Why are Indian banks losing 100 Cr per day?

Why are Indian banks losing 100 Cr per day?

The banking sector in India faces several challenges that directly influence its proper functioning. According to RBI, Indian banks have been losing about 100 crores daily for the past 7 years because of banking frauds. Today, we will cover some of our banking sector's most significant problems.

How bad loans have been affecting Asset quality-??

Non-performing assets (NPA) are bad loans and stressed loans. It is classified as a non-performing asset when a person fails to repay the debt within 90 days of the due date. The term "asset quality" refers to assessing the risks associated with existing assets. Bad loans directly impact asset quality, and banks have suffered significant losses due to the pandemic as not everyone was able to repay loans on time.??

Capital adequacy-?To be safe, Banks retain a certain amount of money in the reserve to safeguard their depositors and themselves from bad loans. For better and more effective functioning, banks are required to hold a particular amount of money in their accounts, referred to as the capital-to-risk weighted assets ratio (CRAR)

Bank fraud- Bank fraud has been on the rise in recent years, and it is one of the most serious challenges the industry is facing right now, with numerous digital transactions taking place. These fraud operations are not effectively monitored because of a lack of regulation and policies, resulting in a steady growth in bank fraud. According to RBI, a total number of 7,400 bank fraud cases were reported in 2021.?

Cyber threats-?As the number of digital transactions has grown, so has the number of cyber threats. This year, we've witnessed a nearly 33 percent increase in the usage of digital payments, which means that there can also be an increase in the number of cyber threats in the future. There have been several cyber attacks on banks in recent years, and making employees aware of cyber security will help prevent cyber-attacks.

A new set of employees-?Many older and experienced employees have been replaced by younger employees who are more technologically advanced. With the expanding digitalization of the banking system, it is becoming increasingly difficult to thrive without keeping up with new technology.

What is the Indian banking sector doing to make things better

• Banks are mostly digitized to make data storing more effortless and convenient.
• The government has also introduced many schemes to help people get loans quicker.
• KYC has become mandatory because of the increasing fraud transactions to ensure safe and secure payments.

What are some of the reforms that you think RBI should come up with for a better and safer banking experience?