Challenges of Public Sector Banks to Handle Stress Assets in the Current Globalised Economy: A Pragmatic Study in Mumbai Region

Abstract

“Arising tide of bad loans is a warning signal when growth in (Non-Performing Assets) NPAs exceeds that in credit continuously year after year. This threatens the ability of banks to continue their usual business. While there is a swelling of NPAs in PSBs, the problem is generalized for all banks including those in the private sector and foreign banksâ€. Banking system in India is specifically different from that of other Asian nations because of the country’s unique geographical, social and economic character in the current globalised economy. NPAs normally had tended to move along with the economic cycle. Often loans given during good times stopped performing when conditions turned adverse. Bank as institutions have critical economic and social role to play through mobilization of deposits by ensuring good returns and security to the depositor. Further channeling creates credit fair rates of interest to borrowers whose access to credit will contribute to increase in productivity and welfare to the society. With the event of Global Financial Crisis recently the catchphrase Non-Performing Assets stands as an obstacle to the well-acquitted public sector banks unfortunately affecting the profitability for financial capital. The innovative regulatory framework recommended by Basel Committee aims to promote stronger liquidity in the banking sector and improves its ability to absorb shocks arising from financial and economic stresses tackling bad loans. This study is undertaken in various branches of six topnotch public sector banks in Mumbai region. The research results the power to handle bad loans of public sector banks through various recovery management measures in particular DRT, Lok Adalats and SARFAESI Act during 2007-08 to 2014-15. This article attempts to examine how the empirical results showed improvement in recovery of NPA contributed mainly by SARFAESI Act and DRTs during the period. For analysis statistical tools such as t-test and mean are used. It is further observed from the study that SARFAESI Act has been largely perceived for generating a time-bound NPA resolution for required momentum in reduction of NPA crisis.