NPA blues: Largest lender of the nation rests its hopes on new ordinance

Several PSUs banks are struggling to deal with the swelling NPAs and there is nothing new in it except the fact that the government has oflate taken some very crucial steps to bail out the ailing banks from this crisis. An Ordinance was passed in the week just passed by to provide more ammo to the Reserve Bank of India to control the NPA menace and to start insolvency proceedings against the defaulters and also to assemble committees to advise them on recovering non-performing assets from the borrowers. Arundhati Bhattacharya, the face of Indian banking and chief of State Bank of India while speaking at an event on 'Asian Banking in Challenging Times' said on Saturday that loans that have become bad with passing time have lost their strength to produce ample money to pay their interest liability.

And the reasons for that have been huge time overruns, leading to cost overruns, which lead to over-leveraged positions, she added as reported by a national news agency.

A recent report by Credit Suisse revealed that nearly 16.6 per cent of loans to corporates - or about 8.4 per cent of the GDP - had been declared non-performing.

Presently banks are bleeding with piling NPAs. The stressed assets which range between Rs 9 lakh crore to Rs. 12 lakh crore are mostly made of bad loans, restructured debt and advances to companies that violated servicing obligations.

"I still believe we have huge potential in the country. The difference of the NPLs (non-performing loans) this time around is the fact that many of the NPLs are assets that are still working," said Bhattacharya, quoted the agency.

She believes that things will take a positive turn in the days to come. While speaking at the sidelines of the event she said, "In view of the fact that our economy is still growing so there is demand over there which has to be properly nurtured and may be also channelised. If you do that, many of these units will probably come back and the write-downs that we will take will probably, not surely, but probably, we will be able to claw back at some point of time."