When the borrower stops paying interest or principal on a loan, the lender will lose money. Indian Banking industry is seriously affected by Non-Performing Assets. In the best interest of our readers, we have come up with a comprehensive post on NPAs, in which analyze the entire issue in detail. Now suppose that initially everything was good and the market forces were working in support to the airline industry, therefore, Kingfisher was able to service the interest amount.
How to solve issue of rising non-performing assets in Indian public sector banks
A critical review of non-performing assets in the Indian banking industry | Emerald Insight
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RISING NPAS IN INDIAN BANKING SECTOR: CAUSES, EFFECTS, IMPLICATIONS AND REMEDIES
The enactment of the Insolvency and Bankruptcy Code, and the announcement of the recapitalisation plan for the public sector banks are likely to have far-reaching implications for the banking sector. Both will likely contribute to a stronger and more resilient banking sector in India. It enables a sound debtor-creditor relationship by protecting the rights of both, by promoting predictability and by ensuring efficient resolution of indebtedness. In view of the impending move towards the full implementation of Basel III requirements and the need to meet the credit demands of a growing economy, buffering up the capital position of public sector banks has assumed priority. Concluding observations are set out in Section IV.
The economic progress of a nation and development of its banking sector is invariably interrelated. The banking sector is an indispensable financial service sector supporting development plans through channelizing funds for productive purpose, intermediating flow of funds from surplus to deficit units and supporting financial and economic policies of the government. Banks serve social objectives through priority sector lending, mass branch networks and employment generation. Maintaining asset quality and profitability are critical for banks survival and growth. In the process of achieving such objectives, a major roadblock to banking sector is prevalence of Non-Performing Assets NPA.