If there is a will there is a way to come out of the NPA menace

The Indian banks particularly Public sector banks are always shielded from disaster and liquidation as they are regular sources of finance and incomes for many vested interests. The beneficiaries are the Government, Banks' Boards of directors, Politicians, Bureaucrats, Big Industrial  Borrowers, Lawyers and Chartered accountants and the losers are hapless depositors, helpless retail borrowers and innocent tax payers. Even the general customers of banks have to bear the brunt  through enhanced service charges unknowingly for all the inefficiencies of banks and the wrong decisions of the powers that control these banks.

The Government needs financial support to take care of its own deficit financing, political ambitions and promises to extend perennial financial support to non viable and uneconomical projects under the guise of Priority Sector lending and provide dependable source of finance to keep the major infrastructure projects started with or without professionals and definitely without any accountability for the end use of the resources obtained from banks. The amounts written off by banks and the costs incurred to  cover up the  failures of banks by forced mergers and acquisitions using Public sector banks have never been questioned and are in fact  all  accepted  as normal business practices. The  write ups on Banks' weaknesses and risks they carry only help a small segment of the population to understand the mismanagement but they are also equally  helpless except perhaps in  writing rejoinders and submitting representations through Change.org in. The joke that if one has a gun he can rob a bank but if one has a bank he can rob the entire society without being noticed or questined is literally being experienced by all is not a joke in reality. From April 1st onwards, all stake holders of banks and the economy will be fleeced mercilessly thanks to the inefficienices of banks in running their busnesses professionally and commercially.     

There are no serious attempts to prevent formation of NPAs in banks by disciplining the Bankers, Borrowers, Accountants, Lawyers and Regulators is a fact and definitely not intended in any way is also a ground reality. Volumes have been written on the resolution of NPAs in banks for decades and the amounts being written off as bad debts and the costs incurred in maintaining NPAs, discussing the problems in what ever forum available and attracting the attention of every one who matter in the country are something terrifying and mind boggling. Unfortunately, the politicians , the bureaucrats, the regulators, the bad borrowers and the banks know very well as to how to perennially  ensure flow of  NPAs in banks without thinking of any lasting solution is what one wonders. This is the art of mismanagement at the cost of tax payers and the depositors. The so called effective Governance continues to be evasive and public bear the brunt as if it is their fait accompli.

Dr T V Gopalakrishnan

Stock and flow approach to tackle NPA menace in Banks.

Stock and flow approach to tackle NPA menace

Banks NPA menace is perennial and needs to be contained on a war footing to make the banks strong, attract investments and take the economy forward on a strong track.  This calls for a two pronged approach. The Staggering NPA stocks need to be taken off the balance sheet of banks as on 31 March 2017 and transferred to an Escrow account to be maintained by RBI with bank wise details and all possible steps to recover through sale of assets, recoveries through legal and other modes available involving even venture capital with incentives to take over such assets need to be seriously and expeditiously considered and implemented.  Since formation of NPAs is a natural process in banking because of the very nature of business involving money and human resources, fresh flows of NPAs need to be minimized through introduction of intensive professionalism in the conduct of credit portfolio of banks and discipline, and penalty for the erring borrowers scientifically with effective and unbiased governance standards of regulation and supervision. Subsidizing the banks’ losses on account of NPAs by squeezing tax payers, depositors and other stake holders of banks and the economy should come to an end once for all and the Banks Board Bureau has to be judged on its own performance in eradicating this disease of cancer from banks and the borrowers. The need to keep away politicians and bureaucrats from Banks is sine qua non to make the banks professional and accountable. 

Dr T V Gopalakrishnan