Page 4 - A Literary Review / NPAs

to sail through). So, all in all, the All of these moves were, in
entire hubbub fizzled into being theory, diversely varied to cover
yet another illustration of the nearly all segments of the debt
grandiloquent legend of the insolvency cycle, but in practice,
invisible hand balancing the moot. As the crescendoing
forces of order & disorder in critical mass of the mounting
counter-acting balance. menace kept trapezing through
However, a momentary its monstrous climb. And at the
breakthrough in a sea of a heart of it all? Were the twins.
decade-long skirmish should not
be time for a breather, or worser 2.1 Eruptive Brotherhood: Evil
yet, holidaying. Twining of the Twin Balance
Rather, it’s a strikingly Sheets.
opportune moment ripe for policy
discussion for the long-term To illustrate, let’s begin with
sustainable curtailment of this the metaphor of a winner’s curse,
moat-gator of a pickle. Afterall, it is a staple term in auction
this was far from a first rodeo for houses, it’s when the winning
the banking system brushing bidder woefully overbids the
against the Blackbox that this actual fair price of the item,
NPA rabbit hole can be, and has bleeding himself dry making a
become. As far back as the days loss in the process of “winning”
of ’91 at the inception of the bid. The “Twin Balance Sheet
economic liberalizing when the (TBS)” problem is an economic
NEP was soaking the deficit spill behemoth rather akin to such
of an economy spiralling a nutshell analogy. TBS is when
regressively in regression with an economy faces a double
decades of delinquently whammy of leveraging stress on
decadent doctrines. Back then is both the crediting banks’, as well
when the first NPA tryst puffed its as the borrowing firms’ parts. It
white
papers
of
wings in the Committee. As it the takes form the during booming
CRISIS TILL THE their mismanagement. eleventh down to assets capital (CRARs) the guiding principles of dealing where growing firms into overly
periods
lay
economic
of
cycle
Narasimhan
extrapolation
further
optimistic
With
9.3%.
to
improvements
in
Indian
risk-

with the NPA riddle, and built the
sails

in
classic

Nevertheless,
COWS COME hour, a surprising seems the and overall provision coverage through Asset day, NPAs since leave stretch, overextended order
giddy debt financing waters that
groundwork
fashion,
at
the
right
ratios
for
settlement
weighted
sally
Reconstruction
them
by
a
of
balance
(ARCs).
Ever
rebounding
tall
Companies
long
to
ratio (PCR) firmly laying the case
a
facing
of
through
that
missing
crack
of
marked
for uncanny optimism
have
way
stakes
jeopardized
its
HOME, The age of naysaying tenterhooks that the the most 1.2 Saved by the bell? been an identifiable yet exorbitant interest realized itself
banking
payments
at
perpetual headache.
of
forecasted
apparatus was teetering on. Just
the
slightest
Even so, the outlook stood far
ordered,
fluctuation,
which
as
doctor
the
case,
of
round
all
the
recent
NPAs' stopless saga
by
the
home
rainbows.
stress-tested
Report
hammered
Financial Stability bi-annual from being A sunshine and 2. BACKGROUND in the NPA crises’ great
furnished by the analysts and the simulation lay claims of a The bureaucratic outreach into GFC wreaking havoc. Whilst the
actualists at RBI brought in good peaking GNPA all the way to a the belly of the beast has been eagerly investing banks strew
A Literary Analysis, Raghu R. Rathore
tidings. With the glimmering silver 13.5% hike, with fringe prospects an anticlimactic, albeit loans en masse with little regard
lining coming in the way of a of touching base with 14.8% too, assiduously active, story. From for contingencies self-
starkly discernible drop in the all in time for fall 2021 by the Debt Recovery Tribunals, to encumbering themselves in
1. The air of financial punditry peaking disconcertingly high at dreaded GNPAs, though perhaps September. At the face of it, the Lok Adalats, from the vogue eventually condensing into
across the Indian economic nearabout the 9% mark, ruffling in the disguise of delineated these numbers should be SARFAESI Act to the innumerable anchored weights of debt
sphere is awash with the sound of quite a few feathers. And with a dispensations. A southward sending shockwaves of austerity rounds of debt restructuring. impairment.
entrenched dissonance grumbling backdrop of crippling recovery- tending trend at 7.5% of all for regulatory action. And Volley after volley of minor
incircles. Tolling the warning bells impotence spiced further by the SCBs’ averaged GNPA ratios indeed, RBI does stress the need nudges and levees in the face of 2.2 Revelations; Worse gets
for an onrushing debt typhoon, pandemic induced downturn strongly seconds a salvaging for individual banks to pull their a growing mountain of trouble. Worser.
with the NPA circus at its further putting a quasi-kibosh on sortie spouting hope weight and their socks up by the Finally forcing the need for an A startling 40% of NPA-laden
forefront. And by the looks of it, small-scale repayments, the that the regulatory buttress of scruff, and strategize capital entire rework of the bankruptcy corporates of India stood reeling
the analytical histrionics were far writing looked set on the wall for the nation’s framework stands provisions in a crucially mechanism, almost from the with an Interest Coverage Ratio
from misplaced. With Gross NPA crumbling crises in tow. Leaving tenacious in the sea of open executable manner (though RBI ground up. The product of which (ICR) of less than 1 (ICR being the
ratios (stacked against total the finance machinery deep in waters. In fact, GNPAs were also backhanded that threat with was the much-celebrated number of times EBITDA can
advances) bobbing over the high the red, red-faced in their down 190 bips in FY2019 - from a their comforting belief that SCBs Insolvency and Bankruptcy Code cover interest obligations, <1
tens of percentage points, ineptitude and red-handed in 11.2% high - all the way down to as a whole had enough capital (IPC) of early 2016. implying inability of the gains to
even cover credit repayments!).
#01 DRAFT VERSION
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