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Letter to BS: How to control the birth of NPAs is foremost task of lenders

Risk is an integral part of the economic activity and lenders can't escape risk

Business Standard 

Banks, NPA, IBC
Illustration by Binay Sinha

This refers to “The three Rs of public sector banking” (June 17). Though the (IBC) has helped reduce the level of stressed assets of public sector banks, the government has to execute further reforms to ensure the and judicial system speed up resolution and recovery of the non-performing assets (NPAs).

While banks, especially the state-owned ones, are engaged in driving social development too, they should be manifold in lending. Asset creation in some of the segments of the economy alone will not propel growth holistically, but pave the way for the rise of defaults. Lenders must lend to all segments to augment capital formation. They should not restrict lending for fear of defaults. NPAs are bound to happen. How to minimise or control the birth of NPAs is the foremost task of the lenders. The decision to create an asset must be a thorough process. Risk is an integral part of the economic activity and lenders can't escape risk. Managing risk to minimise its effects is crucial.

The consolidation of banks won't be of much help in bringing down the NPAs. The government must give a free hand to lenders in decision making.

VSK Pillai, Kochi

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First Published: Tue, June 18 2019. 21:42 IST