Banking Sector - Problems, Reforms and Bad Banks - Seeker's Thoughts

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Banking Sector - Problems, Reforms and Bad Banks

Banking Sector and Problems - Banking sector is economic backbone of the nation. Lately banking sectors have been facing numerous problems like --- Rise in NPA, Twin Balance Sheet problem, and willful default.
The Non-Performing Assets (NPA) and willful defaults are serious concern. Non-performing assets are assets which do not generate any income to the bank whereas the money given in form of loan stays stuck. A willful defaulter is an entity or a person that has not paid the loan back despite the ability to repay it. 
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Indian government’s Stand and RBI- Both Are worried about problems as this can harm struggling economy of the Nation. Indian in recent years had a series of reforms like GST and demonetization etc, which also caused temporary impacts on industries. To prevent problems in Banking sector government has introduced-
1.      Insolvency and Bankruptcy Code- It was introduced to reduce burdens of NPA, where business can be declared as insolvent and certain profit can be generated by those firms.  
2.      Bad banks- bad banks or assets management companies will deal with stressed assets of PSBs. Some examples can be considered for learning purpose like Swedish bank ‘Securum’ that worked for 15years and was fully owned by the government.
3.      Credit Registry System- The credit registry system was introduced for tackling the rising NPA’s problem. As most of the time the decision to give credit is left on management which may further lead to the problem. So the government has decided to introduced the credit registry system where lending decision will be based on the credit registry system