India Bank Bankruptcies & Bank Runs Crisis Widens amid a Collapsing Economy A full-fledged crisis is going to hit the Indian banking sector soon with Yes Bank, Lakshmi Vilas Bank, Dewan Housing Finance Corporation DHFL, Indiabulls Housing Finance, Reliance Capital, Altice and scores of Non-Banking Finance Companies going bankrupt. Tighten up India's own Lehman moment is approaching fast. The recent banking catharsis, which was brewing up since the past years, was bound to erupt and was indeed the major spark leading to the banking system being cash strapped. Worst times seem yet to come and sincerely hope that the rejuvenation measures take lesser than four years to resuscitate a somewhat dwindling economy for now. The slowing of the economy is beginning to reflect on the individual segments too. GDP grew at its slowest pace in the past five years in the last quarter of fiscal 2019. Indian banks are being run like a source of easy loot. The financial collapse is coming soon; And can be seen all over the wall. India's economy is crashing & crashing hard. Welcome to The Atlantis Report. So How bad is The Non-Performing Asset NPA problem with Indian banks? aND Could the revelation of actual truth lead to economic collapse? The problem is massive, and it will lead to the collapse of many banks. Indeed real figure of Non Performing Asset is massive, some banks (as big as Bank of Baroda and Punjab National Bank) have hidden NPA accounts, some zones still follow manual declaration of NPA, furthermore other measures such as evergreening, check purchasing and illegal debit credit is utilized to prevent account from being turning NPA. NPA indicates the amount of loan that was not returned by the customer. An asset becomes non-performing when it ceases to generate income for the bank. As per the current norm, if a loan is overdue during the last 90 days, it will be categorized as a Non-Performing Asset (NPA) The Gross NPAs had increased from a low of 2.5 % in 2011-12 to 10% in 2016-17. Recent figures for the Index of Industrial Production are not very encouraging either. It will further lead to a surge of NPA. Here's a brief synopsis of India's Bank NPA crisis and the ongoing resolution process - 2015: "Deep Surgery" started with the Asset Quality Review (AQR). One time special review of Bank Assets was completed under AQR in the second half of 2015. All large borrower accounts were comprehensively audited Findings of AQR. AQR revealed a higher level of asset quality deterioration or NPAs within the banks. Most Banks were reported to be hiding bad assets under the practice of forbearance (a temporary repayment relief). AQR overrode such practices and helped determine the accurate level of bad loans that Banks were hiding. NPA levels suddenly shot up. NPAs in March 2015: INR 2.78 lakh crores. NPAs in March 2018: INR 9.50 lakh crores. Please take a moment to consider the enormity of the crisis. INR 10 lakh crores (the US $150 billion) is larger than the GDP of 130 countries. This amount was stuck with corporate borrowers, not returning to banks, thus choking credit growth, impacting other growing businesses, and impeding India's economic growth. From the IMF's 2016 data, India's bad loans (8.6%) were much higher than any other prominent economy like China, Japan, the USA, UK, where this is below 2%. May 2016: Insolvency and Bankruptcy Code (IBC) was passed Created a one-stop solution for resolving insolvencies. The greatest strength of IBC - it set a strict time limit for cases, and the process could not go beyond 270 days (9 months). June 2016: National Company Law Tribunal (NCLT) was constituted. Constituted as a quasi-judicial body overseeing the insolvency process under IBC. June 2017: RBI identified 12 accounts ("The Dirty Dozen"), each having more than INR 5,000 crore (the US $745 million) of outstanding defaults. These 12 accounts comprise 25% of the total bank NPAs. April 2018: The first case (Electrosteel) is resolved under IBC. NCLT approves Vedanta Group's bid for Electrosteel at INR 5,000 crore ($750 million). Final outcome – creditors will take a haircut of about 50%, but 5,000 crores out of a total 10,000 crore default would return to the system. All the other remaining accounts from the list are expected to be resolved within this year (under 270 days deadline). Possibly, more money is likely to return to creditors. Next steps: RBI has created a second list of 28 accounts, which comprise 40% of bad loans. These are expected to be resolved by 2019. To address defaults in the future, the government has also rolled out "Fugitive Economic Offenders Ordinance" in April 2018. This bill allows the Government of India to henceforth confiscate all assets, both within and outside the country, of declared economic offenders, who have left the country to avoid facing criminal prosecution. Summary: Between 2018 and 2019, 65% of bad loans will be addressed from 30 accounts in the two lists submitted by RBI. Many other smaller accounts are being addressed separately. Assuming an average 60% haircut, a total of INR 4 lakh crore out of INR 10 lakh crore NPAs is likely to return to the system by 2019. NCLT benches (currently 11) may also be increased to support the speedier resolution. The government deserves credit for: Uncovering the mountain of NPAs that was created over the years and hidden under the carpet but was choking the country's economic growth. Rolling out Insolvency and Bankruptcy Code (IBC), which provides six months (extensible by three months), the time-bound insolvency resolution process. Arresting the leakages and bringing a part of the capital back into the system, which was lost in defaults. Infusing an additional INR 2.11 lakh crore (the US $30 billion) through a recapitalization plan for banks to spur economic growth. It's still early days, and one needs