• About Us
      Asia’s 1 st LEED Platinum Rated Campus

      Asia’s 1st LEED Platinum Rated Campus

      About Us

      • Chairman's Message
      • Vice Chairman & CEO
      • Dean's Message
      • Governing Council
      • Business Advisory Council
      • Academic Advisory Council
      • Work With Us
      • Mandatory Disclosure
      • Anti-Ragging Notice

      TERM ZERO

      Media

      • News
      • Events
      • In Media
      • Media Kit

      Rankings

      Accreditations

      NIRF

      Campus

      Blog

      Annual Events

      • Convocation
      • TEDxGLIMChennai
      • L'Attitude
      • Digital Symposium
      • Sangamitra
      • Annual Alumni Meet
      • SWIM
      • IEC
      • Human Capital Management
  • Programs
      Transform and Lead

      Transform and Lead

      Full Time Programs

      PGPM

      One Year MBA for professionals with work experience

      Learn More Apply Now

      PGDM

      Two Year MBA for professionals with 0-2 years of work experience

      Learn More Apply Now

      EXECUTIVE EDUCATION

      Partner with us for customized learning solutions for your organisation

      Learn More

      Corporate Programs

      PGXPM

      Executive program for Mid & Senior Level working professionals

      Learn More Apply Now APP. Deadline: 30th August, 2020

      PGPM Flex

      Weekend management program for young working professionals

      Learn More Apply Now APP. Deadline: 30th August, 2020

      MBA in Business Analytics

      Family Enterprises Management

  • Faculty & Research
      Ranked 6th

      Ranked 6 th

      by NIRF ranking in teaching and learning among all B-Schools in the country

      Faculty

      • Full Time Faculty
      • Visiting Faculty
      • Adjunct Faculty

      Research

      • Faculty Editors
      • Papers & Journal Publications
      • Case Studies & Books
      • Conference Proceedings

      Centers of Excellence

      • Centre For Excellence in Retail Management
      • Great Lakes Centre For Management Research
      • Kotler - Srinivasan Centre for Research in Marketing
      • Centre for Excellence in Business Analytics and Business Intelligence
      • CET
      • Union Bank Centre for Banking Excellence

      Conferences

      • NASMEI
      • Financial Conference
  • Recruiters & Companies

      “Great Location for Talent. We are happy to continue visiting and having budding professionals join us and grow their careers.”

      Anil Visal

      Partner - Deloitte India

      Campus Recruitment

      • Recruitment Process
      • PGDM Class Profile 2018-20
      • PGPM Class Profile 2019-20
      • Past Recuiters
      • Student Achievements
      • Recruiters Speak

      Internships

      • Recruitment Process
      • PGDM Class Profile 2019-21
      • Live Projects

      Placement Reports

      • PGPM
      • PGDM
      • Internship Report

      Leadership Series

      • Titans Speak
      • Industry Lecture Series
      • Thought Leader Series

      Talent Listings

  • Alumni

Non-Performing Assets and Economic Recession

May 12, 2014 | Posted by bobbysrinivasan << back to blog

Recently the RBI announced that our public sector and commercial banks carry huge amounts of non-performing assets and restructured loans in their books amounting to 10 percent of all lendable funds. Overseas agencies are predicting that this will raise the 14 percent. It is a scary scenario. Why and how did this happen?

First, we can speculate that the Indian banks are highly leveraged and poorly run. Some serious loan losses threaten bank’s solvency. For example a bank leveraged 20 to 1 only needs to lose 5 percent of its assets through loan losses and it is insolvent.

In India, in the past, farmers were given loan by the banks and they were never repaid. Indian government wrote off 60000 crores. Our banks have lent very large amounts of money to big businesses that many of them have no ability to repay. According to our finance minister, several thousand crores are required to recapitalize our banks.

Can this practice continue? If it did, what will be the result? The sub-prime crisis of 2008 taught us a big lesson. Several thousand savings and loan associations went belly up and this almost drove the US economy into a recession. Thanks to the quantitative easing (QE1, QE2 and QE3) the US bailed out of the situation. But when this money is eventually withdrawn from the economy there is a likelihood of serious recession in the US.

It is the time for the new government to realize the predicament that the banks are in and have to take timely action. The problem which is serious cannot be washed away.

We don’t need a crisis like the 2008 subprime. Let me end this blog with a conversation that I had with a businessman in real estate. He had borrowed 25 crore rupees from one of the banks. The real estate market is currently pretty dull and so he is not able to sell his units. He told me that he will not pay the bank loan or the interest. When I asked him as to how is it possible, he gave me a list of companies who have borrowed in thousands of crores and not paying back. He said that he will surrender the houses to the bank.

When the new government takes over in a few days, they should look into this matter most urgently. Otherwise, (like nobody predicted 2008 sub-prime) we may end up in a deep economic mess which can reduce our economic growth rate to a minuscule.

<< back to blog

Programs

PGPM - One Year MBA for professionals with 2+ years work experience

Learn More >

PGDM - Two Year MBA for graduates with 0-2 years work experience

Learn More >

Events

Union Bank Finance Conference
Dec 17, 2020

Networking with Champions
Nov 08, 2020

Harry Kraemer on Performance with A Purpose
Oct 08, 2020
Read more

Successful Women in Management (SWIM) Lecture Series
July 05, 2020
Read more

The Great Circle Alumni Talk Series
July 04, 2020
Read more

  • About Us
  • Programs
  • Faculty & Research
  • Recruiters & Companies
  • Alumni
  • Blog
  • Contact Us