Vet loans carefully

With reference to the editorial, “Caught in a cleft” (September 13), I can appreciate the difficult situation faced by the government and the central bank and their inability to tackle it because of its sheer magnitude. 

The suggestion of the editorial to “consider selling off/divesting stakes in subsidiaries and non-core businesses” is perhaps the only rational possibility. A word of caution: Transferring government stake to the LIC is not a solution. Such temptations should be curbed and the government should go only for genuine divestments.

However, it is crucial to ensure that new loans are vetted carefully so that five to 10 years from now, we don’t face a similar situation. Loans must not be given over extraneous considerations, favouritism or political patronage. Our banking system is robust enough to evaluate loan applications dispassionately, objectively and based on a holistic study of the sustainability of the project proposal.

Several large loans are sanctioned on the whims and fancies of bank chairpersons or due to political pressures. Instances of bank officials getting gifts on the weddings of their children and amassing wealth are quite common. That’s the root cause of the problem; that’s where the collective focus should be.

Krishan Kalra   Gurgaon Letters can be mailed, faxed or e-mailed to: 

The Editor, Business Standard

Nehru House, 4 Bahadur Shah Zafar Marg 

New Delhi 110 002 

Fax: (011) 23720201  ·  E-mail: letters@bsmail.in

All letters must have a postal address and telephone number