointment the Modi-led government once again shifts its focus on bank's long hanging stress – 'the bad loans'?

  • Twitter
  • Facebook
  • Linkedin
  • whatapp
  • View in App
Deputy RBI Governor Viral Acharya: Modi brings back focus on banks' NPA issue?
Bad loans have been a bitter part of Indian banks' story for a few years now. Various measures have been taken to cure it, yet bad loans continues to haunt banks. Photo: Youtube

Viral V Acharya on Wednesday was appointed as the deputy governor of Reserve Bank of India (RBI). The post fell vacant after Urjit Patel was elevated as the governor of RBI in early September after Raghuram Rajan's three-year term ended.

Acharya is an economic professor in the New York University Stern School of Business (NYU Stern) and his research interest lie in banking, credit risk, asset pricing, liquidity risks and many other financial institutions.

In an interview with Bloomberg on October 10, 2016, Acharya raised the non-performing assets (NPA) issue currently plaguing banking sector in the country. 

He had said, “A bad bank solution is what India needs to stop the bad loan wound from festering further.”

Interestingly, this is an idea that is resonating well with current RBI Governor Urjit Patel as well. 

Soon after his appointment, in October 2016, a senior government was quoted by the Indian Express as stating that the idea of a "bad bank" may be back on the table. 

Ex-Governor Rajan was against such an idea. 

Considering Acharya's major interest, does that mean with his appointment the Modi-led government once again shifts its focus on bank's long hanging stress – 'the bad loans'?

Bad loans have been a bitter part of Indian banks' story for a few years now. 

Since past few years, RBI, under Rajan's stewardship, has been resolving mounting bad loan issue. Public Sector Banks (PSBs), in particular, are presently suffering with high NPA issue, higher provisions, sluggish growth in credit off-take.

Date released by RBI stated that bad loans have crossed $ 138 billion (approx Rs 8.72 lakh crore) in June 2016, a rise of 15% in just six months.

An analysis of 18 PSBs made by Care Ratings revealed that the NPA ratio was as high as 14.5% in September 2016. 

Till second quarter of current fiscal (Q2FY17), a total of 30 Indian banks had a negative profit after tax (PAT), saw slowdown in Net Interest Margin (NIM), and reported higher provisions and NPAs.

Though in Q2, the NPAs slowed down, yet its needs deep modification to resolve as it remains higher compared to March 2015 quarter. 

Acharya has constantly spoken about the bad loan crisis. In one of his research reports dated June 2015, he said, "Most of the ills of the PSBs can be singularly traced back to its asset quality, as they are forced to lend at nonoptimal conditions for various non-viable private projects, welfare schemes and also to other public enterprises.”

PSBs and new private banks were in a similar position in 2005. However, since then, new private banks strengthened their credit portfolio and reduced NPAs while PSBs have showed a huge increase in NPAs.

To account for stressed NPAs, banks maintain higher provisions. 


Acharya had said, "Unless Indian public sector banks raise significant capital in the next five years, their balance sheets would have to shrink alarmingly for their capital to remain over the levels mandated by Basel 3 requirements."

Acharya  told Bloomberg, "PSBs which receive a big chunk of the deposit savings in the economy, are not lending well at all. They are rolling over bad loans, a big chunk of their assets is stuck in the restructured category." 

On consolidation move of smaller banks into larger banks for curbing bad loans, he said, "Historically any bank distress in India has been resolved by mergers. Banks in India haven’t typically failed except for small banks here and there. But the trouble is that a public sector bank cannot under the current statute be sold to a private sector bank."

A Credit Suisse report stated that it expects the overall ratio of impaired assets to rise from 12% to over 16%. This indicates the bad loans will continue to haunt banks. 

With this idea to create a 'bad loan bank' to solve the NPA issue, what direction will RBI take under leadership of Urjit Patel will  be interesting to watch. 
 

Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.

TAGS:
Viral AcharyaNarendra ModiUrijit PatelRaghuram RajanBanksBad loansNPAsNon-performing assetEconomyReserve Bank of IndiaBanking & Financial ServicesPublic Sector Banksprivate banks
Written By: Pooja Jaiswar
Updated: Wed, Dec 28, 2016
03:06 pm
Mumbai, ZeeBiz WebDesk
RELATED NEWS
Viral Acharya's resignation: RBI union moots collegium of experts to select governors, deputy governors Viral Acharya's resignation: RBI union moots collegium of experts to select governors, deputy governors
Why RBI deputy governor Viral Acharya resigned: Here's official RBI response Why RBI deputy governor Viral Acharya resigned: Here's official RBI response
RBI deputy governor Viral Acharya resigns, may return to the US: Sources RBI deputy governor Viral Acharya resigns, may return to the US: Sources
Urjit Patel quits in shock move! Viral Acharya next? Urjit Patel quits in shock move! Viral Acharya next?
RBI vs Centre: Urjit Patel in spotlight, markets on watch RBI vs Centre: Urjit Patel in spotlight, markets on watch

LATEST NEWS

Adani Enterprises calls off fully subscribed FPO; money to be returned to investors

Women in Budget 2023-24: Marginal rise in allocation for WCD Ministry; new savings scheme for women announced

US Fed hikes rates for first time in new year

Budget announces host of measures to enhance business in IFSC

Budget 2023: Massive hike in Senior Citizen Savings Scheme, Post Office Monthly Income Scheme; Govt doubles deposit limit | Details

Budget 2023: Tax sops, fiscal consolidation tight rope walk for FM Nirmala Sitharaman

Budget 2023: Infrastructure development capex hiked by 33% to Rs 10 lakh crore

ITC shares fall and then recover after government hikes cigarette taxes — do investors need to panic?

Budget 2023: Fully imported cars, including EVs, to cost more

Budget 2023: New Income Tax regime standard deduction - check amount

  • India News
  • World News
  • Companies News
  • Market News
  • Personal Finance News
  • Technology News
  • Automobile News
  • Small Business News
  • Income Tax Calculator
  • Live TV
  • Videos
  • Photos
  • Author
  • Rss Feed
  • Advertise with us
  • Privacy Policy
  • Legal Disclaimer

Latest Trending Updates

  • EPFO
  • Budget 2020
  • Income Tax Return
  • Auto Expo 2020
  • Home Loan
  • Business News

Trending Topics

  • Income Tax
  • income Tax Calculator
  • 7th Pay Commission
  • Reserve Bank of India
  • GST
  • Latest Business News

Follow us on

zeebiz
zeebiz

Partner Sites

  • Zee News
  • Hindi News
  • Marathi News
  • Bengali News
  • Tamil News
  • Malayalam News
  • Gujarati News
  • Telugu News
  • Kannada News
  • DNA
  • WION
© 2023. India Dot Com Private Limited. All Rights Reserved.
LIVE TV