Letters: Time for a rethink

The govt must step come up with stringent measures to make banks efficient in conducting business

With reference to Ishan Bakshi?s report, ?Solvency position of govt banks worsens? (February 25), the debt burden and the consequent decelerating debt servicing capacity of business enterprises are directly hampering the asset quality of banks. This impacts public sector banks (PSB) more, as the major chunk of their advances are for the infrastructure, power, communications, iron and steel and textiles sectors, which are stressed due to costly debts.

If this situation persists, PSBs will end up with negative net worth. It is imperative for PSBs to rethink their lending rates and capital adequacy, strategies for recovering bad assets and the effectiveness of existing measures to achieve the targets stated in their budgets.

The asset quality problem is not only because of ineffective sector-specific reforms but also due to growing financial indiscipline among borrowers and the way public sector lenders are dealing with the situation. The government must step come up with stringent measures to make banks efficient in conducting business and maximising returns.

V S K Pillai Changanacherry
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