The challenge before the banking sector, in particular public sector banks (PSB), is the recovery of bad debts called non-performing assets (NPA). Even relatively new private sector banks such as ICICI, Axis, HDFC, Yes and Kotak Mahindra are reeling from the rising number of NPAs.
The Reserve Bank of India has asked banks to clean up their balance sheets. But how? Full recovery of NPAs is impossible. But writing off NPAs means incurring heavy losses. The recovery of loans is not helped by the Debts Recovery Tribunal, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act or asset reconstruction companies. PSBs have to perform so many non-banking duties - implement social security schemes, provide loans, collect taxes and fees, register documents, sell stamp paper etc.
The banking sector is a sinking ship. Saving it entails wasting more public money. Even after their balance sheets are cleaned up, the NPA weed will sprout again.
Sudhir Keshav Bhave, Mumbai
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