to wait for results, but it's a promising indicator. - "It used to be Indian tycoons could borrow as much as they wanted & default with no fear of losing their companies. No more. The impact is potentially far-reaching." "welcome development: the humbling of India's tycoons. A tough Bankruptcy code, chastened banks, and probity in Delhi have dealt a blow to cronyism." Many bank's nets stressed assets are more than two to three times their net worth, and therefore these banks are effectively insolvent. But these are all government-supported banks and thus continue to operate due to access to liquidity, which in turn is due to the assumption of government support being there in the event of a crisis. The bankruptcy law that India recently passed. It is a useful achievement. But it's simply words on paper without institutional backing—and the institutions aren't there yet. Two things need to happen: State-controlled banks need to get these loans resolved; then, the system that allowed them to build up needs to be demolished. Each of these has an obvious solution. The problem is that the government is simply unwilling to implement either one. Resolving loans isn't a simple process. Somebody ultimately has to take a haircut. That requires a system in which people are able to make decisions based on obvious facts on the ground. Which project will be viable once it's restructured? Which will require more money? Which should be shut down? India doesn't have a system like that yet. At the moment, decision-makers face political pressure to protect sensitive projects. And bank officials worry that any choice they make could come back to haunt them later if some anti-corruption crusader accuses them of taking bribes. Banks are the next significant fraud after Politicians in India. Has anyone has any idea how much interest is swindled out of people's hard-earned money by the Banks for the few thousand loan one has borrowed? The mathematical calculation is the need of the hour — no use blaming anyone or the system. The money from the banking sector has been liberally looted by the so-called industrialists colluded with bankers, politicians through parallel companies, creating fake overseas jobs and moved money and bought assets in the desert. Who is the investor in the Middle East? Who are buying properties in London and Europe? Now the screws are tightened. People are crying foul. If it is not corrected, the currency would be similar to paper. The People saying they don' t have money to repay now approaching courts for repayment and not to dispose of their companies. How much money of the middle class is looted by these so-called industrialists no one asks any questions. Industrialists & Big business Houses have to pay a significant amount of money as a donation to these Politicians who are ruling, so who will ask THE question to whom? Punjab and Maharashtra Co-operative Bank (PMC) used more than 21,000 fictitious accounts to hide loans it made, according to a police complaint lodged by Indian officials, in the latest banking fraud case to spook the country's depositors and investors. The actual financial position of the bank was camouflaged, & the bank deceptively reflected a rosy picture of its financial parameters," said the complaint, noting that the fictitious loan accounts were not entered into the bank's core banking system - a factor key in the perpetration of a $2 billion fraud at Punjab National Bank (PNBK.NS) that was uncovered in 2018. The PMC case has sparked renewed concerns about the health of India's troubled banking sector, which has been rocked by a multi-billion dollar fraud at a state-run lender, the collapse of a significant infrastructure lender, bad loan issues at state-run banks and a liquidity squeeze that has hit shadow lenders. More than two dozen co-operative banks are now under RBI administration, but PMC Bank - with deposits of 116.2 billion rupees as of March 31 - is by far the largest. In a significant relief to the hopeless customers of the crippled PMC Bank, the RBI increased the cash withdrawal limit to Rs 10,000 per account-holder fr Rs 1,000 set earlier but retained the six-month curbs. The regulator also said the relaxation in withdrawals would take care of over 60 percent of the customers of the cooperative bank focused on low-income customers. Just wait. Shortly, Air India will be privatized, and a sizable number of employees are going to lose their job. These are loans; Banks considered safe and secured. Next, large scale VRS in BSNL and MTNL will make a considerable number of employees loan defaulter. Again, Banks considered these loans are safe and secured. Large scale privatization of 28 PSUs will make many Banks bankrupt. Modi thinks that all private companies will give him Tax, and he will not have any responsibility to ensure a good business environment. The fact of the matter is that due to this government in the helm of affairs, neither Private nor Government PSUs can run smoothly. All will become sick. Be it Telecom like Voda, Airtel, etc. (8 Companies are already shut down owing huge Bank debt), aviation Jetairways, Air India, and even spice Jet (Earlier seven companies are shut down), Auto sector, etc. Everywhere loss, recession, and job loss. Does this government deserve to remain in the helm of affairs? The lesson is clear. India needs a highly educated Finance Minister, preferably of a Finance background. Indian economy is crashing because of the tightening of corrupt. But corruption and tax evasion have been happening over the past these years. What is needed is to remove this dishonesty, and it will take many years. You can't bring economic growth inorganically by forcibly redistributing the hard-earned money from rich to the so-called poor who never worked for this.
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