Finance Minister announces 2.11 lakh crore to re-cap banks

Photo Credit: REUTERS/Danish Ismail

The non-performing assets (NPAs) stood at Rs 7.7 lakh crore at the end of March 2017, according to a Bloomberg article.

Different charts explaining the staus of non-perfomring assets of banks.

Bad Loan Stock Grows

Source: Bloomberg|Quint

Banks with steepest rise in bad loans

Source: Bloomberg|Quint

Banks with highest NPA Ratios

Source: Bloomberg|Quint

The RBI cites three reasons for these loans which have gone bad: genuine business reasons; wrong business decision and inefficiencies; and

Source: IndiaSpend

When he was the governor of RBI, Raghuram Rajan wrote an email to the employees, “We do not punish the wrong-doer–unless he is small and
weak.This belief feeds on itself. No one wants to go after the rich and well-connected wrong-doer, which means they get away with even more. If
we are to have strong sustainable growth, this culture of impunity should stop.”

In between 2009 and 2016, the government has pumped about Rs 93,000 crore into public sector banks. Finance Minister Arun Jaitley announced a
plan to give $32 billion in the next few years.

Source: Bloomberg|Quint, McKinsey

The non-perfomring assest have increased by 3.78 times in the last 4 years according to Congress MP, Shashi Tharoor.

A few major developments from Jaitley’s plan.

  1. Rs. 1.35 lakh crore in capital infusion to be done through recapitalisation bonds
  2. Rs. 76,000 crore in capital infusion to be drawn from budgetary support
  3. Capital infusion would be done over the next two fiscals
  4. Nature of recap bonds, details to be made public soon
  5. Series of banking reforms to be announced in next few months

Edited by: Hari