The Daily Brief Are PSU Banks Making A Comeback?
Dec 16, 2024
Public sector banks in India are experiencing a remarkable turnaround. With decreasing non-performing assets and government reforms, their stability is improving significantly. The discussion also dives into a major energy deal between India and Russia, hinting at a strategic shift in the energy landscape. Meanwhile, there's a look at the risks associated with the surge in unsecured retail lending. The insights paint a picture of a dynamic financial and geopolitical environment shaping the future.
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Improving Asset Quality in PSBs
- Public sector banks' bad loans and write-offs are decreasing, while recovery rates are rising.
- This indicates improving asset quality, a result of strategic measures taken after a period of significant bad loans.
The 2015 Asset Quality Review
- The Asset Quality Review (AQR) in 2015 revealed hidden bad loans, especially in wholesale lending to large corporations.
- Defaults by companies like Kingfisher Airlines highlighted the issue, leading to an 80% jump in recognized bad loans.
Government's Four-Pronged Strategy
- The government implemented a four-pronged strategy: recognition, resolution, recapitalization, and reforms to address the bad loan crisis.
- Key reforms included the IBC, Bank Board Bureau, amendments to the Sarfasi Act, and a public credit registry.