Letter to BS: Setting up of a bad bank to park all NPAs is irrational

The idea of setting up of a bad bank to park all the non-performing assets (NPAs) of the public sector banks (PSBs) is irrational. To merely tuck away the NPAs of PSBs is like brushing all the dirt under carpet rather than cleaning the house. Sooner or later, the same reckless lending and lack of accountability will give rise to another mountain of NPAs. A government which has so much political heft and talks about economic reforms is taking the easy way out of a difficult, and frequently recurring, situation. It should show both the boldness and the wisdom to comprehensively reform all the systems and processes in the PSBs which led to this situation. Else, it can merge the weaker PSBs with their stronger brethren. The third option is to confine the weaker PSBs to do limited or narrow banking. Setting up a bad bank with all the ills of the PSBs and frequently dipping into the public to finance the PSBs should not be an option. History will not judge the decision kindly.

Arun Pasricha  

Delhi