Presently the Indian Banking is passing through a deep crisis mainly on account of mounting Non-Performing Assets, which were unfolded after the Assets Quality Inspection by the RBI at the instance of the then RBI Governor Raghuram Rajan. The growth in NPA was phenomenal. Non-Performing Assets as on 31st March 2015 was Rs 2.78 lac crore which increased up to Rs. 5.39 lac crore as on 31st March 2016 i.e. recording growth by 93.62% while as on 31st March 2017 Rs. 6.85 lac crore shot up by i.e. contributing growth by 26.88% and Rs. 8.42 lac crore as on 31st March 2018 i.e. contributory further growth by 22.94%. Thus this enormous growth in the last three years is increased by 302.03%. This had a two-fold adverse impact on the profitability of the Bank. In its first place banks lost the interest on the said amount and on the other side, banks had to make provision for the said amount in phases. Notwithstanding this 21 PSB’s have booked an operative profit of about 1.54 lac crore for the year March 2018 but due to provisions made on account of NPA amounting to Rs. 2.47 lac crore has to book the loss amounting to Rs. 80282 crore. In some of the banks, the continued losses capital eroded which forced the government, the owner of the public sector bank, to infuse capital in order to fulfil regulatory compliances. In March 2018, 19 of the 21 PSB’s recorded losses. There is a strong possibility of this trend continuing this trend in the current year as well.

This situation aggravated further after the Nirav Modi scam came to light. Arvind Subramanian, the Economic Advisor to the Prime Minister, in his immediate response stated that the government cannot afford to have the luxury of inducing repetitive doses of capital to the ailing banks at the cost of taxpayers. This statement was supplemented further by the captains of Industry from ASSOCHAM and FICCI demanding privatisation of public sector banks. This was obvious. The captains of industry also said that the ownership structure of the public sector banks is the root cause for the present crisis.

As all are aware, despite an operating profit of about Rs 1.54 lac crore PSB’s recorded a loss of Rs. 80,000 crore mainly due to provisions on account of NPA to the tune of Rs. 2.47 lac crore, in which the share of big business houses is 85.60% which indicates that the big business houses are responsible for the present crisis in PSBs. The same large corporates, who are defaulters, are daydreaming to own these ailing banks is astonishing. The suggestions for privatisation of PSBs seem misdirected however this is an unfinished agenda of the pro-reform lobby.
The Narendra Modi Government after assuming the office initiated steps to improve the health of the Public Sector Banks. Towards this goal, Gyan Sangam was organised at the NIBM campus Pune. The Prime Minister himself attended the meeting. The Gyan Sangam was followed by Gyan Sangam-II and then Indra Dhanushya etc. However, despite these initiatives the health of PSB, instead of improving, continued to deteriorate and now the crisis has reached a peak level.

It was Raghuram Rajan, the then Governor of RBI, at whose instance the Asset Quality Inspection was carried out in all PSBs, which landed the PSBs in the present crisis. Upon realising the gravity of the crisis, the present government took initiatives such as the Insolvency and Bankruptcy Act to resolve the issue of the amount due from big corporates. Initially, 12 big corporate accounts, with total admitted claims of Rs 3.26 lac crore, were referred to the National Company Law Tribunal. Though the process is on all concerned are slowly realising that it is very difficult to recover even 50% of the amount claimed. Thus, the bankers are required to provide for the balance amount and precisely this is the reason why almost all the banks continue to record the losses. Hence, the core question that ‘How PSB’s will come out of the present crisis?’ remains unanswered?

Piyush Goyal, the caretaker Finance Minister, had convened the meeting of Chief of all PSB’s, in which the idea of Bad Bank was tossed up but now the formation of Assets Recovery Company is being thought of for big NPAs whereas for the small and medium-size NPAs “Mission Sashakta” was launched. Since the government has realised that the sacrifice for the bankers is inevitable, the government is left with no other option but to infuse capital in ailing Banks.

The core issue before the banking sector is “Recovery” of the loan, whether it is small, medium or large. If the account becomes NPA, nobody wants to repay. In case of farm loans in 2016, around Rs 5,318.75 crore was waived off by the Tamil Nadu Government. In 2017, the Maharashtra Government waived Rs. 30,500 crore. Karnataka in 2017 around Rs. 8165 crores. UP, in 2017 around Rs. 36,359 crores. In Jammu & Kashmir around Rs. 244 crores. In Punjab around Rs. 10,000 crores and in Chhattisgarh around Rs. 129.76 crores were waived. In 2014 Andhra Pradesh & Telangana Government and Union Territory Pondicherry, Crop loans have been waived. PSBs in order to reduce NPAs in their Accounts, and as a Balance sheet mechanism, have written off around 2.61 lac crore in last 6 years. In just 2017-18 PSBs wrote off around 1.44 lac crore. Maybe all this writing off of loans is justifiable but in the end, the entire banking recovery climate is vitiated for which the citizens are paying in the form of taxes. How far will this continue?

If all this continues, one day the banking will collapse, resulting in the collapse of the economy.

*Tuljapurkar is Joint Secretary of All India Bank Employees Association.

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