The banks in India are facing sharp decline in the margin of profits. The default in repayment of loans by both individuals and firms mounting constantly and it has reached upto 68 thousand crores of rupees. Most the defaulters are in the category who have taken more than one crores of rupees.
The State Bank of India at the top with 29 per cent of outstanding loan amount but market capitalisation of the SBI is in sound position. It has gone up by 3861 crores of rupees and stands at Rs 1,51,766 crores. The banking sector is worst sufferer of global recession. Even in the sound economy of the America the government had to bail out many leading banks of American by financial packages. In India also in the Union budget the government is provding 36 thousand crores of rupees capital support of 13 public sector banks.
The Prime organisation the confederation of Indian Industries in its survey of 15 banks – 5 public sector banks, 3 private banks and 7 foreign banks assessed deterioration in key performance indication in credit growth, net interest income, growth on profit after tax and return on equity. The banks are hit hard owing to the impact of strict regulatory requirements and stress on asset quality. The banks profitability is marked by basel III capital requirement and revised guidelines on priority sector lending. Because of high bank lending rates the slow down in the industrial sector has also severely affected the banking business in the country.
The loans are availed by the small consumers and it has shun away heavy industrial and commercial borrowing and timely repayment. Another business organisation the Assochem has assessed that the rural wages have gone up by 20 per cent putting pressures on the prices of foodgrains. At the same time the cost of agriculture has also gone up with increase in prices of fertilisers and diesel and rates of transportation of grains. If the Reserve Bank of India provides capital incentive to the industry, business and commerce by reducing the bank lending rates the revival of economic activities will also improve business and economic health of the banks.
The activities of banks are more closely linked with the economic activities than the economic policy. The purpose of the economic policies should be to accelerate the economic activities and money circulation.
Founder : Late Shri Ramgopal Maheshwari