Post 2009, when the world had started believing that global meltdown was over and the time of recovery was nigh, Europe landed its right foot on the bear trap. Today, it seems the EU bloc will never find living easy; at least not in near future.
But I do not want to discuss the global economic scenario. You, and everyone else who reads a magazine or two every month or a newspaper or two every week knows it all. Instead, I am more interested in discussing another matter that deserves a quick thought – the rising non-performing assets (NPAs) in the Indian banking industry.
Wait! Do not brand me a pessimist. I am talking about an industry that is set to gain momentum from NPAs that are piling up in the books of banks – the asset reconstruction companies (ARCs). Yes, I want to talk about the boom that is set to bring in some resilience for the Indian ARCs, at least for those who missed the bus during the first phase of this four year-long slowdown.
For those who know little about ARCs, they are companies which thrive on bad loans of banks and other financial institutions. Their modus operandi is to buy these bad or distressed loans from the banks’ books and turn them around to make a fortune when good times come knocking. Going by that logic, the Indian banking industry is set to provide them ample opportunities now. As they say, bad loans are made during good days, it’s just that you realise the pile of (worthless?) waste when days go bad. The situation with Indian banking industry is more or less the same. While there has been much talk about how well the Indian banking industry has managed to stay insulated from ills of the global crisis, rise in their gross NPAs to advances ratio, especially in the first quarter of the current calendar year (gross NPAs of public sector banks other than SBI rose 10.5%), got every one thinking.
Gross NPAs of a few public sector banks including Indian Bank, Central Bank and Punjab National bank shot up by as much as 35% of their value a year ago. As a result, it’s time for the ARCs to arrive at the scene to infuse make banks’ books appear pretty. And all this at a time when the ARCs are being ridiculed by almost everyone around, especially since the past 12 months or so, when everyone started dreaming of a quick recovery.
It is high time the ARCs prove why they are such an essential part of the financial industry. It is also time that the Indian banking industry admits to the benefits of the ARCs, which are all set to make their living appear worthier on paper, especially in the light of the current market condition. In short, ARCs will play the doctor and keep the banks’ NPAs under check. Period.
But I do not want to discuss the global economic scenario. You, and everyone else who reads a magazine or two every month or a newspaper or two every week knows it all. Instead, I am more interested in discussing another matter that deserves a quick thought – the rising non-performing assets (NPAs) in the Indian banking industry.
Wait! Do not brand me a pessimist. I am talking about an industry that is set to gain momentum from NPAs that are piling up in the books of banks – the asset reconstruction companies (ARCs). Yes, I want to talk about the boom that is set to bring in some resilience for the Indian ARCs, at least for those who missed the bus during the first phase of this four year-long slowdown.
For those who know little about ARCs, they are companies which thrive on bad loans of banks and other financial institutions. Their modus operandi is to buy these bad or distressed loans from the banks’ books and turn them around to make a fortune when good times come knocking. Going by that logic, the Indian banking industry is set to provide them ample opportunities now. As they say, bad loans are made during good days, it’s just that you realise the pile of (worthless?) waste when days go bad. The situation with Indian banking industry is more or less the same. While there has been much talk about how well the Indian banking industry has managed to stay insulated from ills of the global crisis, rise in their gross NPAs to advances ratio, especially in the first quarter of the current calendar year (gross NPAs of public sector banks other than SBI rose 10.5%), got every one thinking.
Gross NPAs of a few public sector banks including Indian Bank, Central Bank and Punjab National bank shot up by as much as 35% of their value a year ago. As a result, it’s time for the ARCs to arrive at the scene to infuse make banks’ books appear pretty. And all this at a time when the ARCs are being ridiculed by almost everyone around, especially since the past 12 months or so, when everyone started dreaming of a quick recovery.
It is high time the ARCs prove why they are such an essential part of the financial industry. It is also time that the Indian banking industry admits to the benefits of the ARCs, which are all set to make their living appear worthier on paper, especially in the light of the current market condition. In short, ARCs will play the doctor and keep the banks’ NPAs under check. Period.
