Sustianble Finacial Stability is the need of the hour.

The so called financial stability is not that easy to  be achieved as long as the public sector banks continue to slog with the problems of bad debts and the borrowers continue to grapple with the slow growth, lack of investments and evasive ease of doing business.The Indra Dhanush approach to solve the problems of PSBs will not be of any use as long as the borrowers are not allowed to be disciplined both by the banks and RBI  because of direct and indirect interference from the Government  and the cross subsidisation of the banks ' losses by the tax payers and the depositors among the other stake holders exists.. The Government should ensure that the banks are highly professional and their credit portfolios are run strongly with the business and commercial approach and for that RBI should have a free hand..Banks cannot be expected to be run only with the depositors and tax payers support backed by the Governments unlimited guarantee. Their business is lending and  not investing in Government and other safe and unsafe  securities. Investments are part of their commercial approach and the investment climate should be congenial. The Credit market and bond market are weak and with this back ground the expectation of a sustainable Financial stability would be a far cry. The capital market dominated by investments from PSUs,and other institutions also is weak and this also needs a total revamp by attracting maximum retail investors at least a minimum of 51%  of the paid up capital of Listed Companies. The Credit rating of Companies should be done by banks based on their conduct of loan accounts.among other things.  The recycling of funds in banks is weak and unless they are able to have fast churn out of funds which is dependent on the repayments and recoveries of loans, banks cannot be expected to have a healthy balance sheets. The economy can be said to be strong  and fast growing only if its Financial system consisting of markets, institutions and instruments (they bring out in the market for mobilising funds, deploying them and liquidating the instruments freely ) is sound, dynamic, stable and vibrant.  

Dr T V Gopalakrishnan    

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