Prevention of NPAs in Banks is an inevitable Social Justice.

 

NPAs in Banks — At Whose Cost? The Economy and Its Stakeholders

The banking sector in general—and public sector banks (PSBs) in particular—has long operated in a manner that drains depositors’ and taxpayers’ money, aided by a nexus of politicians, bureaucrats, bankers, and errant borrowers under a relaxed regulatory environment. Former Prime Minister Atal Bihari Vajpayee candidly stated in the 1990s that “NPAs are nothing but loot.” The system has known this truth for decades, yet the problem persists despite getting some enhanced legal support as of now again at a high cost in terms of time and money - just because depositors and taxpayers silently bear the burden. Periodic bailouts follow whenever the crisis threatens financial stability.

Depositors have few safe avenues for savings beyond banks, and alternatives like gold, real estate, or other commodities often serve as conduits for unaccounted money and speculative activity rather than productive investment.

A lasting solution to the NPA problem requires discipline—both among bank managements and their borrowers—and an independent, efficient regulator free from political or bureaucratic interference. Such a model was proposed as early as 2004 in Management of NPAs in PSBs by Dr. T.V. Gopalakrishnan, published by the Indian Institute of Banking and Finance, with a foreword by Dr. C. Rangarajan, former RBI Governor and Chairman of the Prime Minister’s Economic Advisory Council. The book proposed the creation of a Precautionary Margin Reserve Fund (PMRF)—a shared responsibility mechanism between lenders and borrowers—to contain NPAs, incentivise good borrowers, and penalise poor credit behaviour.

Despite professional acclaim and recommendations for pilot implementation, the model was never adopted. Had it been, the banking system would likely have been far stronger today—reducing NPAs, preserving depositor confidence, and preventing the “twin balance sheet” problem that has repeatedly strained India’s financial stability. The recurring and accrual loss to the economy because of the NPAs is something of a very high magnitude which cannot be easily set aside to ensure and realise the the status of fast growing economy.

Dr. Rangarajan observed in his foreword (2 July 2004):

“High levels of NPAs affect profitability, liquidity and solvency of banks, ultimately impacting financial stability itself. The author has made several suggestions to contain their growth. One such idea—the Precautionary Margin Reserve Fund—envisages both borrowers and lenders contributing to a common fund. Only an efficient banking system can fulfil the socio-economic goals set for it, and this book explores precisely that.”

The RBI’s recent move to introduce minimum provisioning floors (0.25–5% for performing assets, based on risk class) is, in essence, a partial acceptance of this idea. The PMRF concept—built on mathematical objectivity and fairness—could have become an inbuilt corrective mechanism to identify good borrowers, discipline defaulters, and safeguard the interests of all stakeholders without bias or undue discretion.

Ultimately, depositors’ money—the core raw material of banking—must not be used to subsidise inefficiency or moral hazard. A system that compels prudent behaviour, transparency, and ethical accountability from both lenders and borrowers is not just sound economics—it is social justice.

Loka Samastha Sukhino Bhavanthu.

Dr T V Gopalakrishnan

(personal Views).

RBI's Sensible and sound Support to Government's dream of Atmanirbhar Bharat

 Levy Precautionary  Margin Reserves as PROVISIONS  from bad borrowers to save the  bank depositors and tax payers from Bad debts.  

According to the news report “RBI proposes 100% Bank Provisions”, (ET dated 8th Oct), the central bank’s proposal to introduce minimum provisioning floors ranging from 0.25% to 5% for performing assets—based on asset class and credit risk stage—is a prudent though long overdue  step to save depositors and tax payers from subsidising the default borrowers  Hope this proposed provision is levied from the borrowers to have a built in mechanism to prevent the formation of NPAs. 

Strengthening bank balance sheets through disciplined provisioning and promoting credit quality are essential for maintaining the health of the financial system and safeguarding the interests of all stakeholders, including the government and depositors. Such measures will provide the much-needed foundation for sustainable economic growth.

