Letter to BS: The need of the hour is zero tolerance on bad loans

It is heartening to see that Reserve Bank of India Governor Urjit Patel has ruled out any dilution in the norms of bad loans in the face of lobbying by banks and members of Parliament with respect to the power sector. In fact, stringent rules make sure serious attempts are made to clean the bad loan mess by putting the Bankruptcy Code to use. Hence, the plea of the infrastructure sector that it could not be built without accounting forbearance is unverifiable at best. Any attempt at regulatory forbearance will be a throwback to bad old days of disguised loans, especially by the public sector banks that were often armtwisted by promoters who have political clout.

Let us accept the fact that public confidence in the banking system has been shaken. Even though recent events of individual acts of commission or omission might not erode confidence in general, but easing of norms and standards of provisioning for non-performing assets will further dent public confidence in the banking system.

The need of the hour is zero tolerance on bad loans. Fiddling with accounting does not change the reality. Let us end it. This will also help clean up the banks’ books besides bringing discipline to corporate finances and governance as well.

Satish Murdeshwar  Pune

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