Twin Balancesheet Problem (TBS)- Three Stages
economic survey perspective
- As of 31 December 2015, the total non-performing asset of scheduled commercial banks in India have stood at 9.6 lakh crores. Majority of this NPA is concentrated among the public sector banks (PSBs).
- Economic survey notes that the level of NPA in Indian economy, is among the highest in the BRICS nations!
- This NPA problem has created stress in the balance sheets of both the corporate and public sector banks, hence a new term was coined “twin balance sheet problem”.
- CEA Arvind Subramanian has outlined three stages in which this cancer has spread in the Indian economy 1) before the sub-prime crisis, there was a surge in borrowing 2) after the global financial crisis, there was a fall in demand 3) ultimately, corporates had debt servicing problems to a point where their revenue was insufficient even to pay for the interest.
- What is IC1 company?
- Although, India’s case is unique because despite such high level of India, our economy has not collapsed, or come to a standstill, unlike those advanced economies after the sub-prime crisis, or those East Asian tigers after the crisis of 1997.
- Survey projects two scenarios of the NPA/TBS problem: 1) phoenix 2) containment.
- Because of this problem, banks have become reluctant in their lending operation especially the micro and small enterprises.
- The decline in the profitability, has also led to fall in the share prices of public sector banks, some of them even selling below their face value.
No comments:
Post a Comment