Non Performing Assets and Crisis

A Non-performing asset (NPA) is defined as a credit facility in respect of which the interest and/or installment of principal has remained ‘past due’ for a specified period of time.

The issue of big loan defaults and non-performing assets of public sector banks came to the fore when United Bank of India declared high profile liquor baron Vijay Mallya’s promoted Kingfisher Airlines, its directors: Subhas R Gupte, Anil Kumar Ganguly, Ayani Kurassi and Ravindranat H Nedungadi, as the wilful defaulters.

As per RBI guidelines, a wilful defaulter has the capacity to repay the debt but does not service it or uses the loan for purposes other than the sanctioned ones. The next day India’s apex court dismissed Kingfisher Airlines’ plea against the United Bank of India’s decision to declare the company a wilful defaulter.

The issue also rose to prominence when CBI, India’s anti-corruption agency, arrested Syndicate Bank CMD S K Jain, some middlemen and Neeraj Singal, Managing Director of Bhushan Steels for enhancing the company’s credit limit in violation of laid down procedure. As per the latest data given in the Parliament, NPAs of public sector banks nearly doubled from Rs. 1.17 lac crore in 2012 to Rs. 2.27 lac crore in 2014.

Suggested Reading

Rajyasabha Tv Special on NPA

 

 

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