The Performance of Economic Sectors and Their Growing Non-Performing Assets in India

Abstract

The Indian banking system of an economy is of foremost importance for its financial and economicdevelopment. It forms the core of the financial sector and plays a critical role in transmitting monetary policyimpulses to the entire economic system. Hence the stability of banking sector is of paramount importance for thedevelopment of an economy. Non-performing assets(NPAs) or loans are growing issue in commercial banks especially in Indian Public sector banks which are facing huge losses due to accumulated NPAs over the past twenty year. As 90% of the total NPA isheld with public sector banks, it is essential to focus on the procedure of giving loans by them and proper verification of collateral and other reliability to repay the loan. The extensive lending by the banks to companies during the boom phase of the economy(e.g.2008-09) without proper documentation (relaxed) leads to such rising NPA levels. This paper focuses onthe accumulation of NPAs and its implications on sectors’economic performance. It also specifically emphasizes the efficacyof SARFAESI Act, DRT tribunals, IBC (Insolvency Bankruptcy Code 2016) as mitigation of NPAs. The problem of double trust dilemma in the context of NPAs has been introduced is a case of investor and innovator.