The npa menace continues haunt the banking system and it is becoming a threat to the Financial System's Stability. The NPAs disclosed, undisclosed (umpteen ways to camoflage NPAS) and with those already under CDR mechanism and those in the pipeline estimated at Rs 2,68000 crores is a huge sum which neither the economy nor the banking system can bear and should bear. The loss direct and indirect to the exchequer,the banks,stake holders of banks other than bad borrowers, public ie the common man who bears the brunt ultimately the costs of NPAs through budgetary provisions to capitalise the loss making banks is something astronomical and none including the rating agencies has bothered to assess. This is something strange and questionable. When there is a direct solution to prevent formation of NPAs and to cover up the losses of NPAs available within the banks themselves involving the borrowers and banks, the need to make bear the losses by everybody other than the bad borrowers is something undigestable and not tolerable. The banks can rate the borrowers
professionately by adhering to some standards of monitoring and supervision and levy a penalty from borrowers who happen to be performing below the prescribed standards. This approach will ensure the borrowers to be more vigilant and make perform better. The relatioship between banks and borrowers will improve and the responsibility of keeping the loan accounts healthy will augment automatically. This rating acn be a tool to evaluate borrowers even by the SEBI and those who have dealings with bank customers in different ways. The Government can use these ratings for offering tax and other incentives. IPos of Corporates can be priced based on these ratings. Over a period, the banks will have huge fund mobilised from borrowers to cover NPAs and at the sametime the formation of NPAs will have come down considerably. Sibsidising bad borrowers by other stakeholders and general public who include the Common Man is not justifiable and does not sound reasonable.Will the authorities care to seriously consider the solution which has been approved, evaluated and recommended for a trial by veteran academicians. The solution is statistically researched and found to be worth attempting with excellent results. The Balance sheets of banks will get stronger over a period.
This comment is in response to an article appeared in Business World dated 13/07/2012)
professionately by adhering to some standards of monitoring and supervision and levy a penalty from borrowers who happen to be performing below the prescribed standards. This approach will ensure the borrowers to be more vigilant and make perform better. The relatioship between banks and borrowers will improve and the responsibility of keeping the loan accounts healthy will augment automatically. This rating acn be a tool to evaluate borrowers even by the SEBI and those who have dealings with bank customers in different ways. The Government can use these ratings for offering tax and other incentives. IPos of Corporates can be priced based on these ratings. Over a period, the banks will have huge fund mobilised from borrowers to cover NPAs and at the sametime the formation of NPAs will have come down considerably. Sibsidising bad borrowers by other stakeholders and general public who include the Common Man is not justifiable and does not sound reasonable.Will the authorities care to seriously consider the solution which has been approved, evaluated and recommended for a trial by veteran academicians. The solution is statistically researched and found to be worth attempting with excellent results. The Balance sheets of banks will get stronger over a period.
This comment is in response to an article appeared in Business World dated 13/07/2012)
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