The Prime Minister’s vision of transforming India into a developed, Atmanirbhar Bharat by 2047 can be realistically achieved through these sensible and sound RBI initiatives, complemented by ongoing fiscal discipline—such as containing fiscal deficits while rationalising Direct Taxes and GST 2.0.

However, these financial measures must be supported by robust governance standards across institutions and public utilities, prioritising ethics, transparency, and welfare. Ensuring low food inflation, a bearable cost of living, equitable wealth distribution, and measurable trickle-down effects of growth are vital. Equally crucial is improving the quality of data on employment, tax compliance, and wealth creation to guide policy decisions effectively and equitably.

T.V.G Krishnan

Bengaluru 

RBI's Prudent decision and global Uncertainty

 Dear Sir,

            

              RBI Monetary policy with Great caution and lot of expectations. 

Apropos your editorial 'Unchanged Repo:a pause for expectation' (Oct3), the RBI's  recent monetary policy keeping the policy rates unchanged is nothing but an admission of the positive and negative changes affecting the economy from the national  and international dynamics seen in politics, economics, social and technology areas .While the national scenario offers political stability , favourable economic macro factors in terms of steady economic growth , benign inflationary expectations thanks to favourable  Union Budget measures particularly in containing fiscal deficit despite attractive income tax concession and GST 2.0 rationalisation aiming at massive consumption demand to boost the economic growth, the international scenario unfortunately has been highly unpredictable thanks to the geopolitical economic and social scenario thanks to the uncertainties emanating from the USA policies  basically having ripple effects on the economic front world over. All said the approach of the Reserve Bank to maintain neutral stance aiming at economic growth keeping the inflation expectation far below the minimum of 4.0% is a wonder facilitating the much needed credit growth innovative and growth oriented. The market sentiments have been kept in tune with the expectations and hope the economy continues to be in growth track as widely expected globally.        

T.V.Gopalakrishnan

Bengaluru. 

Modified version of this letter appeared in Deccan Herald dated 4th October 2025.)

Love -The Universal Force for Peace and Harmony.

                             Love – The Universal Force for Peace and Harmony

Make life lovable,  enjoyable and livable with peace, tranquility, and an awareness of its short and fragile nature, all dependent on Nature’s blessings and abundance. A change of mindset is all that is needed.

Love yourself, your family, your society, your state, your nation, other nations, the universe, humanity, all living beings, nature in its entirety—hills, rivers, mountains, oceans—and above all, love your own soul and link it to the Master Soul. There is nothing beyond love. Love alone is the unifying force that connects everything between the earth and the sun.

Life is the same for all living beings, but rational application varies. Human beings, blessed with intelligence and emotions, have misused rationality, often turning it into a source of discrimination instead of dignity, respect, and harmony. Nature, however, has retained its balance despite humanity’s arrogance, and when disturbed, it expresses fury—reminding us of the need to live in tune with it.

Religions, politics, and the lust for wealth and power have often divided humanity, breeding jealousy, hatred, and greed. These divisions have inflicted irreparable damage to peace and harmony. Yet, the Supreme Energy that sustains the universe remains unchanged, calling upon us to recognize unity in diversity.

It is time for enlightened religious heads, visionary politicians, social reformers, scientists, technocrats, environmentalists, administrators, and all right-minded people to come together. The common goal must be the welfare of all living beings, ensuring that the blessings of nature and the fruits of human knowledge are shared by every generation to come.

In the end, no one carries wealth or power—only a name, remembered briefly for one’s deeds. Let us therefore live with noble thoughts, selfless actions, and responsible leadership.

MAY Good BETIDE All People. May the Sovereign rule the earth, following the righteous path.May all beings ever attain what is good . May the Worlds be prosperous and Happy . 

(Universal Prayers Swami Yatiswaranda)

May there be peace and happiness for all.

