Letter to BS: Asset quality review, PCA don't always mean penalising banks

The state of affairs in the banks had less to do with procyclicality and more to do with politically induced reckless lending to dodgy borrowers.

This refers to “Moody’s rating action and the Rs 28 trn push” by Soumya Kanti Ghosh (November 11). The writer wrongly sees the asset quality review of the banks and the imposition of prompt corrective action (PCA) norms as a way of penalising the banks for past actions. This is not true. This was done to know the real quality of the advances of the major, true level of non-performing assets (NPAs) and temporarily restrict the lending activities etc to conserve capital, stop reckless lending and strengthen the concerned banks. The state of affairs in the banks had less to