Letter to BS on Rs 880-bn recap money giving PSBs a long rope again

The government is going to provide 20 public sector banks (PSBs) about Rs 880 billion through a mix of budgetary allocation and sale of recapitalisation bonds. This will only help the banks to lend more. Whatever may be the conditions to lend, the banks should ensure not to repeat history of money going down the drain. Many banks, over a time, have failed to contain bad loans despite periodic capital infusion by the successive governments. There are several reasons, including political interference and corruption for loans turning bad. Frankly speaking, the assets reconstruction companies (ARCs) in our country have not fared well and their presence seems yet another reason for mounting the non-performing assets (NPAs) over the last few years. The banks have become too lethargic or have eschewed from their fundamental duty of recovery of interest and loan instalments. Maybe the banks feel that there are ARCs, other organisations to shoulder the real burden of recovery of loans. As far as possible, it is better not to solve problems of the inside with the outside solutions. Banks should concentrate more on the recovery of bad loans. They must, themselves, try to reduce the NPAs to the minimum by aggressive, sincere and sustained action of recovery all through the year.

 

Ramanath Nakhate  Mumbai  Letters can be mailed, faxed or e-mailed to: 

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