Rbi should cut banks some slack while restructuring npas
The RBI’s financial stability numbers show two things. One, the relentless (सतत/निरन्तर) growth of non-performing assets (NPAs) by all banks between March 2012 and 2016. The best-known offenders (उल्लंघन करने वालाकसूरवार/दोषी) are, of course, state-owned banks. But over the last two years, even foreign banks have seen a sharp spike in bad debt growth, while private banks have seen a steady (नियमित/संतुलित) upward creep (बढ़ना/धीरे धीरे परिवर्तन होना) in the growth of NPAs.
Over the last two years, the annual increase of bad loans for all banks has jumped from around 20% per year to nearly 80% in the fiscal year ended March 2016. Two, India’s largest borrowers have gorged (ग्रस्त होना) on bad debt, even as their share of total loans has dropped marginally in two years.
In March 2015, big borrowers accounted for 72.8% of all bad debt and 58.1% of total borrowing. By March 2016, they held 86.4% of NPAs, while their share of borrowings dipped slightly to 58%. The dip in borrowings perhaps reflects growth pessimism (निराशावाद) and a lack of appetite for funds. The spike in bad debt owes much to stalled (ठप/अवस्र्द्ध) projects, stagnant (गतिहीन/स्थिर/मंद) demand, a dip in margins and loss of pricing power. The RBI wants to solve these problems, but less dramatically than proposed by former governor Raghuram Rajan.
While Rajan insisted that banks set aside money to cover all bad debt, the new dispensation (व्यवस्था) at Mint Street wants to cut banks some slack (लापरवाही) . Some bad debt, which may recover given enough time, will now be called ‘sustainable’.
Five sectors — infrastructure, steel, textiles, power and telecom — hold 61% of bad loans. The RBI hopes they can turn around. But this should be a temporary reprieve (विराम) . India’s new bankruptcy code, less stringent (कठोर/सख्त/कडा) than US Chapter 11provisions, should make it easier for lenders to convert bad loan to equity and sell them to asset reconstruction companies (ARCs) at a discount. The ARCs can rejig (बदलाव/परिवर्तन) managements to turn around these companies. Pricing will be crucial: too low and banks will take a hit. Too high, ARCs may shun what is on offer. We suggest a compromise, where banks sell at a discount, with covenants (अनुबंध) specifying further payoffs in case of successful turnarounds. This may keep everyone happy in the short term.
Relentless (Adjective)
Unceasingly intense. सतत/निरन्तर
Synonyms: Continuous, Persistent, Non Stopping, Unceasing
Example: If you are relentless in pursuit of your dreams, you will achieve them.
Offender (noun)
A person who commits an illegal act. उल्लंघन करने वाला कसूरवार/दोषी
Synonyms: Culprit, Felon, Delinquent, Guilty
Example: At the same time any manifest contradiction of the Articles, or any obvious evasion of them, would subject the offender to the penalties of deprivation.
Steady (Adjective)
Regular, even, and continuous in development, frequency, or intensity. नियमित/संतुलित
Synonyms: Equiponderant, Regular, Firm, Stable, Tenacious
Example: He finally found a steady job after working part-time at a number of different places for a couple of years.
Pessimism (noun)
A tendency to see the worst aspect of things or believe that the worst will happen. निराशावाद
Synonyms: Gloominess, Dark Side View, Expectation of Negativity
Example: A person who embraces pessimism will never see the rainbow that often follows the rain.
Stall (verb)
Stop or cause to stop making progress ठप करना/अवस्र्द्ध करना
Synonyms: Halt, Stop, Hinder, Impede, Interrupt
Example: The peace process has been stalled by the leaders' unwillingness to compromise on a number of key issues.
Stagnant (Adjective)
Showing no activity; dull and sluggish. गतिहीन/स्थिर/मंद
Synonyms: Stationary, Motionless, Dull, Still
Example: Because John needs more money and his current salary has been stagnant for three years, he is looking for a new job.
Slack (adjective)
Having or showing laziness or negligence. लापरवाह
Synonyms: Unsteady, Infirm, Sluggish, Lingering, Flabby
Example: When the Soviet Union dissolved only two years later, not with a bang but with a whimper, we were slack-jawed with surprise.
Reprieve (noun)
A cancellation or postponement. विराम
Synonyms: Abatement, Postponement, Amnesty, Pardon
Example: He accepted the death sentence and refused to appeal for a reprieve.
Stringent (adjective)
Strict, precise, and exacting. कठोर/सख्त/कडा
Synonyms: Strict, Rigid, Severe, Harsh, Tight, Inflexible
Example: Airplanes must pass stringent safety tests before they are allowed to be passenger carriers.
Rejig (verb)
Organize (something) differently. बदलाव/परिवर्तन
Synonyms: Reorganize, Rearrange, Redefine.
Example: After three years of inception, his company did not show any progress, he needs to rejig the complete structure of the company for sustainable growth.
Covenant (noun)
A binding arrangement अनुबंध
Synonyms: Contract, Bond, Deal, Transaction
Example: The priest’s covenant is an agreement between him and God.
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