The Global Rating Agency, Moodys has downgraded the creditworthiness of the biggest Bank in India, State Bank of India from ‘C-‘to ‘D +’. One of the reasons mentioned for the downgrading is the Non-Performing Asset (NPA).
NPA means the loans taken by the customers and not returned. It runs in to thousands of crores of rupees. While the Bank Managements take extra care and effort to get the loans taken by the common people got returned, the big fish like corporates and big business are capable of avoiding through many loop holes to delay refund of loans and some times not pay at all. The Bank Mnagements are also not taking serious efforts. This has put many PSU banks in the red in the past also.
Why can’t the Government and the Bank Management take necessary action to get these loans returned and avoid the downgrading and crises?
Downgrading SBI a calculated strategy?
07 Friday Oct 2011
Posted in Uncategorized
VAN Namboodiri's Blog 
Most importantly, whenever any loan is taken from a PSU few formalities are supposed to be completed and there are few rules which determine whether a person/corporation/agency/company is eligible for a particular loan or not. Normally in the PSU banks, these processess are influenced and hence there is a chance of a loan being loaned to someone who does not qualify the eligibility. Such loans are difficult to be performing and result into non-performing. Also, banks are forced to lend to certain categories of public as it is a compulsion. Educations loans fall into this category. Since there is no guarantee required for loans less than 4 lacs, there is again a chance of non-performing of such loans. Cumulative, all these lead to NPAs. However, the SBI is making all out efforts to minimise NPAs. The most surprising thing is that the education loans are paid very promptly and NPAs are very less (It is what I have heard from a bank employee).
As you very rightly pointed out, the big fish get away in this game. Government does not have enough ammunition in its armoury to get this big fish. That is why we need a better and strong regulatary force in our government.
Apart from this, they have certain limitations in settling bad debts unlike private banks. Private banks use all the possible methods to extract the loaned amount and at last can settle them quickly compared to PSU banks.
SBI is our pride of the nation. The biggest bank and no problems with its financial stability. Govt also will infuse money if required to help this giant. However, it might be a calculated strategy to rate it down. It does not matter. The elephant will never give away.