Abstract
Banking is lifeline of every economy. It looks like simple thing like collecting money from people and giving credit to people, and retuning the money with interest when depositors wanted it. But banking does many more functions, like financial inclusion, through priority sector lending loans to agriculture, MSMEs , renewable energy, issuing bonds, facilitator in foreign exchange, and many more . At present banking sector in crisis due to many challenges. NPA issue is looming, , willful defaulters like Vijay Malya and others, bank employees collusion with corporates to loot bank, capital to risk adequate ratio dwindling, conflict of interest while sanctioning loans, and many more. But the bigger question is that, what is the root cause of these problems or symptoms? Is it because of failure of governance or failure of Regulation needs a detailed analysis.
After the thorough review the literatures on the titles; i) The Public sector banking crisis in India ii) The Government needs a clear vision for the future of India’s Banking Sector” iii) The roots of the current banking crisis iv) The crisis in Indian banking v) Root cause of India's banking crisis: A non-existent corporate bond market vi) What this banking crisis really is, and how govt has missed what matters most and viii) Is India Sliding Into A Banking Crisis? A diagnostic research approach is used in analyzing the presenting the data pertained to Indian public sector banks. Reasons for increasing NPAs, failure of governance and regulation, meeting social obligations, in-effective recruitment system, onon-compatiable interest rates, increased customers expectations, lack of accountability, meeting global requirement both in terms of quality, speed and size, mis-match in bank employees salaries are the major challenges before the public sector banks needs urgent attention and to find the suitable solutions through consolidation of banks among the public sector banks and between public and private sector banks , which is the successful model in western countries.
Amendment in banking Regulation act to give more power to RBI to take decisions to reduce NPA, steps like big private audit firms must audit which public sector banks would not allow now and Independence and autonomy to banks while ensuring compliance, market based salaries to higher professionals, Clearing the balance sheets would ensure sustainability of banking sector. Laws like confiscation of property of fugitives, and extradition treaty with nations like UK and western nations help to repatriate those absconders like Malya, Neerav and LalithModi,
This paper also throws a light on the recent developments takes place in the banking sector with particularly in public sector banks and the ways and means to curb NPAs threat also has been analysed. Recent Developments and Ways to Tackle NPA Insolvency and Bankruptcy Code (IBC) , Credit Risk Management , Tightening Credit Monitoring , Amendments to Banking Law to give RBI more power , More “Hair-cut” for Banks, Stricter NPA recovery, Corporate Governance Issues, Making every employee should come under Accountability, raising capital” to address the problem of NPA, using unclaimed deposits , monetization of assets held by Banks, making Cash Reserve Ratio (CRR) attractive, refinancing from the Central Bank , Structural changes to involve private capital and so on.