{"id":26753,"date":"2024-02-12T09:42:50","date_gmt":"2024-02-12T09:42:50","guid":{"rendered":"https:\/\/edukemy.com\/blog\/?p=26753"},"modified":"2024-02-12T09:42:52","modified_gmt":"2024-02-12T09:42:52","slug":"upsc-mains-what-is-your-understanding-of-non-performing-assets-npa-despite-various-measures-taken-by-the-government-of-india-the-banking-sector-in-india-continues-to-grapple-with-the-persistent","status":"publish","type":"post","link":"https:\/\/edukemy.com\/blog\/upsc-mains-what-is-your-understanding-of-non-performing-assets-npa-despite-various-measures-taken-by-the-government-of-india-the-banking-sector-in-india-continues-to-grapple-with-the-persistent\/","title":{"rendered":"UPSC Mains &#8211; What is your understanding of Non-Performing Assets (NPA)? Despite various measures taken by the Government of India, the banking sector in India continues to grapple with the persistent challenge of Non-Performing Assets. Examine. (15M, 250 words)"},"content":{"rendered":"\n<figure class=\"wp-block-image size-full\"><a href=\"https:\/\/edukemy.com\/refer-and-earn\" target=\"_blank\" rel=\"noreferrer noopener\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1280\" height=\"300\" src=\"https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/09\/Attempt-our-Daily-Weekly-Current-Affairs-Quiz-now-10-1.png\" alt=\"\" class=\"wp-image-46428\" srcset=\"https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/09\/Attempt-our-Daily-Weekly-Current-Affairs-Quiz-now-10-1.png 1280w, https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/09\/Attempt-our-Daily-Weekly-Current-Affairs-Quiz-now-10-1-1170x274.png 1170w, https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/09\/Attempt-our-Daily-Weekly-Current-Affairs-Quiz-now-10-1-585x137.png 585w\" sizes=\"(max-width: 1280px) 100vw, 1280px\" \/><\/a><figcaption><a href=\"https:\/\/edukemy.com\/refer-and-earn\" target=\"_blank\" rel=\"noopener\" title=\"\">Refer &amp; Earn NOW<\/a><\/figcaption><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_73 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<label for=\"ez-toc-cssicon-toggle-item-6a1f900d06dfc\" class=\"ez-toc-cssicon-toggle-label\"><p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-cssicon\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a1f900d06dfc\"  \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-what-is-your-understanding-of-non-performing-assets-npa-despite-various-measures-taken-by-the-government-of-india-the-banking-sector-in-india-continues-to-grapple-with-the-persistent\/#Introduction\" title=\"Introduction:\">Introduction:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-what-is-your-understanding-of-non-performing-assets-npa-despite-various-measures-taken-by-the-government-of-india-the-banking-sector-in-india-continues-to-grapple-with-the-persistent\/#Body\" title=\"Body:\">Body:<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-what-is-your-understanding-of-non-performing-assets-npa-despite-various-measures-taken-by-the-government-of-india-the-banking-sector-in-india-continues-to-grapple-with-the-persistent\/#Non-Performing_Asset_NPA_Classification\" title=\"Non-Performing Asset (NPA) Classification:\">Non-Performing Asset (NPA) Classification:<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-what-is-your-understanding-of-non-performing-assets-npa-despite-various-measures-taken-by-the-government-of-india-the-banking-sector-in-india-continues-to-grapple-with-the-persistent\/#Reasons_for_the_Persistence_of_the_NPA_Crisis_in_the_Indian_Banking_Sector\" title=\"Reasons for the Persistence of the NPA Crisis in the Indian Banking Sector:\">Reasons for the Persistence of the NPA Crisis in the Indian Banking Sector:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-what-is-your-understanding-of-non-performing-assets-npa-despite-various-measures-taken-by-the-government-of-india-the-banking-sector-in-india-continues-to-grapple-with-the-persistent\/#Actions_Taken_by_the_Government_of_India\" title=\"Actions Taken by the Government of India:\">Actions Taken by the Government of India:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-what-is-your-understanding-of-non-performing-assets-npa-despite-various-measures-taken-by-the-government-of-india-the-banking-sector-in-india-continues-to-grapple-with-the-persistent\/#Way_Forward\" title=\"Way Forward:\">Way Forward:<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-what-is-your-understanding-of-non-performing-assets-npa-despite-various-measures-taken-by-the-government-of-india-the-banking-sector-in-india-continues-to-grapple-with-the-persistent\/#In_case_you_still_have_your_doubts_contact_us_on_9811333901\" title=\"In case you still have your doubts, contact us on 9811333901.&nbsp;\">In case you still have your doubts, contact us on 9811333901.