AN OPEN CALL BY RBI FOR BANK'S TO SETTLE OUT "WILFUL DEFAULTS"

Based on recent guidelines issued by the Reserve Bank of India on Wilful Defaulters-

- A. K. Agnihotri

If businesses in an economy are enticed to lose money at a bank's cost rather than make money, a financial abyss may emerge. The Indian banking industry in recent past has got one of the highest percentages of loan assets classified as non-performing assets (NPAs). There was a time, when India was listed as having the fifth-highest level of non-performing assets (NPAs) in a report by CARE Ratings of 2020. The referred report divided the world's nations into four groups: those with very low levels of NPAs, those with low levels of NPAS, those with medium levels of NPAs, and those with high levels of NPAs. India has been categorised as having "high levels of NPAs" and is in category 4 with an NPA ratio of 9.85 percent. Only Greece (36.67%), Italy (16.35%), Portugal (15.52%), and Ireland (11.85%) have a worse NPAs scenario than India.

Gradually with lot of efforts from all corners of Financial System, the NPA position is under little control as per recent ORBIS data. Scheduled commercial banks' net non-performing assets (NPA) ratio fell to a 10-year low of 3.9 per cent in March 2023, the Reserve Bank of India noted in the latest edition of its Financial Stability Report. The public sector banks' financial situation has significantly improved, with profits being recorded on a consistent basis and the Insolvency and Bankruptcy Board of India (IBBI) moving quickly to resolve or liquidate their non-performing assets (NPAs). The government has also been giving the PSBs with sufficient budgetary support to maintain their sound capitalization, ensuring that their Capital Risk-Weighted Adjusted Ratio (CRAR) stays comfortably over the threshold levels of adequacy.