Examining the rise of Non-Performing Assets in India
Distilled Policy Brief
- Non-Performing Assets (NPAs) are loans where repayments of interest or principal remain unpaid for over 90 days, with gross NPAs in India rising from 2.3% of total loans in 2008 to 9.3% in 2017.
- Public sector banks account for approximately 85% of the total gross NPAs in the economy, which reached Rs 10.35 lakh crore as of March 31, 2018.
🎯 Prelims High-Yield Examination Points
Focus on NPA classification criteria (90-day default rule), asset quality ratios (Return on Assets), and jurisdiction split between NCLT and DRT under IBC.
⚖️ Mains Analytical & Syllabus Linkages
Analyze structural factors behind India's Twin Balance Sheet problem, the consequences of evergreening loans, and the role of parliamentary committees and RBI frameworks in resolution.
🎯 UPSC Prelims Practice Drill
With reference to Non-Performing Assets (NPAs) in the Indian banking sector, consider the following statements: 1. A loan is categorized as a Non-Performing Asset if repayments of principal or interest remain unpaid for over 90 days. 2. Public sector banks account for approximately 85% of the total gross NPAs in the economy. 3. Escalating NPAs lead to lower provisioning requirements for losses, thereby increasing a bank's Return on Assets (RoA). Which of the statements given above are correct?
- [A] 1 and 2 only
- [B] 2 and 3 only
- [C] 1 and 3 only
- [D] 1, 2 and 3
▶ Reveal Official Answer & Analytical Explanation
Statements 1 and 2 are correct: NPAs are loans where repayments of interest or principal remain unpaid for over 90 days, and public sector banks account for around 85% of the total gross NPAs in the economy. Statement 3 is incorrect because escalating NPAs require banks to set aside higher provisions for losses (not lower), which reduces their profitability and lowers their Return on Assets (RoA).
🏛️ Historical Twin PYQ Anchor (2021)
Consider the following statements regarding the "National Clean Air Programme (NCAP)": 1. It is implemented by the Ministry of Environment, Forest and Climate Change. 2. Central Pollution Control Board acts as the sole regulatory executive body.