ASSIGNMENT 1

PRECIS WRITING

FOR RBI GRADE B/NABARD GRADE A/B

&
SEBI GRADE A

1|P a g e W W W . E D U T A P . C O . I N QUERY? HELLO@EDUTAP.CO.IN / 8146207241

Read the following passage and make a precis in about 130 words:

When the Indian economy and its banking sector emerged relatively unscathed after the global
financial crash of 2008, India’s financial system became the envy of the world. That seems a distant
memory today as the banking sector of the country reels under one of the worst crises it has faced
in a long time. A mounting pile of bad loans, poor accounting standards and growing evidence of lax
supervision and banking fraud—unearthed over the past few weeks by several government
agencies—highlight the deep rot at the core of India’s financial system.

In 2009, India had among the lowest ratio of non-performing assets among the largest economies of
the world, which form the elite G-20 club. Eight years later, it has among the highest ratio of such
assets.

The fact that India’s bad loan ratio looks grim today has a lot to do with the fact that India’s central
bank has been prodding banks to recognize such toxic assets over the past few years—after long
years of quiet forbearance. Be that as it may, the rise in bad loans and the lack of adequate
provisions has put Indian banks in a tight spot now.

While the bad loan problem is more acute among state-owned lenders such as SBI, even private
banks may not be fully accounting for their share of toxic assets.

Stress tests by the International Monetary Fund (IMF) show that faced with adverse financial
shocks, Indian banks may find themselves to be much more vulnerable than their counterparts in
other large emerging markets.

That something is rotten in the state of state-owned banks has been known for quite a while. A
committee to examine the weakness in state-owned banks and to suggest reforms was set up by
the Reserve Bank of India more than four years ago under the chairmanship of P.J. Nayak. The
Nayak committee submitted its report almost at the same time as the National Democratic Alliance
(NDA) government was sworn in, during the summer of 2014.

Yet, three-and-a-half years down the line, very few of the committee’s recommendations have been
acted upon.

Unless the government undertakes structural reforms to overhaul the way in which state-owned
banks are managed, they will continue to be the Achilles heel of the Indian financial system,
dragging down growth and investments over the long term.

2|P a g e W W W . E D U T A P . C O . I N QUERY? HELLO@EDUTAP.CO.IN / 8146207241