While it almost seems that banks need to sound the alarm bells for the news surrounding them of late, the latest statement by the S&P Chief Economist might just calm the waters. Over the last few months, a number of public sector banks across the country have been put under prompt corrective action (PCA) by the Reserve Bank of India, predominantly for their non-performing assets and for reporting net losses for two consecutive financial years. In addition, the recent loan fraud scandals have rubbed salt on the wounds of banks and have put them on the back foot, Punjab National Bank in particular.
While it all seems downhill for public sector banks, Paul Gruenwald, who is the Chief Economist at S&P Global Ratings, said that there’s no need to push the panic button just yet. According to him, he said the non-performing asset scenario in India is not a big obstacle, he notes that if banks can still offer credit or loans, then the situation will heal itself in time. He added by saying that the fact that the Government of India has asked its banks to come clean is a clear path ahead in itself.
Comparing the banking sector of India with China, Paul opined that India’s efforts to make the system transparent puts it on the front foot, considering China’s NPA (Non-performing asset) ratio has been stagnant for years.
Source: Financial Express