The NPAs are creation of banks and there are five categories of NPAs which are caused by the neglect of the top management and the auditors. There are disclosed NPAs on which only all discussions get focussed.Apart from disclosed NPAs, there are potential NPAs, camouflaged NPAs, hidden NPAs and abinitio NPAs which seldom get noticed and reported. These four categories are there in every bank and this risk because of these is very high not only for the banks but for the financial system and its stability.The detection of NPAs is very crucial and the software used should have been authenticated by the Regulator.There is always a trade off between the management and auditors to hide NPas and this is an open Secret among banks. The losers because of high NPAs are the depositors and shareholders. The tax payers also make good the losses on account of NPAs through budgetary allocations to support the banks to maintain the capital adequacy. The amounts written off by banks on an year to yaer basis are substantial and these are borne by depositors, shareholders, employees and other stakeholders.It is time a detailed investigation of NPAs of banks is carried out and a self correcting mechanism to contain formation of NPAs involving only banks and borrowers is introduced. Otherwise the banks will suffer, the economy will suffer and finally all stakeholders of the economy also will suffer.
Dr.T.V.Gopalakrishnan
(This comment is given in response to an articleThere is more to United Bank of India's problems than Infosys' software that appeared in Business standard dated 25/2/14)
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