Strengthening Indian Banking Industry through NPA Management

Non-Performing Assets (NPAs) are becoming a major issue in the Indian banking sector. Raghuram Rajan, the governor of the Reserve Bank of India (RBI), India’s central bank, has made it his goal to strengthen the Indian banking sector by setting a target of March 2017 for the banks to clean up their balance sheets. He has been instrumental in taking many major decisions to reduce NPAs. Additionally, the Government of India has also initiated some more measures to strengthen the fight against NPAs. The case study highlights the initiatives taken by Rajan as well as the government to strengthen the Indian banking sector along with providing scope for debating whether these measures are comprehensive enough, given the fact that the NPAs were the highest in the public sector banks which aggressively implemented the populist schemes of successive governments. Experts feel that unless structural reforms are brought in and the government gives up control of these banks, the problem of NPAs will persist.