Let there be not another Lehman Brothers’ story in India, that happened due to a bad situation / bad loan payers or whatsoever.
There is always a set of defaulters, but with the increase in population / denominator; the numerator rises too. The new numerator mismatches the resources available within the bank to handle the spike. And at a point, banks cease bearing the burden and it becomes the first lonewolf to deviate from the group of banks to misalign with the rules of the game.
Latest news indicates a rise in NPA amongst IDBI, SBI & many other stabilized banks:
Banks generally convert NPAs into a no-loss asset, sometimes a little-profit asset; by auctioning / reselling these assets held / guaranteed by defaulters as a security cover. When the numbers were small, perhaps banks managed such auctions amongst a smaller circle of frequent buyers. Now that the number has been increasing, it then sounds an alarm and the banks certainly want to involve
more public. The most active links to check are as below:
If 100% of NPAs are converted into Performing Assets through potential buyers in the public; then the banks have almost nothing to worry about and the pressure on their parental institutions to control inflation & interest rates could be limited to external influencers like gold price, dollar price, oil price etc.
Above is a sample from an auction site.