According to the International Monetary Fund(IMF),the level of non-performing loans in India remains high.IMF has favoured strengthening the level of capitalisation of some banks,particularly government-owned banks.
Further,the IMF has said that strengthening the level of capitalisation in banks was one of the recommendations of the Financial Sector Assessment Programme (FSAP) for India.
The Financial Sector Assessment Program(FSAP) is a joint program of the International Monetary Fund and the World Bank.It was launched in 1999 in the wake of the Asian financial crisis.The program brings together the World Bank and IMF expertise to help countries reduce the likelihood and severity of financial sector crises.
The FSAP provides a comprehensive framework through which assessors and authorities in participating countries can identify financial system vulnerabilities and develop appropriate policy responses.
The FSAP follows a three-pronged approach when looking at the country’s financial sector which are(a)The soundness of a financial system versus its vulnerabilities and risks that increase the likelihood or potential severity of financial sector crises (b)country’s developmental needs in terms of infrastructure,institutions and markets and (c)country’s compliance with the observance of selected financial sector standards and codes.
Non-Performing Assets(NPA) are loans or advances that are in default or are in arrears on scheduled payments of principal or interest,usually for a period of 90 days.Before the period of 90 days,they are called Stressed Assets.