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