Why NPA’s have become an issue for banks and FII’s in India?
• The origin of the problem of burgeoning NPA’s lies in the quality of managing credit risk by the banks concerned. • What is needed is having adequate preventive measures in place namely, fixing pre-sanctioned appraisal responsibility & having an effective post-disbursement supervision. • Banks concerned should continuously monitor loans to identify accounts that have potential to become non-performing. • Resolution of NPA’s • At present, local banks are saddled with the management of NPA’s for which they do not have management time for proper resolution. • As a result, they are reluctant to make new loan to industrial or commercial enterprises as NPA’s have strained their resources. • The unavailability of new loans has therefore hindered economic growth and development. • Contd…… • ADB intends to assist local banks resolve their problems with NPA’s by facilitating the financing of SPV’s and other mechanisms designed to acquire and service such assets. • This will enable the local ba
