The Cost of NPAs are borne by innocent stakeholders

The staggering NPAs of banks are nothing but a different kind of loot of public money mostly by corporates and other borrowers. More the NPAs mean more loss of taxes, depositors and other stakeholders money and there is no justification in finally writing off the losses. The business of banking is based on public money and business should be run on professional and commercial lines. Borrowers cannot expect to run their business using depositors' money ruthlessly and without adhering to the discipline expected of them. Economic Slow down may be a cause for business failures but the failures cannot be fully accounted for by business failures. Bankers also have to be blamed for recklessly lending throwing to winds basic principles of lending. The only way to prevent formation of NPAs and discipline the bad borrowers is to have a rating introduced for them based on their performance and conduct of accounts and levy a small penalty for deterioration in rating. This way borrowers will be disciplined and banks will have funds collected from bad borrowers to cover up the NPAs over a period. Other stake holders will definitely welcome such a move.

Dr.T.V.Gopalakrishnan

( This comment appeared in ET dated 23/11/12).