Issue of NPA in Indian banking sector.

When the interest or principal on the loan has been overdue for more than 90 days, the loan is classified
as non-performing asset (NPA). For such loans, there are two options. First, the banks can keep funding
such loans and hope for the growth, in time, in economy which will solve the problem. The second is
that banks can write off these loans as bad loans. In other words, banks can accept that these are losses
and move on.

The Indian banking sector is being plagued by this problem of increasing NPA. This bad loan crisis did not
happen overnight. Indian lenders, especially the public sector banks, have been lending high risk
investments in order to appease the government. These high risk investments do not always turn into
sufficient profitability. With the increase in number of such companies whose operating profits are
lower than the interests these companies owe to banks, the companies take further loan to support
their loan. These loans are now stressed assets. The stressed assets of the banks are now at 11.3%. This
results in the banks not being able to cover the loss of the value of their assets. As mentioned earlier,
the banks have two options. In India, the governor of RBI, Raghunath Rajan, has suggested going for the
second method. The second method comes with immediate costs. That is why Indian banks try to resist
this type of shocks.

According to a report by the Indian Express, the NPA stood at Rs. 52,542 crore by March 2015, tripled
from three years ago. The rise in bad loan lending has been more rapid in the last few years as
compared to previous years. The bad debts for public sector banks rose by 4% for 2004-12 while they
rose by 60% for 2013-15. Owing to this situation, Raghunath Rajan has suggested going for the second
option, that is, the surgery method. Between 2013-2015, 29 public sector banks declared 1.14 lakh
crores as bad loans.

The problem of NPA did not come as a shock to investor. Yet, the reaction from their side has been
bordering to panic. Some camps believe Raghunath Rajans surgery method would be futile at this
moment as the economy is still growing at a pace lesser than its capacity.

Legal methods can also help bank recover bad loans. Debt Recovery Tribunals help with resolving cases
of defaulting over 10 lakhs and there are Lok Adalats as well as the Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act. Lok Adalats help in smaller cases of arbitration
and settlement. The Interest Act allows banks to retrieve assets from a non performing borrower
without going to courts.

All in all, the NPA crisis that has gripped India can be pacified. Is it Raghunath Rajans suggested surgery
or the legal discourse taken by the banks or yet the stressing of the bad loans that will relieve this
problem is yet to be known.
True freedom does not exist.

The 20 year old youth thought about how much freedom he had got as he got out of bed. He had finally
moved out of his parents house and bought his own flat in a new city. No one would interrupt him
when he would work, no one would wake him up when he felt like sleeping. He was free indeed.

But, was this true freedom? He still had to work every day to fulfill someone elses dreams just so that
he could enjoy a weekend with his friends. Nothing comes free. Not just that, he did not really feel free
to speak his mind and shout out his heart in a rigid and judgmental society. He was bound by the social
burden of being a civil citizen and not behaving like a crazy young boy that he yearned to be. The laws of
the nation as well as the sermons of his conscience kept him chained to the non-spiritual body that he
wished to be free from. He understood that a society could not function if restrained was not exercised
and it was the duty and responsibility of every person to be a good human being.

The young man wandered what true freedom was. Was it being able to spread wings and fly like a bird?
Or was it being able to explore the depths of the ocean like an ocean fish would do? He did not know
the answer. He finally decided to get out of bed. At least he was free to take a walk before life began.