INDIA'S STRESSED ASSETS CONUNDRUM - SUGGESTED WAY-OUT

Dawn of Twenty First Century sighted the Stressed Assets {NPAs} These banks andfinancial institutions came under tremendous pressure for financing the projects inthe various sectors that perforce became necessary with the Economic Reforms in1991 that enabled the private participation in a wider sense in the economicdevelopment process followed by the Financial Sector Reforms 1991-1992 onwardsthat blurred the functional lines hitherto existed between the commercial banks andthe DFIs.Because of rising Non-Performance Assets (NPAs) of the major private participantsfrom the later part of the first decade of the new century the banks and financialinstitutions were not able to maintain their level of profitability in their operationswhich further constrained due to enforcement of Prudential Norms by the RBI. TheNPAs reached peak sometime in 2006-07 that led to increasing uneasiness in theFinancial Sector.This entailed amendment of the Banking Regulations Act 1949.Then came IBCwhich opened up a newer route to escape from honouring the NPAs resulting in writeoff of large public money. This is going on; the catastrophic outcome of which istelling upon the economic slowdown. The Prudential Norms Circular of 12 February2018 issued by the RBI was struck down by the Supreme Court.The PSBs having been working under invisible political interventions from the timethey were nationalized way back in 1969 aided more in building up the NPAs. ThePSBs having found themselves in a fixed situation due either because of policy orpolitical considerations were unable to act according to the loan covenants forrecovery of NPAs. IBC route had not been beneficial to the PSBs who ultimately hadno option but to make provision for Bad Debts/Doubtful Debts and write them off intheir books of accounts.This is the Work-in-Progress {WIP}