The observation that While bad news about banks can be hidden, bad news about borrowers is visible to all is totally wrong. The bad news of both the banks and the borrowers are hidden by the ingenuity of the accountants and auditors from everybody is the truth as accounts are liberally fudged and balance sheets and Profit and loss accounts are conveniently window dressed to suit the requirements of those who read them except perhaps by the retail share holderswho lose their investments for ever.What the system permits, follows and practice is accounting for convenience and not for exhibitig the true sate of affairs .Examples are Global Trust Bank and Satyam Computers. There are others like Air India , King Fisher like that. The story is slightly different in PSBs as they enjoy unlimited government guarantee and enjoy the depositors and tax payers support perennially though not out of smpathy but out of inevitable compulsions. Finanscial Stability would be a far cry as long as banks , privilged Corporate borrowers in particular are not disciplined by certain inbuilt mechanism and the accountants and auditors are not made accounatle for all their known lapses in presenting the correct state of affairs.
RBI is also unfortunately helpless in setting right the situation except perhaps making some noises here and there when the situation is reaching some dangerous levels.
Dr T V Gopalakrishnan
(This comment in a modified manner appeared in Business standard dated 25/12/2015)
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