Letter to BS: NBFCs' financial indiscipline led to credibility crisis

This refers to “Financial sector stability & our cook Lilu-tai” (October 7). While financial intermediaries are sourcing money from those to save, the deployment of those resources must ensure the interest of those who contributed to the resources is safeguarded. Over a period of time, many banks, NBFCs and co-operative banks have deployed the funds imprudently and that resulted in loan-related frauds and bad assets. They have wilfully kept the financial scams under the carpet and cheated investors and depositors.

While these financial intermediaries are the key pillars of the Indian financial system, the non-observance of financial discipline by them have adversely affected the credibility of the financial system and has negatively impacted the sentiments of investors. The oversight of the supervisors and regulators proved ineffective in controlling the banking activities and is proving to be an impediment in the path of economic growth.

It is important to tighten the oversight by the banking regulator, besides making the various audits and inspections purposeful. It is high time the banking regulator directed NBFCs and co-operative banks to undertake asset quality review, besides re-examination of the compliance reports filed in response to the audits and inspections. Thorough cleansing of the books of these entities is crucial to ascertain their health and save the financial system.

VSK Pillai,  Kottayam

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