Recapitalization of banks

While recapitalization is essential to ensure banks survival in the backdrop of accumulated Non performing assets and poor credit growth,the Governance efficiency in banks independent of the Governments' interference is equally paramount to sustain the banking in their banking business. While the efforts to recover the bad debts should continue without any relaxation, at the same time the banks should  put all efforts to prevent generation of fresh Non performing Advances and save themselves from getting extinct from the  business through loots of the borrowers. The seeds of NPAs are always sown during credit expansion and the recapitalization approach prompt banks  to expand credit and they have to be extremely careful in selecting the borrowers and area of credit expansion.Prevention is always preferable than curing the disease.Banks need to be very wise and highly professional in safeguarding  their business of acceptance of deposits for the purpose of lending and not losing the depositors' money through the art of lending to bad borrowers. It is high time the banks realize that the depositors are becoming wise and they chose their banks based on their health, financial soundness, standards of customer service, regulatory compliance and above all efficiency and independence of management in running the banks.

Dr T V Gopalakrishnan