The NPA mess was one of the biggest scams in India which lead to the collapse of the banking system. The Congress era mess which was created by lending loans to influential businessman without any security or guarantee turned out to be downfall for the Indian economy. The Congress which was directly responsible for this literally ruined the Indian banks.
Vijay Mallya, Nirav Modi, Mehul Choksi who have all fled India today were beneficiaries of getting crores of loans without providing security. Nearly 52,000 crore loan amount had turned into NPA in the last 7-8 years.The Modi government which took charge in 2014 had been struggling to get back the loan amount which is finally yielding results.
According to RBI data, the NPA mess have greatly reduced since past 6 months and is likely to help banks bounce back on track. Both gross and net non-performing assets (NPAs) of scheduled commercial banks have reduced in the two quarters ending September 30, 2018 since their peak in March 2018, the Reserve Bank of India (RBI) said on Tuesday.
However, the RBI did point out that the profitability of banks was still impacted due to a decline in earnings from loan assets and on higher provisioning required due to deterioration in asset quality. That said, it highlighted the bank credit growth that had accelerated over the last two quarters. The RBI, in its submissions to the Standing Committee on Finance, said that the gross and net NPAs of scheduled commercial banks had reduced due to the concerted efforts taken by the government and the central bank to address the problem.
“As a consequence of these measures, the gross NPAs as well as net NPAs of the scheduled commercial banks, after peaking in March 2018, have registered declines for two consecutive quarters,” the RBI said in its submission reviewed by The Hindu.
The data by RBI shows that the gross NPAs of all commercial banks have come down to 10.36 Lakh crore by the end of March 2018 and further went down to 10.14 lakh crore by September end.
However the public sector banks have the maximum NPA burden with 86.6% of all gross NPAs of scheduled commercial banks, but it fell to 85% by September end. Net NPAs for all scheduled commercial banks fell from ₹4.54 lakh crore in the March quarter to ₹4.10 lakh crore as of September 30. Correspondingly, the net NPA percentage fell from 7.97% to 7.19% over the same period.
One of the main reasons why the banks are recovering the loan amount is because of the introduction of the Insolvency and Bankruptcy Code by Modi government which has made most of the companies return back the money.
Since last one year there has been huge recovery to banks with companies fearing a shutdown. So, it is matter of time that banks will recover the amount and the country will slowly come out of NPA mess.