Alarmingly growing NPAs ( Non- Performance Assets) ,that is, bad loans in the banking sector, has made Reserve Bank of India to moot proposals for reducing the cap of a single loan to 25 per cent of the core capital of a single corporate group. At present the corporate groups are granted loans up to 55 per cent of the eligible capital.

The apex bank has proposed that the revised lower ceiling could come into effect from 1st January, 2019. The RBI wants to align its lending caps to companies with the 25 per cent norm set by the Basel Committee on Banking Supervision. The RBI has sought feedback from the stake holders on the discussion paper by April 30.

The corporates in India continue to predominantly depend on banks for their financial needs,instead of accessing the market. It is important to have alternate sources of funding for the corporate sector.

What is really happening?  The corporates manage to avail huge amount of loans from the banks even without submission of sufficient  surety with the undue  political influence and never care to repay. This is how bad loans (NPAs) are created which eat into the profits of the banks to a great extent. So any attempts to curb the same is certain to be opposed by the corporates and the government ,as usual, may succumb to their pressure.