Home  Inquiry  
Role of Asset Reconstruction Companies (ARCs)
Stressed Accounts: Common Feature
NPA Accounts-Way Forward
Stressed Accounts- Settlement Process
Strategic Debt Restructuring (SDR) Scheme: Overview
CIBIL -Introduction and Importance
Strategic Debt Restructuring (SDR)- Post 2
Distressed Units- Some suggestions to Revive
Non Performing / Stressed Account: Role of Consultants
Stressed Accounts: Challenges in Restructuring/Revival
Stressed Accounts: Role of Promoters' Family
NPA Feature: Excess Non-Productive Investments
CDR Mechanism: Why Failed?
PSBs- Oxygen of Rs. 70 K Crores : Serious Flaw in Banking Structure
Mounting NPAs: What Went Wrong (WWW)?
Mounting NPAs: What Went Wrong (WWW)? Part-2: Development in Banking System
Mounting NPAs: What Went Wrong (WWW)? Part-3: Sudden Growth in Economy
Mounting NPAs: What Went Wrong (WWW)? Part-4: Political Compulsions & Corruption
Mounting NPAs: What Went Wrong (WWW)? Part-5: Overambitions/Greed of Entrepreneurs
Effect of Federal Rate, RBI Actions and Chinese Impact on NPA in India
NPA/Stress : Disease but Not the End
Revival of Stressed Account: Employee Participation
Challenges in Running a NPA unit
Upcoming NPA Scenario: Are Banks going to be Hit Harder again?
NPA: How to Turn Failure into Success
Handling of Defaulting / Stressed Accounts by Lenders: Serious Faults
New Articles



Mounting NPAs: What Went Wrong (WWW)?
Part-3: Sudden Growth in Economy

Post liberalization, the economy started vibrating tremendously and this led to freeing various sectors of the Economy particularly Finance , Infrastructure and Industry. Without sufficient Funds, it was not possible to move forward. Funds started flowing from overseas markets, Share Markets witnessed sharp increase in volumes and every penny brought in as Equity was used to raise debt more than 3 times. This made the debt market blast like anything.
Now this led to the sharp increase in lending business .  Infrastructure development,  Industrialisation,  Power, Mining, healthcare, hospitality all segments were like hungry demons out to suck the money . The cascading effect was on equity market which boomed like anything and this resulted into more and more need of debt money to the system. Infact it was like a vibrating ring effecting each other to vibrate further.
With new liberalized environment, political parties started demanding more and more growth. They started  taking more and more interest in GDP growth, IIP numbers and Sensex. This probably also ignited the level of corruption in all segments.

We witnessed a decade with highest investment in infrastructure like Port, Power, Road, Buildings, Bridges between 1998 to 2008. This also made our country manufacturing hub and put the country ahead of many countries in Many industrial segments. Obviously, it was not without any flaws, it took away lot of capital from the system. 


Probably, the respective governments were quite confident about the capability of Indian banks to handle this sudden spurt in demand of money. Though governments and institutions were delivering their best, but the good time was not alone, it brought higher level of corruption, high expectations, chaos in the system and mis-management . In the process, politicians took over the reigns of finance and started over ruling the bankers. The situation in banking system was already on fire due to severe competition, this tendency of forcing the bankers to lend more and more further worsened the situation. Even appointments were not free from any allegations. The pressure of performance with in limited time frame caused the deterioration in quality.


To sum up, Both factors i.e. Growth in banking sector and Economic growth resulted into very high defaults at later date. 

Other factors responsible for current level of NPA needs detailed analysis before pumping money into banking system continuously. This is public’s hard earned money and should be used judiciously. Lending institutions should not be allowed to remain corruption breeding stations forever.
Copyright © 2010 Truue Global Financial Services Pvt. Ltd.