It is a fact that when system identifies NPAs,the figures are more as the system does not discriminate the borrowers and follows the guidelines of RBI.When the NPAs are identified manually,the human intervention helps some borrowers to project a better image and figures get camouflaged.Further there are umpteen ways to hide NPAs which the system may not follow unless the programmes are made that way.There is always a trade off between the Management and Auditors of banks and the NPAs get generally underestimated.When the system generates NPAs,it is bit difficult both for the Auditors and the Management to underestimate NPAs,though it is not fully ruled out.All these years,investors have been wrongly informed of the position of NPAs is a fact which the Deputy Governor also knows as he was all along a commercial Banker before he took over as DyGovernor.The auditors though are independent on paper,as long as they are being paid by the Banks they audit, they get influenced,to adjust NPAs.
Dr.T.V.Gopalakrishnan
(This comment is in response to the article Banks misguide investos on NPAS in Business Line dated 28/06/12).
Dr.T.V.Gopalakrishnan
(This comment is in response to the article Banks misguide investos on NPAS in Business Line dated 28/06/12).
1 comment:
The author has brought out some very valid points.In the US, it is gathered that the software used by banks has to be certified by the FED on an on-going basis.But in India we do not have such a system.The other issue the trade off. The figure of provisioning for loss assets and doubtful assets cannot be generally manipulated because of the nature of the assets. However, in the case of sub-standard assets one has reasons to believe that there occurs a trade off with respect to provisioning.Figures of Income and expenditure cannot be tampered with.But by making adjustments in provisioning for sub-standard assets one can show a better net profit.Another point is that the papers relating to the final are provided as a table item at the audit committee and Board meetings.A closer scrutiny of the figures by independent directors is not possible.
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