Indian Public sector banks have been the driver of Indian economy since pre-independence. They have funded country’s ambitious projects in infrastructure, industries like fertilizer, petroleum to name a few. They have also fueled India’s agricultural growth by financing small time farmers. Off-lately they seem to be facing some challenges that has eroded their balance sheet. Most banks are troubled by Non Performing Assets (NPAs) largely due to the increasing inflation and fluctuating Rupee/dollar value. This has caused their provisions to sour quarter after quarter. In short terms, the loans that have gone bad as the takers have defaulted on returning it back within a stipulated time. Major reasons behind this is the inability to re-pay the loan as interests have increased and rupee has become expensive. Defaulters who deal in an off shore business have mostly defaulted due to their inability to pay back loan. Another challenge faced by these banks are the rapid expansion in terms of products by private banks. While public sector banks enjoy an undisputed public confidence and government backing, private banks are slowly lapping up the subscriber base by wooing them to their interesting product portfolio. Public sector banks certainly need to brace up and catch up with their private counterparts and shed away the traditional working way. Banks like State bank of India recently raised money through QIP, but it did not raise the expected amount. Blame it to the versatile economy, may be. But banks need to get rid of NPAs and come back to green to fuel other major developments in India.
Posts tagged ‘Public Banks’