When it comes to making timely repayment of loans, the common man has a far superior record in comparison to corporates. Corporate loans contribute substantially to the rising bad loan problem in public sector banks, according to the latest available Reserve Bank of India data. The corporate sector account for more than 73 percent of the total NPAs for the banking sector in the fiscal year 2016-17, an analysis by The Indian Express says. The PSU banks issued 37 percent of their total credit to the industry sector. On the other hand, retail loans comprise only 3.71 percent of the total NPAs. These loans stand at 22.83 percent of the gross credit issued.
The main reasons that banking analysts indicate for rising NPAs in loans offered to industry by the banks are business failure and improper risk assessment during making sanction of the credit and company frauds.
The retail loans such as the car, home, and personal loans enjoy much better track record when it comes to repayment. The data also shows that loans given to services and agriculture account for 13.21 per cent and 8.89 per cent respectively of the gross non performing assets.
The Indian Express report also states that Rs 4.70 lakh crore NPAs were due to loans given to the industry as on March 31, 2017 out of Rs 6.41 lakh crore of total gross NPAs of public sector lenders. For retail loans, loans worth Rs 23,795 crore turned into NPAs.
The government last year also came up with bank recapitalisation programme to the tune of Rs 2.11 lakh crore. The government also started a plan in the month of January to turn some of the smaller PSBs into national retail banks and regional retail banks. It also planned to restrict the corporate loans business mainly to large banks such as the State Bank of India.