Page 30 - Banking Finance June 2019

ARTICLE

Government As there is restriction under PCA on the expansion of
credit this has again negative impact and down trend
Government need to induct huge capital out of its own
on the economy which result into the venom cycle.
sources to bail out/save banks.
More pressure on the judiciary for NPAs related cases
Less money as a dividend. Rather than earning
government is losing the money. So on and so on……………………………..
Therefore it is directly impacting the deployment of
What lies beneath? Below the water
money for social and infrastructure development and
results in social and political cost. line.

Political favour/allegation game started. Government What lies beneath as below the water line (90%)? The
has to face the heat. causes. So by knowing that hitting point that will pave the
way somehow to hit below the water line.
Question mark on Government and Regulatory
authorities.
Mess caused by Borrowers
Economy Diversion of Funds: It is one of the important reasons
of NPA. Use of funds to projects other than the ones for
A strong banking sector is important for a flourishing
whom the loan actually sanctioned. Funds borrowed for
economy. The failure of the banking sector may have
a particular purpose but not used for the said purpose.
an adverse impact on economy and other sectors.
Diversion of funds for many ways like expansion/
Banks cannot support the economic activity due to the
modernization/setting up new projects/helping or
shortage of loanable funds as the resources get blocked
promoting sister concerns, using short term fund for
in the NPAs.
long term resources.
Crash/downfall of the value of stocks thus adversely
Wilful Defaults: This is another bigger portion of below
affecting the investors which ultimately is a cause of
the water line iceberg. Borrowers who are competent
discouragement for the public to contribute to such a
to pay back loans but are intentionally withdrawing it,
bank's deposits/shares and resources.
default in repayment obligation. Large borrowers (who
Stress in banking sector causes less money available to have aggregate fund-based and non-fund based
fund other projects, therefore, negative impact on the exposure of Rs. 5 crore and above, contributed to
larger national economy. maximum portion of NPAs.
As investments got stuck, it resulted in unemployment Siphoning of funds
and slow growth.
Lack of expertise in business
Investors do not get rightful returns. Even investors lose
Investment in too ambitious projects
their money in many cases.
Not having required capital but showing in balance
sheet so resulted wrong calculation.
Longer/wrong calculated gestation period of any
project and investing in it.
Failure to stop unwanted expenses.
Taking part in speculation and overtrading.

Mis management of stock/inventories
Lack of Quality Control: Quality management is not as
per the required standard.
Lack of planning.

30 | 2019 | JUNE | BANKING FINANCE