NPAs in PSU banks increase by 51%

The increase in NPAs of PSU banks by 51% is something of very high order and there is no justification of whatsoever to make the tax payers to bear the loss of banks on account of NPAs. The basic cause of NPAs is the undisciplined behaviour of the borrowers and they need to be made to behave responsibly when they use deposits of banks which belong to public. It is something not digestible to bear the loss of Kingfisher like borrowers by public as the loss of PSU banks is ultimately borne by the GOVT using tax payers money. The only way to tackle NPAs of banks is to make the borrowers to compulsorily contribute towards a fund in banks books based on borrowers performance assessed on a continuous basis and build up this fund over a period to absorb the losses on account of NPAs. It is more sensible to make the borrowers particularly the bad ones to bear the cost of NPAs rather than by other stakeholders.Loss on account of NPAs has to be borne only by the bad borrowers.
(This appeared in BusinessLine dated 21/03/12)
from: Dr.T.V.Gopalakrishnan
Posted on: Mar 21, 2012 at 08:30 IST

Public Sector Banks, Borrowers and Basel iii

This refers to your editorial Capital Idea (Et,dt 9/1/12). The objective of the implementation of Basel 111 guidelines is basically to improve the banking systems' ability to absorb shocks arising from financial and economic stress caused due to circumstances beyond the control of banks, regulators and borrowers. No doubt situations arise in an atmosphere of globalised banking and interlinkages of various domestic and international markets involving exotic products and dynamics of economic forces where additional capital resources would come to the rescue of banks. But in india,the way borrowers like King Fisher and many healthy corporates but bad borrowers conduct themselves and banks are made to aborb losses are beyond any tolerance limits. Ultimately, making the Govt being the majority shareholder of these banks to bear the cost resorting to budgetary resources despite its poor fiscals is something unthinkable and this is where the BASEL 111 guidelines needs to be customised in India. The indiscipline of the borrowers and their mismanagement of bank funds need to be dealt with separetely and the Govt should not liberally fund the banks without making them and borrowers accountable for loss of public funds. The NPAs in Indian banking system is basically due to the failure of banks and borrowers and this needs to be factored in while injecting capital by the Govt in Public Sector Banks.


Dr.T.V.Gopalakrishnan
( This letter was sent to ET on 9/1/2012)