Answer to Question #151072 in Management for HIMANSHU TIWARI

Question

In your view, what can be the possible reasons behind the increasingly high NPAs of the Indian banks? How far can this be attributed to the conditions prevailing in the Indian economy?

Answer 1

Indian banks, especially state-owned, have continued to experience increasingly high Non-Performing Assets (NPAs). This can be attributed to factors in the economy, such as low exports resulting from declining commodity prices in the global markets. This situation affects companies and businesses that are involved in such trade. Additionally, the economic crisis of 2008 affected businesses that had taken loans from banks. Most of them were unable to repay due to tough economic times in the country. This led to some banks giving fresh loans to some companies to enable them to repay their interests. The other factor contributing to high NPAs is increasing cases of fraud in the banking sector. Although the impact is small, it still affects banks, especially due to the lack of prosecution and penalizing high-profile fraudsters.