The non-performing assets( NPA) of the banks are mainly attributable to bad loans of the banks. Most of these are white-collar crimes committed by the rich and potent. Most of the homegrown fiscal institutions advance money to borrowers without doing the proper due diligence on the borrowers.
These institutions are subjected to excessive pressure from politicians and the powerful, and they succumb to it, raising all red flags of due diligence (if done).Still, it's a palm-to-palm situation for the lender and borrower if not( as in the utmost cases).
When one ponders over why this problem is persisting, it's hard to find a clear picture as most people concerned are hand in glove with the perpetrators, for this problem to gain. PSU staff look for economic postings, bonuses, pay rises, etc., which are all connected directly or laterally to being their master’s voice.
They're in their separate postings for a time, and they substantially concentrate on their tenure with the fiscal institutions rather than the overall health of the fiscal institutions itself. Having more information related to this then you can write on the category Investment Write For Us. Or else if you have any questions contact at firstname.lastname@example.org.
This is a poor reflection of the popular watchword "pennies wise and pounds foolish". Their due diligence is substantially confined to asking similar businesses in the same business who are also borrowers of the fiscal institutions about the borrower.
This practise is neither complete nor reliable.
Hence, in the due course of time, the financial institutions will have a huge exposure. Most borrowers pay their bills on time in the first few months or years.
They also sluggishly indulge in syphoning off the borrowed capital to other gambling enterprises under different names( which may exist on paper only). This type of exertion is most common in family-possessed businesses. It's the common man who suffers at the end.
We also need to carry out proper vetting of the bankers to avoid conflicts of interest with the guests while sanctioning the loans. The institution of maker-checker's generality in sanctioning these loans will go a long way in preventing them from getting bad debts.
It's the common people who suffer from these problems created by the NPAs, which are man-made. The government needs to deal with this problem and take on the few heavy and rich people who are taking the system for a lift.