Merger no solution

This refers to the editorial “The NPA denouement” (June 29). The diminishing returns, and the deteriorating financial health of the public sector banks are keeping investors from investing in their scrips. The various measures or schemes being in force in banks for the fast resolution of bad assets are not only not delivering the intended results, but are pushing banks to go for large write-offs in the case of big ticket loans. At this juncture, pressurising banks to go for higher provisioning would be much detrimental to healthy growth of banks. Neither merger nor narrow banking for weak banks are going to tackle the ballooning non-performing assets (NPAs) crisis. 

Till stressed sectors remain under stress, the health of the banks will not improve. The government and the banking regulator need to look for flexible NPA norms to relieve banks from stress. Based on the issues being faced by the various segments of the economy, sector-specific flexible policy on NPA norms is needed to improve the quality of the assets. Fast resolution of bad assets without significant hair cuts to banks must be given the highest priority to save the banking sector and secure the interest of the investors and depositors. 

  V S K Pillai  Changanacherry

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