Letters: Daunting, not impossible

Apropos the report, "PSU bank reforms fall short of expectations" (August 25), the three areas to focus on are extending absolute functional autonomy to public sector banks (PSB); raising enough capital to ensure regulatory commitments and tackling non-performing assets (NPA).

The key challenges in raising capital are low equity valuations, an overcrowded market and regulatory curbs. Similarly, more NPAs mean more provisions, more risk weight on capital and shrinking profit.

Expected capital support from the government in relation to actual requirements in the run-up to Basel III compliance in 2019 is meagre and given the fiscal situation, it is almost certain that this will not meet the needs of PSBs entirely. The problems confronted by PSBs are more serious than what they appear to be. Nevertheless, there is a realisation now that the health of PSBs is indeed bad and the measures initiated indicate the level of seriousness. It is a daunting task, yet not impossible, given that India Inc came out of the problems of the economic turmoil in the early 1990s.

Srinivasan Umashankar Nagpur

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