Public Sector Banks, Borrowers and Basel iii

This refers to your editorial Capital Idea (Et,dt 9/1/12). The objective of the implementation of Basel 111 guidelines is basically to improve the banking systems' ability to absorb shocks arising from financial and economic stress caused due to circumstances beyond the control of banks, regulators and borrowers. No doubt situations arise in an atmosphere of globalised banking and interlinkages of various domestic and international markets involving exotic products and dynamics of economic forces where additional capital resources would come to the rescue of banks. But in india,the way borrowers like King Fisher and many healthy corporates but bad borrowers conduct themselves and banks are made to aborb losses are beyond any tolerance limits. Ultimately, making the Govt being the majority shareholder of these banks to bear the cost resorting to budgetary resources despite its poor fiscals is something unthinkable and this is where the BASEL 111 guidelines needs to be customised in India. The indiscipline of the borrowers and their mismanagement of bank funds need to be dealt with separetely and the Govt should not liberally fund the banks without making them and borrowers accountable for loss of public funds. The NPAs in Indian banking system is basically due to the failure of banks and borrowers and this needs to be factored in while injecting capital by the Govt in Public Sector Banks.


Dr.T.V.Gopalakrishnan
( This letter was sent to ET on 9/1/2012)