Exploding NPA numbers: What can moneylenders ‘teach’ us?

Abstract

This paper attempts to bring out the learnings for banks that can be taken from moneylenders. Moneylenders have been in existence since ages, yet they never faced any problem of non-recovery or Non-Performing Assets(NPA). The paper starts by explaining different terminologies involved with NPAs, interpreting statistics of public and private banks in terms of GNPAs, NNPAS and NP. It tells about the evolution of moneylenders from their existence till now, understood the type of demand that they cater to and what kind of threats does formal institutions like micro finance have for them, if any? With surveys conducted of few moneylenders, this paper conveys the voice of moneylenders. With this we are trying to gauge as to why people have always preferred money lenders and why they pose a threat to banks despite charging high interest rates? What are the possible reasons? Their availability? Their existence since ages or is there something else?