Letters: Dented profitability

The monetary measures announced by RBI Governor Dr Subba Rao were largely as expected, given inflationary trends in the economy. But his announcement of tighter provisioning norms for non-performing assets in the books of the banks must have taken all bank chiefs by surprise. The across-the-board enhancement in provisioning for sub-standard and doubtful assets by five percentage points to 25 per cent and for restructured standard assets up to two per cent will make a big dent in banks’ profitability, unless they make serious efforts to recover those loans or upgrade the non-performing assets in a big way. The governor’s concerns are not without substance as would be indicated by the data available as on date from the audited financial results announced by most banks, barring six public sector banks including State Bank of India. RBI has already advised all banks to declare their non-performing assets data as derived directly from the system against manual calculation, to arrive at the true position prevailing.

S Ravindranath, Coimbatore

Readers should write to:
The Editor, Business Standard,
Nehru House,
4, Bahadur Shah Zafar Marg,
New Delhi 110 002,
Fax: (011) 23720201;
letters@bsmail.in