What are the reasons that took banks into crisis? It is analysed that increasing Non Performing Assets (NPA’s) is the biggest reason for the failure of PSB.
The highest amount of NPA’s was for country’s big name such as SBI, PNB, CANARA Bank. These NPA’s has adversely affected the growth of banks and dragged them into crisis.
Other reasons for such downfall is analysed that most of the NPA’s are into infra, real estate, powersector. Though, private sector banks lend to these sectors but their exposure to these sectors are significantly less due to their limited risk appetite and restricted exposure ceilings. Further, lack of capital infusion, adverse asset selection and state ownership of banks has also contributed to such downfall.Public sectors banks by their very name are subjected to mass development of the economy as they have to fulfill their socio-economic responsibility which really is not the case with private banks. As a result banks are given economic responsibility to reach to the mass and generate enormous employment responsibility. To protect from present crisis Reserve bank of India and Ministry of finance have taken many initiatives such as Asset Quality Review (AQR) and Prompt Corrective Action (PCA). Out of 21 banks, 11 banks are into Prompt corrective action (PCA) and other banks also have chance to fall into same categorybecause of their inherent finance weakness.Apart from government has alreadyinfused Rs. 52311cr to banksfor the capital requirement.
Despite all the facts it cannot be ignored that Public sectors banks are the most important growth driver of the economy and they are the one who also contributefor the socio economic development of the country through their presence in rural areas and supporting weaker section of the society. They consists of hardworking employees, and have the large base of borrowers. They are the temple of Modern India. Privatizing the banks is not a solution since it will defeat the purpose of nationalization. All they need is a better government support, better supervision, modern technology, better risk management, and an alternative lending approach.They have the capability to build the nation again.