Letters: Leave RBI out of mess

With reference to the article, “The politics of tackling NPAs” by A K Bhattacharya (March 29), I support the central government’s reported move to ask the Reserve Bank of India (RBI) to lead the resolution of non-performing assets. The RBI’s good name will likely prevent political controversy.
 
However, the article does not discuss the likely repercussions of such an act on the RBI’s reputation — many of the decisions could be criticised or scrutinised.
 
I am surprised by the insistence of bankers for pre-vetting of their NPA resolution decisions as if they have lost faith in the institutional mechanisms of the legal system and banking regulation. The government will set a wrong precedent if the RBI is directly involved as it will have to regulate the same banks following an arms-length principle.
 
In a country where there is a debate even on RBI representatives joining the bank boards, involving the banking regulator in the NPA mess isn’t desirable.
 
What the central government should provide is credible legal advice, which can be used to vet the processes adopted by banks in NPA resolution. One possibility could be to appoint a temporary additional solicitor/advocate general (banking), with the informal consent of the major Opposition party. This solicitor could help banks follow a procedure that would withstand the scrutiny of higher judiciary.
 
Everything else should be the decision and responsibility of the bankers. Wherever necessary, the government should consider change of leadership instead of allowing unnecessary leeway.
 
Regarding the plight of the three banks based in the east, the main cause of their poor performance is the poor rural economies of the states they predominantly serve. These banks are engaged in rural financial inclusion and deserve the full support of the government. Y P Issar   Karnal

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