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What are the challenges facing india’s public sector banks today
1. What are the Challenges Facing India’s
Public Sector Banks Today?
Indian Public sector banks have been the driver of
Indian economy since pre-independence. They have
funded country’s ambitious projects in infrastructure,
industries like
fertilizer,
petroleum to
name a few. They
have also fueled
India’s agricultural
growth by financing small time farmers. Off-lately they
seem to be facing some challenges that has eroded
their balance sheet. Most banks are troubled by Non
Performing Assets (NPAs) largely due to the increasing
inflation and fluctuating Rupee/dollar value. This has
2. caused their provisions to sour quarter after quarter. In
short terms, the loans that have gone bad as the takers
have defaulted on returning it back within a stipulated
time. Major reasons behind this is the inability to re-pay
the loan as interests have increased and rupee has
become expensive. Defaulters who deal in an off shore
business have mostly defaulted due to their inability to
pay back loan. Another challenge faced by these banks
are the rapid expansion in terms of products by private
banks. While public sector banks enjoy an undisputed
public confidence and government backing, private
banks are slowly lapping up the subscriber base by
wooing them to their interesting product portfolio.
Public sector banks certainly need to brace up and
catch up with their private counterparts and shed away
the traditional working way. Banks like State bank of
India recently raised money through QIP, but it did not
3. raise the expected amount. Blame it to the versatile
economy, may be. But banks need to get rid of NPAs
and come back to green to fuel other major
developments in India.
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