Letter to BS: Mergers among PSBs are not going to deliver any relief

Any lag in regulating and controlling credit expansion of banks will pave the way for the further growth of NPAs

This refers to “Govt banks have 90% of NPAs” (September 24). Successive governments have promoted bad banking practices by favouring corporates and these flawed policies and practices have resulted in turning several banks that were doing well at the time of nationalisation into bad banks carrying heaps of bad assets and poor credibility. The poor governance in the banks made it easy for the fraudsters. Reforms executed were aimed at boosting the demand for credit.

Liberalised credit policies and increased delegation of authority to various divisions to sanction credit have resulted in high liquidity. This situation was exploited by some  to siphon off the resources of the banks and it resulted in the accumulation of bad loans that are a drag on the economy.

Mergers and amalgamations among public sector banks are not going to deliver any marked relief. Power to take punitive action against those found guilty need to be vested with the concerned regulators and they need to initiate action judiciously to ensure that no genuine banker or borrower is punished. Some other segments of the economy need more reforms. 

The government has to focus on financial intermediaries, especially in the case of state-owned banks to make them strong. Any lag in regulating and controlling credit expansion of banks will pave the way for the further growth of non-performing assets.

V S K Pillai  Kottayam

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