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Letter to BS: PSBs should lend only to borrowers who can repay loans

Pushing up and encouraging lending to small businesses and retail borrowers by holding loan melas is not a wise move

Business Standard 

NPAs
Non-performing assets may increase due to loan melas

This refers to the editorial “Phone banking, again” (September 23). I agree with the views expressed in the editorial. Pushing up and encouraging lending to small businesses and retail borrowers by holding loan melas is not a wise move. The public sector banks (PSBs) have barely started recovering from the (NPAs) loans mess and to again force them to lend will set the clock back. The PSBs need to lend based on risk assessment of the borrower and his/her ability to repay the loan. The hard earned money of the depositors and the capital paid for by the tax payers cannot be blown away recklessly, like the loan melas pushed by Janardhana Poojary in the Congress era.

Forcing banks not to declare loans to small businesses as NPAs till March 2020 will enable PSBs to cover up their growing NPAs to this segment for a much longer period of time. Economic development happens when banks lend wisely, borrowers invest in businesses, production of goods and services increases and loans are repaid on time. Lending in melas and then not repaying does not create a perception of economic well-being. It only shows the pitfalls of political interference and patronage. We are creating the setting for the next phase of the big NPA mess. This happens every few years. But the difference is that this time it will come too soon after the previous phase.

Arun Pasricha, New Delhi


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First Published: Mon, September 23 2019. 21:54 IST
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