Non performing Managers.

This refers to your editorial Non performing Manager (Business standard 26/8/13). The Deputy Governor’s remark that the reason for unabated growth in NPAs of public sector Banks is that "non-performing administration, poor project appraisal techniques, herd mentality, lack of accountability, post-disbursal supervision, etc.” is very true and this callousness gets accentuated when the slow down of the economy also becomes handy to justify non performance. The banks’ Chairmen generally get not more than two years and as rightly pointed out in your editorial, they spend first year exposing the previous chairman for his creating accounting practices to project a better image of the bank and its balance sheet and the second year they have their own agenda to window dress the balance sheet and project a lower level of NPAs as if they could do some magic and introduce solid measures to improve banks’ profitability and bring down the level of NPAs. These sorts of accounting gimmicks have been a regular feature as there has always been a trade off between the auditors and the management and the exact position gets highly camouflaged. Even the RBI becomes helpless as its system of regulation and supervision does not provide scope for 100 % scrutiny of all transactions and borrowal accounts. Unfortunately the loss on account of NPAs is borne by the Stakeholders who include shareholders, depositors and good borrowers. The only way to solve this menace of NPAs is to make the banks and borrowers accountable with a penalty imposed through close monitoring and supervision of loan accounts from the very first day of grant of loans. There are lapses on both and these lapses need to be fully accounted for. The duration of Chairman and incentives will have only limited applicability to bring down NPAS.The inefficiency of banks and extra smartness of borrowers generate NPAs and this can be curbed only through a built in mechanism to discipline both.Time other stake holders resist this sort of accumulation of bad loans and write off of such loans.

(This comment appeared in Business Line in response to the editorial on Non Performing managers.)