Changing Scenario of Bad Assets in Public Sector Banks in India

Abstract

The Government of India has merged during last two years thirteen public sector banks (PSBs) into five leaving their total number to eleven in addition to State Bank of India which earlier witnessed merger of associate banks and Bhartiya Mahila Bank in it. This major restructuring has been undertaken by the government with the stated objective of making PSBs stronger and internationally competitive. The rationale is that bigger banks can face challenges of the modern day world, out of which raising of capital and upgradation of banking technology are the most important. This restructuring exercise came at a time when many of these PSBs faced challenges of survival because of huge rise in their bad assets (non-performing loans). But for massive recapitalization many of these banks would have faced insolvency like situation. The present circumstances are still too uncertain to guarantee a return of these banks to good financial health as these continue to face twin challenges of capitalization and reduction of non-performing loans commonly known as Non-Performing Assets (NPAs) in India.