Friday, February 21, 2014

Professional and not superficial Supervision is the need of the hour.

This refers to your editorial System alert (Business Line dated February 21,2014).The rise in banks nonperforming loans at alarming levels has been a threat to financial stability cannot be taken lightly at this crucial junction where the economy itself is not performing. Except perhaps the Dy  Governor of RBI who feels that rise in NPAs is no systemic risk as of now, the professional bankers, financial experts, the Government and the Reserve Bank have been expressing their apprehensions on the instability that the NPAs can cause on the Financial System and the risks thereon. The IMF has been warning off and on the weakening of bank balance sheets expecting a very stern action from the authorities. Though RBI has been seized of the problem, and some steps are on to prevent formation of fresh NPAs and recover the bad loans, the fact remains that  unless  and until both the banks and borrowers are disciplined in a very professional manner, this menace of NPAs cannot be minimized in the banks books with attendant negative results in the economy. The semblance of Governance system in banks has been virtually absent thanks to laxity in RBI’s supervision and Government’s interference.It is time RBI goes highly professional in tackling the NPA issue by some meaningful supervision. 

Dr.T.V.Gopalakrishnan

(Sent to BL as letter to Editor on 21/2/14). 

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