As it
is, there is no system of disciplining the borrowers and they benefit a lot by
being non performing borrowers. The banks have to rate the borrowers based on
their performance from the very beginning and have to ensure that
borrowers do not violate banks’ disciplinary norms and they also do
not depend on other stakeholders of banks to take care of them / cross
subsidise them This issue of NPAs can be easily tackled if banks
create a fund by levying a small penalty based on the deterioration of borrowers
and banks can also contribute a small sum towards this fund. They can
accordingly reduce the provisioning requirements. This levy will work as a
disincentive to remain in NPA category. Even SEBI has to go by this
deterioration for all its dealings with the corporates. Government incentives
should also be linked to the rating of banks.The rating should be made
transparent through various ways by RBI, SEBI, and the Govt. Corporates
should be made to indicate the
rating given by banks in their Balance sheets and the rating has to be
certified by the Accountants and Auditors and this rating should be taken
as an important yard stick by the Govt and all other agencies to provide
concessions and benefits. Over a period, this fund generated
by the banks would be sufficient to cover / liquidate the non performing
loans. Other stake holders of banks particularly depositors and
shareholders need not bear the cost of NPAs which is not only illogical but also not justifiable. It is time depositors and share holders fight the
menace of NPAs and get relief from bearing the cost of
NPAs. Ultimately the cost is passed on to tax payers and banks have to be saved from liquidation as it happened in the case of GTB. Will some one seriously ponder over this?
Dr.T.V.Gopalakrishnan
(This comment in a modified form is published in ET dated 1st June 2013 in response to an Article NPAs expect to double in two years.)
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