GD Topic: How can we control banking frauds to reduce NPAs?

To address this GD topic well one needs to first understand ‘what is an NPA?' Put simply, a Non-Performing Asset is a bank loan, deemed to be irrecoverable.

By Aritro Dasgupta

This article was first published on August 19, 2020.

Students often make the mistake of allowing complacency to seep in, once all the MBA entrance exams are over. But they must remember that clearing these exams is only half the job done. The grind of the personality assessment rounds remains. One of the most popular methods to assess students’ personality, is via Group Discussions (GDs). A GD typically pits in any trending topic of strategic importance for the students to debate on. It could also be an abstract GD topic, to test the students’ creativity and team work capacity.

Current trending topics from economy, sports, culture, polity and business are the most frequently used in GDs. One such topic that may be of much importance to the GD rounds in MBA admissions 2023-24, could be about the excess prevalence of NPAs (Non-Performing Assets) in the Indian banking segments, and how frauds may be controlled to reduce this burgeoning concern. Students are free to use their choice of judgement. One must remember, that a GD is not an MCQ based test, so multiple answers could be correct. The students need to logically and factually justify their viewpoints, though. In fact, they could even remain neutral, by imbibing positives and negatives on both sides of the divide.

Unlike several other GD topics, this is one where there is lesser scope for debate. That is because, no one is likely to state that there isn’t a requirement to cut the NPAs. It is more of a discussion rather than a debate on how to improve the state of affairs. For that, one needs to first understand ‘what is an NPA?’. Put simply, a Non-Performing Asset is a bank loan, deemed to be irrecoverable. In order for a loan to be deduced as an NPA, a minimum period of three months must elapse since the due date. Thus, a loan hypothetically due on September 15, cannot be termed as an NPA, until the earliest of December 15.

Right now in India, the NPA percentage of the total loans is a staggeringly high figure. As per RBI data, the figure for NPAs had reached a nightmarish Rs. 10.25 trillion in March 2018. This represented 11.5 per cent of the total loan figure. There was almost a trillion and a half rupee worth of increase during this period. Fortunately, the figure has been curtailed to an extent as the year ending 2018 figure showed NPAs to represent 10.8 per cent. This is further expected to come down to 10.2 per cent by September this year. In lay man’s terms, imagine a bank has distributed loans of Rs 1,000 in a year. Out of this, 102 will not be recovered at all.

So even if one takes a high average interest rate of say 10 per cent (rarely happens), the bank will still not recover even the amount distributed, forget the interests. This at a time, when there is steady inflation. This terrible situation with NPAs has come around primarily thanks to twelve major accounts, responsible for a lion’s share of the bad debts. The Public Sector Banks (PSBs) have been the worst hit. While the PNB case is well known, thanks to Nirav Modi and Mehul Chowksi, SBI has also suffered badly. The RBI and the central government have already taken some steps to curb this.

One key decision taken was to adopt the recommendations of the Sunil Mehta Panel for the Project Sashakt. The Insolvency and Bankruptcy Code (IBC) has also been brought in, and is strictly being implemented across the table. The number of banks that come under DSIBs (Domestic Systematically Important Banks) has also been raised. Another initiative is the Inter-Creditor Agreement put in place by the RBI. It has now become a mandatory requirement for all lenders. The security establishment has also become more proactive. For instance, after the ICICI-Videocon scam, there was a no-exit notice sent to all international airports against the ICICI CEO Chanda Kochar. Under previous systems, she might have been able to flout the norms and escape the country.

GD Topic: How can we control banking frauds to reduce NPAs? Points to Remember

• Of all the possible GD topics, this is one where the student needs to keep calm and not be swayed by unnecessary emotion. That is because, this is a pure economy and finance topic.
• Any student caught beating around the bush will surely be eliminated.
• Such a topic is also more likely to be discussed for courses, where students have opted straight away for a finance or banking specialization, rather than for a general management course.
• This topic is easier for Economics or Commerce graduates to answer rather those from Engineering, Arts, Medical, Law, Architecture, Design and other areas.
• In case one has inadequate knowledge on the subject, one must wait for the right opportunity to speak. They must listen carefully to what others speak of and jump in during a pause.
• To prove your point cite data released by credible sources such as the Asian Development Bank (ADB), Reserve Bank of India (RBI), World Economic Forum (WEF), Forbes, Business Insider, Bloomberg, etc.

Creative but workable solutions need to be suggested for this case. The case must also be built around digital solutions, as that is one trending area now. You would do well if you focus on the 4 Cs of Group Discussions - Content, Collaboration, Communications and Clarity.

About the Author:

Aritro Dasgupta is a Teacher, Trainer and Content Writer. He has taught at several leading colleges and coaching institutes in both India and the UAE. Several of his students have finished in the top 10 of various national level exams such as CLAT, AILET and DUJAT. He is also a prolific content writer, having written for several leading publications in India, while currently, also working for one in the USA.

 

 

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