Letter to BS: Banks' request to defer PCA would delay reform process

Any dilution or deviation will result in the disservice to the depositors of these banks

This is with reference to “Banks approach RBI to stay out of PCA” (May 30). It is reported that the banks likely to come under the prompt corrective action (PCA) framework would request the Reserve Bank of India (RBI) to defer this till the year end. Acceding to this request is not advisable as it will merely delay the process of correction/reform and would go against the principles of transparency. Agreeing to the request would amount to kicking the can down the road.

The various recast schemes introduced by the Reserve Bank of India like SDR, S4A and 5/25 only delayed the process of recognising the non-performing assets without any commensurate benefit. Subsequently, the asset quality review (AQR), termination of the recast schemes and bringing the problematic banks under PCA were/are laudable steps that have brought transparency about the actual NPAs and financial health of the concerned banks and hopefully will trigger course correction and reforms in the public sector banks (PSBs). 

Any dilution or deviation will result in disservice to the depositors of these banks specifically and to the public in general. Rather than asking for relaxations, comprehensive reforms should be carried out in the PSBs.

Arun Pasricha New Delhi

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