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Are Indian Banks Bankrupt????

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I read this article 3 months back in money life in a lighter note and thought the situation might not be so bad. After seeing the current quarter results of banks, now I think I must have written this blog long back. If few investor read this blog 3-4 months back , they would not have lost their hard earned money by investing in banks at peak!!! 


It really happened to each and every bank is now and they are giving true picture of NPA after RBI come with a stick.

The banking sector growth (PAT) had been declined by 14.1% as per RBI Financial Stability Report (Issue No 11, June 2015)

Extracted From PWC Banking Analysis.

CDR is there for 15 years and it has been provided for banks to distress their loan account taking into account genuine cases. Suppose I took loan 10 crore from bank and now I don’t have money then bank may give 15 years to repay. What will happen if I will not have a genuine will to repay after agreeing with bank and suppose my income will vanish and I will go bankrupt …… L






The same situation has been  happening to the banks one after another … Now the situation is so worse for some banks gross NPA = Bank’s Total Market Cap !!!!!
RBI tries to make Banks more powerful to make CAP (Corrective Action Plan) to recover well before account would become NPA in last January 2014 … but it seems bank failed in accessing those NPA candidates.


To help bank’s further RBI permits rescheduling of the debt without considering it as restructuring. Actually it was helping banks to show less NPA on balance sheet and refinancing stalled infra and other projects.




How Banks invited more problems?

The CDR (corporate debt restructuring),JLF(Joint Lenders Forum) and 25%/50% mechanism introduced to help banks to mitigate the initial provisioning pressure. Still SBI introduced more flexibility by its 5-25 structure.


According to Nayak committee report published in May 2014 the financial position of PSBs are very fragile. It is due to regulatory delay and weak board governance of PSBs.

Apart from that you might have heard S k Jain episode of syndicate bank. Was this an isolate case?If the owner who supposed to be the watchdogs for effective management, become nibblers, Can employee be far behind??

Note: It was just an analysis why PSB and other banks are in severe pain now. I may be wrong, Facts and content I have taken from Money life magazine for educational purpose.
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