Non Performing loans in BRICS Countries

Abstract

After 2008 most of the BRICS countries witnessed sharp decline in the growth. The reasons could be due to high inflation, regulatory and policy risks causing significant financial and operating stress across Steel, Textile, Infrastructure, Telecom sectors. There is a significant importance of BRICS counties in the global economy, but in past few years they are grappled with budget deficits, anemic growth rising unemployment and high rise of Non-performing assets. As per our review it is clear that there is a steep increase of NPAs in BRICS countries which adversely impacted banks by reducing their profits, decrease in lending and increase in provisioning impacted the economy. Some of the reasons are, majority of these financial institutions were not having holistic regulatory framework and early warning mechanism to assess the business conditions. Besides weak credit appraisal mechanisms and not having the timely investigation mechanism for analyzing the intent and business rational of default borrowers led to more NPAs. Non-performing assets were highly impacted by the macro-economic parameters of Capital adequacy ratio; NPAs to loans and Year wise provisioning for the loans were taken into consideration to analyze the NPAs status across BRICS countries. Banks need to identify the willful defaulter and genuine business failure and these cases should be treated in a different manner. In most of the developed countries bulk of the banks keep provisioning for any expected NPAs and these damages are written off at an initial stage and their balance sheets carry very little NPAs. Besides the recovery measures are also stringent for foreclosure of loans.