Letters: The science of loan recovery

This refers to Charan Singh' article "Why are NPAs higher in public sector banks?" (May 21) and Y P Issar's Letter to the Editor "Recovering NPAs"(May 22). Charan Singh has used tractor loans to highlight the problem of recovery of loans in public sector banks (PSBs). But that doesn't explain the whole gamut of the credit appraisal and follow-up mess in PSBs. Issar has mooted the idea of commissioning and rotating retirees, who have had an ace record in realising NPAs, among PSBs . This is not feasible in the current system prevalent in public banks.

I am tempted to quote PSB's exposure of more than Rs 7,000 crore to Kingfisher Airlines (KFA) as an example of inefficiencies in their credit and recovery mechanisms. A consortium of 17 banks had lent to KFA. It is interesting to notice that HDFC Bank and Axis Bank are conspicuously absent from the list of banks. There are similar big-ticket exposures where PSBs have totally failed to recover loans or realise the collaterals and these two banks are not there either. Their credit appraisal process is so scientific that it kept them away from awful borrowers. The truth of the matter is that PSBs do not have the lending skills that guarantee risk-free exposures. Political interference and clumsy appraisals have added to the mess.

K V Rao Bangalore

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