Monday, December 23, 2013

NPAs, Loot and display of wealth by borrowers

Banks have umpteen ways to camouflage bad loans and write off of loans. Pramod Mittal is one case that came to light because of his display of wealth for his daughter's marriage.There are several other cases where the Companies are defaulters and sick but the men behind them are strong and financially very sound and healthy. As this sort of loot was going on unchecked, I had with an intention to have a lasting solution to this ever increasing menace done a research and got my Ph D awarded from Madras University with excellent comments of appreciation particularly for the solution arrived at for tackling this NPAs in a very pragmatic manner. The solution suggested was found simple practical,easily implementable without any scope for bias, favour and corruption. It was an inbuilt mechanism to discipline borrowers and lenders as well.The solution was appreciated by the top barons of banking and ended with that. Had they shown some inclination to prevent this NPA formation, the solution could have been implemented in the year 2003 and by now, this festering problem would have been contained to a great extent for the benefit of the economy, banks borrowers and other stakeholders of the economy who include the Government first and many others.Now RBI has come out with a discussion paper to beat about the bush and without any scope for minimising the menace.The means proposed would not justify the ends as the procedures involved are cumbersome,expensive and not result oriented. The authorities do not want any solution as they have their own axe to grind if the system in vogue is in chaos.
Happy to note that the subject has attracted attention and through money life and lot of discussion takes place.

(This comment has been published in Money Life).

Dr.T.V.Gopalakrishnan



1 comment:

FINCOP said...

Herbs in the backyard are hardly made use of. Your suggestions deserve immediate attention by the RBI instead of a grandiose bureaucratic plan and incriminating auditors for the fault of banks. The origination of NPAs deserve more attention than now. Cure cannot be worse than the disease. The RBI failed to mention in a long document the reasons for the banks failing to follow the instructions given in 2002 and in that context how it would expect to implement the grand plan now announced. Any way my detailed comments and suggestions on the draft paper of the RBI would be placed on the web before today evening. Hopefully, the RBI carries this consultancy discussion to listening and acting instead of standing on prestige that its draft shall prevail over practicality.