Npa essay upsc

This is how the NPA curve has been moving in the recent years, as per a news report in the Business Standard: Private-sector and foreign lenders are better placed. Their NPAs in proportion of their lending is lesser than that of the PSBs.

According to Reserve Bank of India (RBI) explains the definition of NPAs, “An asset makes non-performing when it stops to generate income for the bank.”

The Corporates also affect the impact of higher NPA. Stress in banking sector causes less money available to fund other projects, therefore, negative impact on the larger national economy. Higher interest rates by the banks to maintain the profit margin.

Indian banks can adopt a similar arrangement by involving the RBI directly or through the creation of a Special Purpose Vehicle (SPV). Structural change to involve private capital – The compensation structure and accountability of banks create a problem for the market.