With reference to "Clean up, or fudge?" (July 2), the strict recognition of assets by banks following directives from the banking regulator has resulted in the burgeoning of stressed assets. After cleaning up the books, what next? The answer is simple - recovery or quality improvement of the assets. Despite engaging sufficient human capital and using the judiciary's services the banks couldn't bring down the level of stressed assets, which only went up. If the present scenario continues it will erode the net worth of banks. An economy which is on the path of recovery and moving forward with growth can't afford bad assets to mount.
While the role of banks in economic growth and social development is vital, it is equally significant to ensure sound finances of these intermediaries. It is possible only if the government and the banking regulator show adequate concern to drastically bring down bad loans. Banks need to look for strictly restricting credit flows to the debt-ridden companies, and regulatory control on these companies need to be strengthened by the government to prevent them from excessive bank borrowings.
While bad loans are on account of genuine causes as well as fraudulent activities of borrowers and bankers, different approaches are required to deal with both and accountability should be fixed on the guilty to signal a positive message across the sector. The creation of an authority to monitor the stressed assets of banks under the supervision of the banking regulator will be an added remedy.
V S K Pillai, Changanacherry
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