- The government cleared a package to resolve the persistent rise in non-performing assets that are plaguing public sector banks and denting credit growth.
- The package, which includes an ordinance to amend the Banking Regulation Act of 1949 to empower the Reserve Bank of India to take more actions to check bad loans, is learnt to have been cleared by the government.
- The Cabinet has recommended an ordinance which has to first go to the President to secure his assent.
Issue with bad loans
- Bad loans in the Indian banking system have gone up sharply in the last one year.
- According to Reserve Bank of India data, gross NPA, as a percentage of gross advances went up to 9.1% in September 2016 from 5.1% in September 2015.
- The stressed assets moved up from 11.3% to 12.3%.
- Stressed assets in some of the public sector banks have approached or exceeded 20%.
- Economic survey of 2016-17 has pointed out the twin balance sheet problem that is, stressed companies on one hand and NPA-laden banks on the other.
Source : The Hindu
GS III : Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.