Economic Survey : Banking

  • Suggests setting up public sector asset rehabilitation agency (PSARA) to take charge of large bad loans in banks.
  • With government backing, PSAR can overcome coordination and political issues on bad loans
  • As per the Survey, gross NPAs has climbed to almost 12 per cent of gross advances for public sector banks at end-September 2016.
  • At this level, India’s NPA ratio is higher than any other major emerging market, with the exception of Russia.
  • The consequent squeeze of banks has led them to slow credit growth to crucial sectors-especially to industry and medium and small scale enterprises (MSMEs)-to levels unseen over the past two decades.
  • As this has occurred, growth in private and overall investment has turned negative. A decisive resolution is urgently needed.

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