{"id":5964,"date":"2018-03-21T15:55:00","date_gmt":"2018-03-21T10:25:00","guid":{"rendered":"https:\/\/teekhapan.wordpress.com\/?p=5964"},"modified":"2018-03-21T15:55:00","modified_gmt":"2018-03-21T10:25:00","slug":"lets-move-beyond-nirav-modi-bad-loans-are-bleeding-india","status":"publish","type":"post","link":"https:\/\/vivekkaul.com\/2018\/03\/21\/lets-move-beyond-nirav-modi-bad-loans-are-bleeding-india\/","title":{"rendered":"Let\u2019s Move Beyond Nirav Modi, Bad Loans Are Bleeding India"},"content":{"rendered":"
Media reports suggest that Nirav Modi is in New York, and has no plans of coming back to India. His operational fraud is expected to cost PNB Rs 12,646 crore. PNB is the second largest public sector bank in the country and as of December 31, 2017, had accumulated bad loans of Rs 57,519 crore. A bad loan is a loan which hasn\u2019t been repaid for a period of 90 days or more.<\/p>\n The one good thing that has happened since Nirav Modi\u2019s fraud came to light is the relentless focus of the mainstream media on the operations of India\u2019s government owned public sector banks.<\/p>\n The total bad loans of the public sector banks as of December 31, 2017, stood at Rs 7,77,280 crore. This forms 86.4% of the total bad loans of scheduled commercial banks (i.e. public sector banks + private sector banks + foreign banks).\u00a0 This basically means that the total bad loans of scheduled commercial banks as of December 31, 2017, would be around Rs 9,00,000 crore.<\/p>\n Hence, Nirav Modi\u2019s fraud of Rs 12,646 crore is just a drop in this ocean of bad loans. But his fraud has put a face to the sad state of affairs that prevails at public sector banks and has thus elicited interest from the mainstream media and the common public.<\/p>\n Before Nirav Modi came long, the bad loans of public sector banks was just an issue which with the business press was concerned about. Now even the TV channels in different languages are having discussions around the issue.<\/p>\n Nevertheless, the fundamental issue at the heart of the bad loans of India\u2019s public sector banks continues to remain unaddressed. Who is responsible for this mess and what should be done about it?<\/p>\n The government released some interesting data earlier this month in an answer to a question raised in the Lok Sabha. As per data from the Reserve Bank of India (RBI), the total bad loans from the \u201cindustry-large\u201d category of loans, as of December 31, 2017, stood at Rs 5,27,876 crore. This was for scheduled commercial banks as a whole. The RBI defines a large borrower as a borrower with whom the bank has an exposure of Rs 5 crore or more.<\/p>\n Such borrowers are essentially responsible for a bulk of the bad loans of the banks in India. They are responsible for around 59% of the bad loans (Rs 5,27,876 crore expressed as a percentage of Rs 9,00,000 crore) of scheduled commercial banks. Bank loans to large industrial borrowers formed 59% of the bad loans, even though the total lending by banks to such borrowers formed only around 30 per cent of the total loans given by banks.<\/p>\n Public sector banks accounted for Rs 4,64,253 crore or 88% of bad loans in this.
\n\u201cNirav Modi, Nirav Modi, where have you been<\/em>?\u201d is a question that the bankers at the Punjab National Bank (PNB), must be asking themselves these days.<\/p>\n
\nIn fact, the much criticised public sector banks do a pretty decent job of lending to the retail sector. Take a look at Table 1, which basically compares proportion of retail loans which turn bad with proportion of loans to corporates which turn bad, for a few public sector banks.
\nTable 1:<\/p>\n