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Non Performing Assets - Indian Banking System, Indian Financial system Video Lecture | Indian Financial System - B Com
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FAQs on Non Performing Assets - Indian Banking System, Indian Financial system Video Lecture - Indian Financial System - B Com
| 1. What are Non-Performing Assets (NPAs) in the Indian banking system? |  |
Ans. Non-Performing Assets (NPAs) refer to loans or advances that have stopped generating interest income for the bank or have not been paid back by the borrower for a specified period. These assets are considered as non-performing when the borrower fails to make interest or principal payments for 90 days or more.
| 2. How do NPAs impact the Indian banking system? | |
Ans. NPAs have a significant impact on the Indian banking system. When banks have a high proportion of NPAs, it affects their profitability, asset quality, and overall financial health. It reduces the availability of funds for lending, hampers the bank's ability to meet regulatory requirements, and can lead to liquidity issues. NPAs also pose a risk to financial stability and can weaken investor confidence in the banking sector.
| 3. What are the main causes of NPAs in the Indian financial system? | |
Ans. Several factors contribute to the rising NPAs in the Indian financial system. These include economic downturns, lack of creditworthiness assessment by banks, willful default by borrowers, delays in project implementation, inadequate risk management practices, policy and regulatory issues, and external factors such as natural disasters or market fluctuations. The combination of these factors leads to the accumulation of NPAs in the banking system.
| 4. How does the Indian government address the issue of NPAs? | |
Ans. The Indian government has implemented various measures to address the issue of NPAs. These include the establishment of asset reconstruction companies to acquire and resolve NPAs, the introduction of the Insolvency and Bankruptcy Code to facilitate the resolution of stressed assets, recapitalization of public sector banks, and reforms in the banking sector to improve governance and risk management practices. The government also emphasizes promoting responsible lending and improving credit monitoring systems to prevent the creation of new NPAs.
| 5. What are the implications of NPAs on the Indian economy? | |
Ans. NPAs have significant implications for the Indian economy. They can lead to a credit crunch, as banks become cautious in extending new loans. This hampers economic growth and investment. NPAs also strain the government's fiscal resources, as it may need to infuse capital into public sector banks to maintain their solvency. Additionally, NPAs reduce the availability of credit for productive sectors, leading to job losses and hindering the overall development of the economy.
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Dec 23, 2024 Last updated |
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