Why are NPAs higher in public sector banks?

Description

Social sector obligations are only part of the problem; the extreme inefficiencies in credit and recovery mechanisms remain the bigger issues, especially when compared with private sector competitors. In its recent report on governance in bank boards, P J Nayak, current head of Morgan Stanley India who headed the Reserve Bank of India (RBI)-appointed committee, pointed to the urgent need for the government to remove discriminatory external shackles imposed on public sector banks (PSBs), so that these banks can compete fairly with their private peers. This, in fact, is the general refrain from PSBs. They generally ascribe their burgeoning non-performing assets (NPAs) to their vulnerability to political pressures to lend to certain segments of the economy - known as "priority sector" lending - to fulfil social responsibilities. However, higher NPAs have been recorded in many sectors, including the priority sector, and the major stressed sectors are infrastructure, iron and steel, textiles, aviation and mining. Read more at: https://www.business-standard.com/article/opinion/charan-singh-why-are-npas-higher-in-public-sector-banks-114051901183_1.html

Publication Date

19-5-2014

Publication Title

Business Standard

Publisher

Business Standard Private Ltd.

Keywords

Financial management, Financial system, NPAs, Banking

Source Link URL

https://www.business-standard.com/article/opinion/charan-singh-why-are-npas-higher-in-public-sector-banks-114051901183_1.html

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