According to a recent press report a study by Assocham has reported that the proportion of bad loans or non-performing assets (NPAs) to total loans of 11 listed banks for the year ending March 2010 stood at 2.21 per cent compared with 15 per cent in the late 1990s.
Reports said that there was renewed risk of accounts going bad in sectors such as telecom, airlines, small and medium enterprises (SMEs) and agriculture owing to the changing macroeconomic situation. It also said that the continuation of high NPAs in one sector has fair chances to lead to drying up of credit flow to others.
Reports also said that the existence of high NPA could lead to a bad effect on the economy as a whole. The study has said that the recent economic meltdown, initially in the US and then in rest of the world, was a direct result of many loans going bad.
The industry chamber has thus recommended insurance schemes for SMEs and the farm sector as a cushion, as these are most vulnerable if accounts turn bad. The study was conducted jointly by Assocham and investment bank, Resurgent India, also has suggested debtor assistance program and weather derivatives to protect crop loan portfolios.