Banking on change
The level of gross non-performing assets or bad loans in the banking system is expected to spike to 4.4 per cent by the financial year 2014-15, from the current 3.9 per cent, according to an analysis by Standards & Poor's. At the same time, the additional funding requirement for the sector is expected to rise to Rs 2,80,000 crore in another five years. The aggregate profitability of the sector has correspondingly dipped below the long-term trend. Taken together, the numbers mean the sector would be stressed for funds to shore up its capital base and lending books.
While the default by borrowers, both in the corporate and retail sectors, in the repayment of loans has hurt the banks, the nature of the ownership of the public sector banks has also played a crucial role in leading the sector to its present predicament. The weak capital base of government-owned banks has hurt their ability to lend more. The weakness is because the government, their principal shareholder and itself fiscally challenged, has found it tough to add to or even retain their capital at current levels. In this context, the announcement by the Reserve Bank of India on Friday to invite fresh applications to set up new banks is enormously welcome. The new banks will take at least a year to be up and running. But what they would do is introduce a sense of urgency to the operations in a sector that forms the fulcrum for a possible revival of the growth story.
- Activist, her aide booked for cheating in attempt to frame acquitted murder accused
- Extended Monorail running hours fails to pull crowd
- HC orders action against Essel World for causing harm to mangroves
- Cops crack bar girl’s murder case after waiter’s tip-off
- Railway to provide plastic pouches for commuter IDs
- Last safety check for Metro to begin April 18