The issue of NPAs or unpaid loans is universal. The leading nations around the globe have been dealing with the problem which has been declining profits of the banks.
Every country has developed various policies, schemes and law agencies to protect the economy from declining.
Take a look at how India and the global economies deal with NPAs.
China currently has 250 million dollars in bad debt. More than 40% of these unrecovered loans are directly related to real estate.
In order to develop the infrastructure, the Chinese government gave green signals to enterprises who unnecessarily built several towns and cities from the loaned money.
But, these enterprises were later unable to repay the loans.
In Italy, lack of returns in the real estate and the construction sector is believed to be the main reason for the tons of bad debts equaling to 207 billion dollars.
Bad debts along with the national debts have reached a point where citizen’s money cannot compensate the entire losses causing a huge financial crisis.
Being a part of the Eurozone, Italy was saved by bailout funds provided by EU to recapitalize banks.
Spain faced a major issue of unpaid loans during the housing crisis that happened in 2008.
But the Spain Government was quick to fix this issue with the appropriate remedial measures. As a result, the bad debt ratio fell from 6.09% in 2016 to 5.7% in June 2017 which is a good sign of recovery.
Apart from bailout money from EU, Spain also set up state based stressed asset management in which bad debts are properly evaluated and recovered.
Russia's NPA ratio accounts to 9.16% of the total loans which is much higher than India.
The Russian economy is over-dependent on oil and gas exports and when global oil prices crashed down Russia's oil and gas industries collapsed.
As a result, Russian banks sanctioned loans to rescue the economy but, the spent money never came back leading to the debt crisis.
Along with it, economic sanctions imposed on Russia by America and other European countries slowed down economic growth.
Banks were rescued through government bailouts followed by a government takeover.
Slowdown and steady economic growth is the main reason why Ireland has been facing the NPA issue.
Apart from setting up a National Asset Management Agency, the Government also introduced insolvency services in 2013 to support real estate and housing debtors. Thanks to that, the country’s bad loan ratio has dropped significantly from 27% in 2013 to 14.2 percent in 2016 and the trend is continuing
A Large part of the success can be attributed to successful debt restructuring programmes. The programmes concentrated among real estate owners and allowed flexible methods for the debtors to repay loans.