| The stakeholders of the economy and the banks bear the brunt as the losses on account of the dirty loans are passed on to the tax payers, depositors, shareholders and employees. The solution lies not in setting up bad bank but in disciplining the bad borrowers and the bad management of banks by imposing an inbuilt penalty on them using a statistical model identifying the symptoms of bad behaviour and bad supervison right from the sanction of loans. Such loans need to be liquidated by the fine amount collected and maintained with the banks over a period. Making the economy suffer and compelling the other stake holders to bear all the consequences cannot be tolerated any more and there should be a mechanism to punish the bad behaviuor. Unless and until a self correcting mechanism is put in place to liquidate the NPAs, the economy and all stake holders will continue to suffer and the bad guys will enjoy for ever.Time a serious and practical view is taken to contain the menace of NPAs in banks books and make the banks contribute to the economy the way the economy needs them as a supporting system for its fast and sustainable growth. |
(This comment appeared in Financial Express against the article setting up of Bad bank to take over bad loans.)
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