'Better corp governance helps private banks limit NPAs'

Former Reserve Bank Deputy Governor K C Chakrabarty today said private banks have been able to contain issues around asset quality plaguing the sector due to better corporate governance and hard work.
"Corporate governance, quality of management, accountability... They (private banks) are working hard, and hence earning more," Chakrabarty, who quit RBI last month, told reporters here, when asked about what helps private banks deal with the NPA problem better.
Earlier, the commercial banker-turned-RBI Deputy Governor added that the private banks are better placed than the state-run banks for NPA management.
"So far as NPA is concerned, I think they are at the same position. Improvement will only be known after the complete March results," he said.

In its financial stability report released last December, the RBI had said the state run lenders' gross non performing assets will rise to 4.9 per cent by March 2015, while the same for private sector lenders will be 2.7 per cent.
For a system as a whole, the gross NPAs will rise to 4.4 per cent in March 2015, up from the 4.2 per cent in September 2013, the RBI said. It is only the old age private sector banks which have a higher prevalence of NPAs, while the new age ones have been able to contain their Gross NPA ratios at the 1 percent mark as well.

Chakrabarty, who was known for his candid views, described NPAs as a problem emanating from "non performing administration".

When asked to elaborate on the external forces on the administration front, Chakrabarty said, "(I am referring to) all. Bank, economic administration and regulatory administration."
He said one of the pitfalls of the policymaking in the country was that we used to offer "too many carrots and a few sticks", especially on a topic like NPA management, Chakrabarty said the policy on early resolution on NPAs is a step in the right direction.
The policy incentivises early detection and resolution of the NPAs, while there are disincentives for those causing a delay in recognising the problem of asset stress, he said.