Discipline borrowers and banks mercilessly to prevent NPAs

Gopalakrishnan T V 1 second ago

This loot through banks by Corporates and others has been a regular feature and it gets ignored because banks are able to write off of the loans out of profits and they are also able to get capital support from the Government.The write offs seldom get scrutinised. On the contrary , influence works a lot to get the loans written off.Board of Directors who include RBI and Government nominees have no time to seriuosly go through the Agenda items and most of the items cleared as a matter of routine. These agenda include loan proposals and write offs. The auditors of banks seldom make any comment or dissent and there is always a trade of between auditors and the Board of Directors. The banks balance Sheets are drawn as desired by the Chairman and by the influential Board members.It has nothing to do with the ground realities. Chairmen of banks are entitled to draw bonuses based on performance and the performance indicators are window dressed heavily so that they are able to draw a lumsum money on an year to year basis. Employees representatives are also on the board and they seldom raise any dissent or they are not heard adequately on the Board agenda. The Chamber of Commerce and other representative bodies who always fight for concessions and reliefs for their members  are never heard fighting to reduce the bad loans and are never found disciplining the borrowers.The only way to reduce the formation of bad oans is to have a self correcting mechanism by which right from the day of sanctioning of loans the borrowers need to be disciplined by a rating method based on their conduct of acounts. Banks also need to be brought under discipline and should be penalised if they are observed to be lax in the proper conduct of loans. Banks need tight regulation unlike other industries as they deal with money and hunman resources and it is humanly impossible to prevent greed and commitment of irregularities. Banks need a strict vigilance on an ongoing basis as they deal with depositors hard earned money. Tax payers also should object to supporting banks for their failures by using Govt resources.

Dr.T.V.Gopalakrishnan

(This comment is given in Money Life against the article " AIBEA blows the whistle on bad loansof Indian banks "appeared on 26/2/14)