Banks execution is genuine impression of economy.

So if the economy is not doing

admirably then it triggers a progression of events bringing about expansion in bad
loans/NPAs. Let us observe the numbers to comprehend the issue better.

Role of Internal Control Systems of Banks

A close reflection of the scenario lets us know that the denominator is the guilty party in
2016. In 2001, total advances/loans by banks was an minor Rs 5.2 lakh crore contrasted
with 2016 figures of approx.. Rs 84.0 lakh crores (source: Public sector bank
recapitalisation: Allocation inadequate, say analysts) Also, the size of effect is high in
total terms as all the bad debts and dubious assets are about to reach Rs 5.3 lakh crore in
2016.
Generally, the commitment of priority sector versus non priority sector in Gross NPAs is
around 40:60 or as of late 45:55. For each 100 Rs a bank loans to its clients, Rs 40 needs
to go to priority sector which incorporates ranchers, weaker segments, MSME and
organizations supporting agribusiness sector. Out of the above NPAs approx Rs 2.0 lakh
crore is from priority sector and staying from non-priority sector. Banks help the
companies, which defaulted, through Corporate Debt Restructuring (CDR) instrument in
the event that they feel that organization's awful stage is impermanent and revival is
conceivable given a few concessions or extra top up loans were given.
Reports show that main 10 industries add to 80% of the considerable number of cases
under stress. Iron and Steel sector is performing badly because of worldwide slowdown
and did not recoup totally after 2008 mortgage crisis. Presently because of slow offtake
by Indian purchasers and absence of appetite from Chinese business sector implies they

are the most noticeably awful performing industry as on date. The rest of the 4 of main 5
add to 40% of stressed or restructured cases. Infra/EPC/Construction/Engg are the
trickiest industries wherein if there is a deferral in execution of the venture, the
undertaking wont be economically feasible.
The primary issue lay with past government where numerous ventures were cancelled for
want of clearances by ecological, right of way, local activist bodies and so on. Past
government and current government are not doing anything in a general sense to deal
with these issues. Therefore, undertakings were deferred yet the organizations need to
benefit the enthusiasm on loans/working capital taken from banks. This resembles a loselose situation circumstance. Banks loaned cash accepting that the ventures will be
finished on time and the debt will be adjusted back by the organization whereas the same
did not hold true constant at ground level.
What could have been done?

Indian law treats an individual and his company as 2 distinct entities. So if

company has obtained loan and defaults, best case scenario bank can seize
properties of the company, yet can't seize property of individual. There are
numerous organizations which have defaulted however their
promoters/proprietors have properties worth billions of dollars. In such cases,
govt. can pass laws and check whether it is feasible to make the proprietors pay
for the default.
Second arrangement could be to check whether the defaulter has eagerness to pay.
At times, an additional flush of cash can empty new rent of life into the defaulters'
future income. In such cases giving additional cash can prompt better loan
repayment. Obviously due diligence should be finished.
A third choice could be bank change over debt to equity and as opposed to going
about as moneylenders, turn into the proprietors of these defaulting organizations,
designate boards, govern these organizations and take them back to benefit
(something a Private equity firm does).