The Indian banking industry faced significant issues in fiscal year 2020 related to rising non-performing assets (NPAs) and credit crunch. Both public and private banks saw increased NPAs over 10% due to a poor business environment, higher costs, political intervention, legacy regulations, and the fear of investigations by agencies like CBI, CAG, and CVC. The document recommends improving business practices, making banks more independent and autonomously run, reducing oversight from multiple agencies, aggressively cutting costs through measures like voluntary retirement schemes, and removing slack from operations.

1. 20
Indian Banking Industry
Private Banks
B2B B2C
Public Banks
FY 20 – NPA & Credit Crunch
Credit Lending
Crunch
=
Fear of 3C’s
CBI, CAG, CVC
+
Higher Costs
+
Poor Biz Env
+
Low Confidence
Rising NPA
=
Biz. Env
+
Political
Intervention
& Apptmt.
+
Legacy
Regulation
NBFCS
(not in scope)
NPA Growth 2 - 4% NPA Growth > 10%
YES Bank
P
U
Consolidating PSU
Banks with
Mergers
Remedial Ask
• Improve business improvement
• Govt cant run banks, they need to be independent and run autonomously
• Let auditors govern them
• Remove too many gate keepers like 3C’s - CBI, CVC, CAG, fear to be
removed
• Aggressive cost restructure is required, slack has to be removed
• VRS is required like BSNL, MTNL
Source: LiveMint, Bloomberg, ThePrint, ET
Non Performing
Assets (NPA)Market Cap.
Market Cap. except
few like SBI, PNB