Why not RBI be little more strict with banks and their exposures

The individual and Group exposures of banks are on the high side and the Groups which have systemic influence if become NPAs then the impact on the economy and banking system will be very severe. NPAs are the creation of banks and the borrowers. No doubt economic slow down does affect the portfolio of banks but banks do take shelter under this and expand their advances portfolio by entertaining borrowers who are otherwise not eligible.The RBI should make a study of the NPAs and their contacts with banks, their boards and politicians. to establish that there are different categories of NPAs in banks. They are ab-initio NPAs,Potential NPAs, Camouflaged NPAs, Hidden NPAs and disclosed NPAs. The disclosed NPAs have only been discussed by all where as, the other NPAs get ignored as the system permits that. If periodical write offs are taken into account or avoided the NPAs are much bigger and would be threatening the stability and even the viability of the Financial system. The menace of NPAs can be tackled only by enforcing strict discipline on Banks and borrowers irrespective of their influence, contacts and systemic importance. It is time stake holders of banks Viz Depositors, share holders and employees take up the issue of NPAs as they are bearing the brunt.The stake holders of the economy ie the Government and tax payers also suffer on account of NPAs on a recurring basis and from this angle the topic deserves to be debated on a national forum.

Dr.T.V.Gopalakrishnan

(This comment is in response to the write up  'Time to be alarmed, even RBI finds group exposure risky' that appeared in Business Standard dated 1/1/13).