The Coronavirus Epidemic raging all across the world has left a financial and economic void in the functioning mechanism of the banking system in the country. The void has led to the growth of the fiscal deficit and subsequent deceleration of the financial market towards the negative territory with all the financial elements and indicators striking a chord of negativity in the market. According to the reports published by the Financial Stability Departments of the Reserve Bank of India, the rate of Non-Performing Assets (NPA) in India has risen from 8.75% to 14.7%, thereby an exponential rate of uneasiness is expected to be witnessed in the society.
The Insolvency and Bankruptcy Code In India (IBC) has established the reason that difficulty in the creation of financing opportunities for the banking institutions have been the primary reason behind the rise in the occurrence of NPAs. Creating a Provision for Bad Debt Consolidation is one of the primary measures that have been taken to resolve the issues and problems associated with the functioning of the NPAs. However, it has been advised that the creation of a provision for bad debts is important before insolvency is declared by the banking institution.
Along with this the reason that has been pointed out for the mounting of debt in the economy is the tendency to refrain from paying off existing dues and thereby delaying clearances. The dues from the companies, on account of capital loans, taken by them while establishing branches run into lakhs and crores of rupees. Due to the non-payment of such dues, NPAs are rising rapidly in the Banking Sector.
If there is a requirement for the bad banks who tend to liquidate easily, there is a need to establish a good NPA market where there will be adequate leverage of financial resources and a stable financial environment.
