New Delhi:
If the current NDA government is to be believed, the whopping Non-performing Asset (NPA) figures are because of the indiscriminate lending practiced by its predecessor UPA government. The ruling BJP has from time to time claimed that the Congress led UPA government allowed banks to give out loans worth crores just on the basis of one phone call. Prime Minister Narendra Modi, on multiple occasions, had termed the UPA’s loaning system as the ‘phone-a-loan’ scam. However critics say that despite knowing the fact that the banks are in troublesome state, the NDA government didn’t paid much attention to the crisis.
Recently Finance Minister Niramala Sitharaman blamed the downtrending GDP growth in the last two financial years on the effect of the ‘twin balance sheet crisis’. Blaming this on the Congress-led UPA government’s policies, she said, “That’s when phone banking was also happening.”
Highlights:
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The BJP led NDA claims that the previous UPA govt allowed banks to give out loans worth crores just on the basis of one phone call.
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However critics say that despite knowing the fact that the banks are in troublesome state, the NDA govt didn’t paid much attention to the crisis
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One cannot deny the fact that such a crisis couldn’t erupt overnight and the UPA govt has a role in it; but also at the same time the role and policies of NDA govt is also questionable which failed to check and effectively resolve this crisis
Reports suggest that gross NPAs (GNPAs) in the banking sector have seen a nearly four-fold increase since 2014, when the Narendra Modi-led government came to power. On the other hand, a few analysts argue that the NPAs were always there (since 2010) but were not visible on balance sheets of banks. The real NPAs came in light after the then RBI Governor Raghuram Rajan asked banks to come clean with their accounts and initiated asset quality review (AQR) which led to revelation of high NPAs.
In June this year, Finance Minister Niramala Sitharaman had told the parliament that GNPAs of PSBs jumped over two-fold to Rs 8.95 lakh crore in FY18 from Rs 2.79 lakh crore in FY15, according to RBI data, mainly on account of the recognition of stressed assets as a bad loan by the central bank.
Even the former RBI Governor, in his note to the Parliamentary Estimates Committee in September 2018, had asserted that most bad loans originated in the period 2006-2008 when economic growth was strong. Previous infrastructure projects such as power plants had been completed on time and within budget. Thus the banks extrapolated past growth and performance to the future.
In the same note, Rajan had mentioned that the suspected allocation of coal mines, spectrum coupled with the fear of investigation slowed down government decision making, both in the UPA and NDA. This led to delay in various projects and the project cost overruns escalated, making them (promoters) became increasingly unable to service debt.
According to government data, bad loans of public sector banks have declined by Rs 89,189 crore to Rs 8.06 lakh crore during the financial year 2018-19. Meanwhile, as per RBI provisional data on global operations, gross NPAs of Scheduled Commercial Banks (SCBs) stood at Rs 9.49 lakh crore during FY19.
Though one cannot deny the fact that such a crisis couldn’t erupt overnight and the UPA government has a role in it; but also at the same time the role and policies of NDA government, which has been in power since last almost 6 years, is also questionable, which failed to check and effectively resolve this crisis.
