Correcting misinformed impressions about NPAs and bad banks

A number of NPAs resulted from overleveraging after a high-growth period

Two features about non-performing assets (NPAs) deserve exploration. First, prevailing impressions about banks and NPAs, such as:

• Large borrowers are primarily responsible for non-performing loans; 
• Small borrowers rarely default; 
• Privatisation will prevent NPAs and frauds; and
• A bad bank for problem loans will help or it won’t.

Second, solutions for NPAs have been limited to providing some government funding, with hopes of muddling through.

First, take the contention that large borrowers account for most bad loans. Of total NPAs of Rs 10,149.16 billion, the published Big 12 comprise 25 per cent (Rs 2,537.29 billion).1 Another 100 wilful defaulters of over Rs 2.5 million against whom suits