It’s High Time Banks Move Fast for Dissolving NPAs

This refers to your cover story Cleaning the Bad Loans Mess (May 7). The article was a good summation of issues that have been hitting creditworthiness and discussions on possible solutions to NPAs of both private and public sector banks. It is appalling that the NPAs have been allowed to soar so high and that the lenders woke up only after policy interventions of the Centre and the RBI. In this era of digital money, virtual exchange, and gee-whiz technology for banking transactions, the Indian financial system has been damaged severely. When the RBI earlier slashed repo rates under Raghuram Rajan's tenure, the banks did not pass the savings to debtors, and NPAs led to administrative constraints from the RBI, apart from functional restraints. NPAs have grown under banks’ own feet based on the constituents of the businesses and the capabilities of the debtors. Personal and subjective decisions of CEOs of banks towards politicians for huge credits, seeking tenure extension and post-retirement plum positions, are the main reasons for the despicable development of NPAs. The present unmanageability of NPAs has arisen as existing norms, extant procedures and laws did not largely account for this fact. This problem will continue to depress credit demand till the Centre creates a holding company for banks and waters down its equity stake to a large extent to facilitate professional autonomy and operational leverage. Improved ringfencing of credit and establishment of a holding company for banks will resolutely deal with the menace of NPAs. It is high time banks move further for tacking this problem. B. Rajasekaran, Bangalore