— T.V.G. Krishnan (Personal Views)

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Bangalore Roads - A case of Social Justice

 

This refers to recent media reports on the pathetic condition of Bangalore’s roads and the daily hardships citizens endure. Provision of good roads and their upkeep is not merely an infrastructural need—it is a form of social justice. Roads are the lifelines for mobility, essential services, and economic activity, while also serving as a mirror of governance standards. Smooth, safe, and well-maintained roads make life not only comfortable but also dignified, reflecting a government’s commitment to citizens’ welfare. People miss a lot of their social, emotional, sentimental and other small small desires and  limited aspirations for want of the very essential movements in the absence of safe, comfortable and very  inevitable social visits within the city. Roads play a key role in maintaining not only the social connections but also keeping the people in good healthy conditions is a ground reality which cannot be denied to them on flimsy grounds.   

The responsibility, however, cannot rest solely on the government. Citizens too must recognise their duty in avoiding / preventing hazards, potholes and damage by refraining from dumping garbage, construction debris, or unauthorised parking / violation of traffic rules that choke free movement. Civic indiscipline adds to chaos, delays, and needless suffering.

With better coordination between the administration and the public, Bangalore can have durable, quality roads. Proper governance and responsible civic behaviour can ensure optimum use of resources and prevent wastage of time, money, and effort. The man-hours lost in commuting, and the mental, physical, emotional, and financial stress citizens undergo due to poor roads, is beyond imagination—and must no longer be ignored. Corruption and corrupt practices in the general administration  of public good and services by thoughts, words and  deeds by all and any associated can have only pleasant,  lasting and ever relishing memories.      

Good roads ensure not only the  welfare of people but also reflect on the sensitivity of the Governance system in vogue and prove to be the best and easiest way to earn the goodwill of the people.   

 

T V G Krishnan

( personal Views)

 

Noble Man, Noble Thoughts, Noble Actions, Notable Achievements.

 

On the occasion of the Honourable Prime Minister’s 75th Birthday, I extend my heartfelt wishes for many more happy and healthy years. As a great visionary and role model—both as a leader and performer—he has consistently worked for the nation’s progress and the welfare of people everywhere.

May God bless him with strength, energy, and all resources to fast-track India’s journey towards Viksit Bharat, overcoming every obstacle and achieving the goal much ahead of 2047.

The achievements of our Prime Minister during the past 11 years, despite global and domestic challenges, remain commendable landmarks—placing him in a league of excellence by any standard.

T V G krishnan

(personal)

The need for world class PSBs.

The Need for World-Class PSBs

 India aims for Two PSBs on world top 20 list by 2047” (ET, 13 Sept), strengthening the banking system is paramount. Banks remain the strongest support system and backbone of the economy, mobilising resources and channelising them to meet domestic as well as international challenges—whether they arise from geopolitical uncertainties, currency and tariff fluctuations, or the disruptive sweep of artificial intelligence across economic activity.

Indian banks have travelled a long way, performing creditably in promoting financial inclusion, strengthening balance sheets by reducing NPAs, and empowering borrowers to become globally competitive in line with the Prime Minister’s call for Atmanirbhar Bharat.

It is now time for the system to introspect and revamp its structure, role, and performance to match the fast-changing global landscape. With the rupee gaining international recognition, digital transactions surging, and digital currencies erasing physical boundaries, Indian PSBs must think big. A possible three-tier banking model could be:

1. Banks catering to national and international requirements on a large scale.

2. Banks focused on domestic manufacturing and services.

3. Banks dedicated to agriculture, SMEs, and retail needs.

Since deposit mobilisation depends on customer service, inflation, cost of living, liquidity, safety, and returns, a specialised set of banks exclusively for household savings—including gold—can be envisaged. This could be supported by a stronger deposit guarantee scheme. Banks mobilising deposits can be a major source of finance to those who specialise in the deployment of funds. With this approach, the deposit mobilisation and customer service to depositors can have a game change in the economy ensuring optimum level of resources mobilisation of all kinds from households and others. 

Alongside two giant world-class PSBs for the global stage, such restructuring would ensure specialisation in mobilisation of resources and effective deployment of funds—helping India achieve its 2047 goal.

T V G Krishnan

( personal Views )