Page 31 - Banking Finance June 2023

ARTICLE

NPA

MANAGEMENT

OF PSU BANKS

AT THE COST OF

EXCHEQUER

Introduction: To avert the credit risk, there are rising trends of
commercial banks' intention of making their funds to be
Banking sector reform was done on the expectation of
invested in the government and other approved securities
allocation of more commercial banks' credit to the existing
other than investing in the real sectors in spite of
real sectors vis-à-vis reducing operating costs of banks and
significant margin of fall in the non-performing assets
statutory reserve and cash reserve ratios. Special attention
was put upon reduction of a large fund in the head of bad (NPA) of the banks.
debt which is popularly known as the non-performing assets
(NPA) so that the productive real sectors are entitled to Moral suasion, Capital Infusion and other incentives have
get more bank credit in one hand and profitability of been used by Government of India and Reserve Bank of
banks rises on other. India to motivates the Banks for lending to real sector
specially the Priority Sector as classified by Reserve Bank of
Assumptions were made that, it will improve the health of India. Before discussing, how the PSU Banks in India have
the banking institutions, it will also lead to influence the real paly upon the craving of Government of India, first let discuss
sectors' output growth through channelization of savings
what is NPA and how the loan in India are classified as NPA.
money into investment money as there is linkage between
financial sector and real sector.
Non-Performing Assets (NPA):
As per RBI Master Circular on Prudential norms on Income
About the author
Recognition, Asset Classification and Provisioning pertaining
Dr. Deepak Kumar to Advances No. RBI/2023-24/06 DOR.STR.REC.3/21.04.048/
Senior Manager (Research) 2023-24 dated 01-04.2023 an asset, including a leased asset,
Union Learning Academy, Credit &
becomes non-performing when it ceases to generate income
Policy, Union Bank of India, Lucknow
for the bank.
28 | 2023 | JUNE | BANKING FINANCE