BankingCorporateCorporate financeNews

Will India’s banks collapse under the burden of bad loans of rich people?

State Bank of India (Photo credit - Photo Pradeep Gaur - Mint)

New Delhi: Reserve Bank of India Governor Raghuram Rajan has warned that the global economy is on the brink of a situation similar to the Great Depression of the 1930s. “I do worry that we are slowly slipping into the kind of problems that we had in the thirties in attempts to activate growth,” said Rajan while addressing a London Business School conference in London on Thursday evening. But at home, the banking system itself seems to be on the verge of collapse – mainly under the burden of the big bad loans taken by a handful of rich people.

It’s really ironic and tragic that while poor farmers and small traders are committing suicide as they fail to repay bank loans of a few thousand rupees, banks themselves are dying due to the non-recovery of huge loans taken by country’s super rich, businessmen and the upper middle class who usually take loans of over Rs 1 crore.

As per the Finance Ministry documents accessed by DNA English daily, the top 30 cases of default account for a Rs 1.21 lakh crore, which is almost 40% of the Non Performing Assets (NPAs) in banks. The upper middle class, who usually takes loans of over Rs 1 crore, accounts for 33% of the total NPAs.

According to the daily, the mounting bad debts have forced banks to clamp down on willful defaulters. As on 31st March 2015, banks have declared 7,035 willful defaulters with outstanding of Rs 51,442 crore. The worst hit among Public Sector Banks is State Bank of India, which accounts for over a 1,000 cases worth Rs 11,510 crore.

The situation is so grim with some banks that they may soon be forced to knock on the doors of the government to bail them out of a default crisis which is threatening them to down their shutters.


Related Articles

Back to top button