Letters: Nip NPAs in the bud

The article, "Just how bad are the bad loans" (May 10), by Nitin Sethi and Ishan Bakshi was interesting. Data analysis of bad loans is done after loans are disbursed; their causes are not analysed before.

The main cause is lack of supervision at the operational level. Often, large loan amounts, for example, Rs 100 crore or above, are sanctioned at the head office or regional office of banks and sometimes under political pressure. Rarely is the branch head involved in the sanctioning process, hence monitoring of the loan post disbursement is neglected. The Reserve Bank of India (RBI) comes into the picture only after loans have turned bad in terms of their classification as SMA-0 to loss assets.

Unless the RBI makes drastic changes in the sanctioning and monitoring process, the non-performing assets of banks will increase. One must remember: a stitch in time saves nine.

S A Bhave Pune

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