&nbsp;<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-what-is-your-understanding-of-non-performing-assets-npa-despite-various-measures-taken-by-the-government-of-india-the-banking-sector-in-india-continues-to-grapple-with-the-persistent\/#Visit_our_YouTube_Channel_%E2%80%93_here\" title=\"Visit our YouTube Channel \u2013&nbsp;here\">Visit our YouTube Channel \u2013&nbsp;here<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Introduction\"><\/span>Introduction: <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Non-performing assets (NPAs) refer to loans or advances where principal or interest payments remain overdue for 90 days or more. Despite a decrease from 11.5% in 2018 to 3.9% in FY 2023, NPAs remain a significant concern in the banking sector.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Body\"><\/span>Body: <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Non-Performing_Asset_NPA_Classification\"><\/span>Non-Performing Asset (NPA) Classification:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"has-text-align-center\"><img decoding=\"async\" data-src=\"https:\/\/lh7-us.googleusercontent.com\/J7us-irv-SFvv3mGihJDBTk0NmAztetdLpj4ueN_7xUoB42R_B_IYkShGjkxqMWeMfzaqEOXagExptOc42gDX7Ir-aPS1qEfTrb4BXHYAg9M9Mn4zQf4nhSf3GAdXWhC_IFe_GbPZxcikrwBLt3_1rA\" width=\"474\" height=\"191.36290455397568\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" class=\"lazyload\" style=\"--smush-placeholder-width: 474px; --smush-placeholder-aspect-ratio: 474\/191;\"><\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reasons_for_the_Persistence_of_the_NPA_Crisis_in_the_Indian_Banking_Sector\"><\/span>Reasons for the Persistence of the NPA Crisis in the Indian Banking Sector:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ol class=\"wp-block-list\"><li><strong>Slow NPA Resolution:<\/strong> Merely 484 out of 4,376 cases under the Insolvency and Bankruptcy Code (IBC) have been resolved, indicating a substantial backlog in unresolved cases. <\/li><li><strong>Sector-Specific Challenges<\/strong>: Sectors like power, with NPAs amounting to \u20b91.02 lakh crore ($14 billion) as of March 2021, pose hurdles to overall resolution efforts. <\/li><li><strong>Economic Slowdown and Pandemic Impact:<\/strong> The pandemic and economic slowdown have contributed to an increase in gross NPAs, projected to reach 9.8% by March 2022.<\/li><li><strong>Governance and Regulatory Issues: <\/strong>Weak corporate governance practices and lax regulatory oversight have exacerbated the NPA crisis. <\/li><li><strong>Evergreening of Loans: <\/strong>Practices like evergreening perpetuate the NPA problem.<\/li><\/ol>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Actions_Taken_by_the_Government_of_India\"><\/span>Actions Taken by the Government of India:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ol class=\"wp-block-list\"><li><strong>Recognition of NPAs: <\/strong>Asset Quality Review (AQR) in 2015 and Credit Information Bureau (India) Ltd. (CIBIL) establishment in 2000 to prevent NPAs. <\/li><li><strong>Resolution and Recovery: <\/strong>Implementation of Insolvency and Bankruptcy Code (IBC), Asset Reconstruction Companies (ARCs), and the SARFAESI Act. <\/li><li><strong>Recapitalization of Public Sector Banks (PSBs): <\/strong>PSBs received a recapitalization of Rs. 3.12 lakh crore over the past four financial years. <\/li><li><strong>Reforms in PSBs and Financial Ecosystem: <\/strong>Board-approved loan policies, third-party data sources for due diligence, and specialized monitoring agencies for effective oversight.<\/li><\/ol>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Way_Forward\"><\/span>Way Forward:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ol class=\"wp-block-list\"><li>Establishment of a Bad Bank to manage NPAs, allowing banks to focus on core lending activities. <\/li><li>Implementation of Nayak Committee recommendations, including Bank Board Bureau&#8217;s role in appointments and reducing government stake in PSBs.<\/li><li> Enhanced credit appraisal, penalties for wrongdoing, and strengthening RBI governance and regulation.<\/li><li> Diagnostics for willful default and prevention of evergreening of loans through penalties and accountability measures.<\/li><\/ol>\n\n\n\n<figure class=\"wp-block-image size-full is-resized\"><a href=\"https:\/\/edukemy.com\/upsc\/upsc-essay?utm_source=Blog&amp;utm_medium=Banner&amp;utm_campaign=Essay\" target=\"_blank\" rel=\"noreferrer noopener\"><img decoding=\"async\" data-src=\"https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/06\/UPSC-Essay-Course-1280\u00d7300-1-3.svg\" alt=\"\" class=\"wp-image-42688 lazyload\" width=\"781\" height=\"182\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 781px; --smush-placeholder-aspect-ratio: 781\/182;\" \/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"In_case_you_still_have_your_doubts_contact_us_on_9811333901\"><\/span><strong>In case you still have your doubts, contact us on 9811333901.<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>For UPSC Prelims Resources,&nbsp;<a href=\"https:\/\/edukemy.com\/upsc-cse-prelims-resource-centre\" target=\"_blank\" rel=\"noreferrer noopener\">Click here<\/a><\/p>\n\n\n\n<p>For Daily Updates and Study Material:<\/p>\n\n\n\n<p>Join our Telegram Channel \u2013&nbsp;<a href=\"https:\/\/t.me\/WithEdukemy4IAS\" target=\"_blank\" rel=\"noreferrer noopener\">Edukemy for IAS<\/a><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>1. 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