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Radical reforms

Asset creation and maintaining asset quality is essential for reasonable returns

Business Standard 

With reference to “A gathering cloud” (October 30), it is high time the government looked for more radical reforms in banking, especially public sector banks (PSBs). The proposed recapitalisation of PSBs will augment the capacity to lend. But their functioning needs an overhaul to eradicate deep-rooted inefficiencies and emphasise on accountability. Resource mobilisation and its deployment are equally crucial to ensure healthy banking. While policies are being framed based on broad guidelines of the regulator, it isn’t uncommon to see violations meant to accommodate big-ticket borrowers at the behest of politicians and bureaucrats. The debt servicing capacity of big corporates has been compromised resulting in piling up of non-performing assets.

Asset creation and maintaining asset quality is essential for reasonable returns. More professionalism is needed around delivery of credit. Within banks micro-management of credit is crucial to ensure the health of loans. In the wake of divergence in reporting the quality of the assets, the Reserve Bank of India must look to strengthen supervision of the activities of lenders. Without need-based infusion of capital reviving the health and growth of public sector banks cannot be restored.

VSK Pillai, Kottayam
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First Published: Mon, October 30 2017. 22:33 IST