Letter to BS: Bankers should not be the only ones blamed for rising NPAs

The editorial “The Mudra problem’’ (November 28) was pertinent. Both the governor and the deputy governor of the Reserve Bank of India (RBI) have expressed their dismay about the rising bad debts under Mudra. Their warnings should be heeded. After nationalisation, banks were directed to lend a huge chunk of their loans to the priority sector as a social obligation. The payback for this munificence was the creation of vote banks. These loans under various schemes were seen by the beneficiaries as hand-outs by the government with no obligation to repay. This myth was perpetrated by local level politicians who, along with ground-level governmental officials, were the ones pushing these loans. This is the reason many well-meaning schemes on paper floundered at the ground level.

With the new dispensation at the Centre and steps taken to clean up the banking system, it was expected the era of directed lending was over. However, the Mudra loans belied this. Bankers are in a bind. End use verification becomes difficult and resource to action is limited as there are no collaterals. The loans were too small for banks to enter into litigation. It is time politicians realise that tinkering with the banking system and forcing them into directed lending without help or recourse to recovery are pushing the sector deeper into the quagmire. Bankers should not be the only ones blamed for the rising NPAs.

K V Premraj  Mumbai

Letters can be mailed, faxed or e-mailed to: 

The Editor, Business Standard

Nehru House, 4 Bahadur Shah Zafar Marg 

New Delhi 110 002 

Fax: (011) 23720201  ·  

E-mail: letters@bsmail.in

All letters must have a postal address and telephone number