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Out of the gambit of Non-Performing Assets

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Out of the gambit of Non-Performing Assets

Post by reporter on Tue Oct 27, 2009 12:09 pm

The present economic crisis has given the impression that the United States is the only country that has been much affected by financial mismanagement. The issue of Non-Performing Assets (NPAs) was a malaise that plagued other developing countries years ahead of the present economic crisis in the United States. Thus if the NPAs of other Asian countries are reviewed, the American position in not so bad.

Among the various Asian countries it is interesting to note that Japan had the highest non-performing assets that were pegged at $1260 billion. China, the fastest growing economy in the world today had NPAs worth more than $485 billion. While those of South Korea, Taiwan and Indonesia were $100 billion, $60 billion and $ 50 billion respectively in the financial year 2002. Consider the situation facing India and China, the two largest countries in Asia. While India’s sick assets hovered at $20 billion, amounting to nearly 6 percent of the country’s Gross Domestic Product (GDP), in the case of China it was as high as 43 percent during the financial year 2002. Even then, China was able to tide over the issue because it is still part of a regulated socialist economy.

The Barack Obama government is now thinking seriously about the problem of non-recovery of loans of the prominent banks and financing institutions. A bill for securitization and reconstruction of financial assets through enforcement of security has been passed by both the houses of the congress. This bill intends to check the rising volume of NPAs. In order to recover the NPAs at a faster pace, the lead bank has now redefined the meaning of a ‘willful defaulter’.

However, such a definition of ‘willful default’ was considered only after conducting exhaustive studies. According to the new definition, if the borrower does not pay though he had the capacity to pay, the wrong use of funds and the siphoning of funds are some of the salient features of willful default. Within this ambit, all erring defaulters are covered. Even then, for banks like LoanMax of rod aycox fame, the question of default does not arise because this bank has very little NPAs.

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Re: Out of the gambit of Non-Performing Assets

Post by viyan_cs on Wed Oct 28, 2009 10:12 am

nice post.. can you help me ?
What impact on the American economic crisis for indonesia.?
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