The asset quality of public sector banks (PSUs) has been deteriorating assets (NPAs) are steadily increasing. Unscrupulous lending and concentration of loans to big borrowers is the primary reason for increasing slippages. Recently, the All India Bank Employee's Association (AIBEA) released the list of top 50 defaulters who have not repaid their bank loans. Collectively, they owe about Rs 405 bn to the PSU banks (except SBI). Vijay Mallya's Kingfisher Airlines tops the list with a sum of Rs 26.7 bn. It is followed by Winsome Diamond and others as can be seen in today's chart.
The most worrying factor about rising NPAs in PSU banks is that they have increased due to weak credit administration and not due to financial crunch resulting from global crisis. These are ominous signs for PSU banks. It indicates that their lending practices were inadequate and proper credit checks were not conducted before loaning out money. But the steps taken by these banks once slippages have occurred are even more worrying. Most banks are undertaking write offs rather than indulging in loan recovery. This indicates laxity in efforts on their behalf to recover money.
The most worrying factor about rising NPAs in PSU banks is that they have increased due to weak credit administration and not due to financial crunch resulting from global crisis. These are ominous signs for PSU banks. It indicates that their lending practices were inadequate and proper credit checks were not conducted before loaning out money. But the steps taken by these banks once slippages have occurred are even more worrying. Most banks are undertaking write offs rather than indulging in loan recovery. This indicates laxity in efforts on their behalf to recover money.
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