Letter to BS: Bankers are reluctant to lend over NPA, profitability concern

This has reference to Tamal Bandyopadhyay’s, “Have our bankers forgotten to lend?’’ (March 2). This follows the fi­nance minister’s recent exhortation to lend money to the credit starved micro, small and medium enterprises.
 
The reluctance of bankers to be over-enthusiastic in granting loans should be seen through the prism of the changed banking scenario. Two aspects of banking have clouded the landscape — the basket of bad debts and their profitability.
 
Many banks are laden with massive amounts of non-performing assets. A lot of effort and time is being expended in a bid to recover these loans. The new legal measures provided to help recover bad loans provides a glimmer of hope. But these must be fast-tracked to show more visible results. Many senior bank officials have had legal proceedings initiated for loans granted years ago. No amount of assurances from ministers that there won’t be victimisation will not cut ice till it happens at the ground level.
 
The physical and mental agony the individual and his/her family undergoes when they are investigated by agencies is a deterrent. A bank official who grants loans and if it becomes toxic can be hauled over the coals. But another official who does not grant loans, cannot be punished. Hence there is a reluctance to stick one’s neck out. Branch and bank profitability is now gaining more currency. Provisions for bad debts eats into the profitability. With stringent asset classifications, income can only be booked if recovered. Granting more loans, if not serviced regularly, will adversely impact the profit of the unit concerned. In the past, rural and semi-urban pockets were major beneficiaries of the government sponsored scheme loans. Vested interests gave the feeling to borrowers these were government largesse not be to be repaid.
 
The article also made a sweeping comment about private sector banks being “dens of sales persons, not bankers anymore”. What is wrong with banks selling insurance and mutual funds? It is far better for a customer to buy insurance and mutual funds from his banker than sundry agents. Bank staff selling insurance and mutual funds are certified sellers and in case of a mis-sell, recourse for redressal is available through the bank. This avenue for redressal is not available when individual agents (mis)sell financial products and vanish.
 
K V Premraj, Mumbai

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