Non-performing assets: A study of 2 big loan defaulter companies

Abstract

Growing non-performing assets is a long occurring problem in the Indian banking sector. Over the past two decades, there have been various episodes when the banking sector was severely hit by the unearthing of huge bad loans by a select few companies. In this study, we do a comparative analysis of 2 such companies responsible for the occurrences of bad loans w.r.t. their respective competitors. We describe the macroeconomic environment preceding the episodes, the degree and nature of the crises and the loan buying pattern. We then discuss the policy responses that have been undertaken. We conclude by drawing policy lessons from this discussion and suggest some measures that can be adopted which will then help plug the loopholes existing in the present lending system such that the negative impact on the real economy is minimal.