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Reality check: On bank NPAs

RBI report warns that the worst on NPAs may be yet to come. Urgent changes are needed

The worst is far from over for Indian banks. The financial stability(मज़बूती/स्थिरता) report released by the Reserve Bank of India on Tuesday has warned that the gross(सकल/कुल) non-performing assets(संपत्ति) (GNPAs) of scheduled commercial banks in the country could rise from 11.6% in March 2018 to 12.2% in March 2019, which would be the highest level of bad debt in almost two decades(दशकों). This puts at rest the hope of a bottoming( नीचे की ) out of the NPA crisis(संकटकाल) that has affected the banking system and impeded(बाधा डाली) credit growth in the economy. The GNPA of banks under the prompt(शीघ्र/तात्कालिक) corrective action framework, in particular, is expected to rise to 22.3% in March 2019, from 21% this March. The RBI believes that this will increase the size of provisioning(प्रावधानीकरण) for losses and affect the capital position of banks. In fact, the capital to risk-weighted assets ratio of the banking system as a whole is expected to drop from 13.5% in March 2018 to 12.8% in March 2019. The deteriorating(बिगड़ना/भ्रष्ट करना) health of banks is in contrast to the economy, which is on the path(मार्ग/राह) to recovery, clocking a healthy growth rate of 7.7% during the last quarter. The RBI, however, has warned about the rising external risks that pose a significant(महत्वपूर्ण/अर्थपूर्ण) threat(ख़तरा) to the economy and to the banks. The tightening(कसने /दबाना) of monetary policy by the United States Federal Reserve and increased borrowing(कर्ज लेना) by the U.S. government have already caused credit to flow out of emerging(उभरते) markets such as India. The increase incommodity(उपयोगी वस्तु/पदार्थ) prices is another risk on the horizon(क्षितिज) that could pose a significant threat to the rupee and the country’s fiscal(वित्तीय/राजकोषीय) and current account deficits(अभाव/कमी). All these factors could well combine to increase the risk of an economic slowdown and exert pressure on the entire(संपूर्ण/कुल) banking system.

A major highlight of the financial stability report is the central bank’s finding that public sector banks (PSBs) are far more prone(झुका हुआ/इच्छुक) to fraud than their private sector counterparts. This is significant in light of the huge(बड़ा) scam(घोटाला)unearthed(खोजकर निकालना/पता लगाना) at a Punjab National Bank branch earlier this year. The RBI notes that more than 85% of frauds could be linked to PSBs, even though their share of overall credit is only about 65%. This should come as no surprise given the serious corporate governance issues faced by public sector banks, which to a large extent(मात्रा/सीमा) also contributed to the lax(लापरवाह/सुस्त) lending(उधार) practices that are at the core of the NPA crisis(संकट). In his foreword to the report, RBI Deputy Governor Viral Acharya has noted that governance reforms at PSBs, if implemented(लागू किया,), can help improve their financial performance and also reduce their operational risks. For now, the RBI expects the government’srecapitalisation(पुनर्पूंजीकरण) plan for banks and the implementation of the Insolvency(दिवाला/शोधाक्षमता) and Bankruptcy(दिवालियापन) Code to improve the capital position of banks. These reforms can definitely help. But unless the government can gather(इकट्ठा करना) the courage to make drastic changes to aspects of operational autonomy and the ownership of PSBs, future crises will be hard to prevent(प्रतिबंध करना) .


Important Vocabulary

1.Worst(सबसे खराब )
Synonyms: lowest, bad, inferior, least, unfavorable
Antonyms: best

Synonyms:efficient, expeditious, immediate, instantaneous, precise
Antonyms: delayed, late, later, slow, sluggish

3.Commodity(उपयोगी वस्तु/पदार्थ)
Synonyms: asset, goods, material, produce, product

4.Borrowing(कर्ज लेना)
Synonyms: financing, renting, accepting a loan
Antonyms: loaning

Synonyms: appear, arrive, come up, crop up, develop
Antonyms: abandon, decrease, disappear, drop, fall

6.Prone(झुका हुआ/इच्छुक)
Synonyms: decumbent, face down, flat, horizontal, level
Antonyms: improbably, sitting, straight, unlikely, upright

7.Unearthed(खोजकर निकालना/पता लगाना)
Synonyms: ascertain, bring to light, determine, discover, dredge up
Antonyms: conceal, cover, hide, lose, miss

Synonyms: careless, indifferent, lenient, negligent, sloppy
Antonyms: attentive, careful, caring, concerned, hard

Synonyms: catastrophe, change, confrontation, crunch, deadlock
Antonyms: agreement, benefit, blessing, breakthrough, calm

10.Prevent(प्रतिबंध करना)
Synonyms: avert, avoid, bar, block, counter
Antonyms: advance, aid, allow, approve, assist



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