Divergence of Bad Loans and their Provisioning and NPA in Indian Banking System
The Deliberation, December 19, 2019
5 Pages Posted: 10 Jan 2020
Date Written: December 19, 2019
Banking system uses this practice of divergence in reporting bad loans and their provisioning with the hope that those bad loan accounts would turn into standard assets over time. However with the help of this practice, the real financial positions of these institutions are withheld for some time from RBI as well as the market both. This glossy and superficial picture is presented to avoid knee jerk reaction from the market and RBI. Like all other publicly traded companies, banks too have the pressure of increasing or at least maintaining profitability so that value of their stocks can be maintained at least. So in this window dressing practice, stock market does have an invisible role to play.
Keywords: NPA, Bad Loan, Provisioing, Divergence, Indian Economy
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