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Bold reform: Letter to BS on NPA rules may mean short-term pain for banks

The revised guidelines will bring much pain to the banks in the short to medium term but there is no gain without any pain

Business Standard 

With reference to “cracks the whip” (February 14), the stress in the banking system is very high and the level of (NPAs) is at an unusually high level. Given this, a leaner, simplified, and yet stringent framework announced by the (RBI) for resolution of NPAs vis-à-vis the resolution of stressed assets is a good step in the direction of monitoring and containing such loans.

Steps such as banks harmonising treatment across their books of specific accounts, in case of consortium lending and making it necessary for them to report on a frequent basis, and start the resolution process right away will nevertheless bring greater clarity in dealing appropriately with default borrowers in a coordinated manner.

It is a wake-up call to the defaulters. Certainly, compared to earlier resolution processes, a more streamlined approach was necessary in view of the grim situation. The revised guidelines will bring much pain to the banks in the short to medium term but there is no gain without any pain. needs to be complimented for initiating this bold reform.

Srinivasan Umashankar Nagpur


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First Published: Thu, February 15 2018. 21:40 IST
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