Continuous loss making companies are swallowing a large part of bank loan

Continuous loss making companies are swallowing a large part of bank loan

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New Delhi. Continuous loss making companies (Zombie Firms) are swallowing ten percent of the loans given by the banks of the country. Not only this, zombie companies are also taking 10 percent loan of the total loan of non-banking corporate sector. The worrying thing is that these companies are not making any new investment with this loan, but are using this loan to sustain themselves.

The Reserve Bank of India (RBI) has given this information in its monthly bulletin released on Wednesday. RBI publishes a bulletin every month on the trends related to the economy and financial sector. It has been said in the bulletin of RBI that companies making losses continuously have huge debt. They have been earning negative returns on assets for many years in a row.

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There is no productive use of bank loans

The Reserve Bank of India has said in its bulletin that the average cost of funds of zombie companies increases significantly with the shocks of the monetary policy. Such companies often do not generate new investment activities with the borrowings from banks as non-zombie companies do. They use the loan to survive themselves.

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bad loan big headache

These comments of RBI Bulletin are very important for the Indian banking system. This is because the public and private banks of the country are facing a huge problem of bad loans at this time. Indian banks were forced by RBI to clean their balance sheets in 2015. Then RBI started asset review. It was only after this move of the Reserve Bank that banks took some initiative to reduce bad loans. Many cases were resolved by taking them to insolvency courts. Similarly, banks reduced a large part of their bad loan book by selling them at some discount to asset reconstruction companies. But it is not that this problem has been eradicated from the root. Still, bad loans remain a big headache for many banks.

Tags: banking, Banking Sector, RBI

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