Wednesday, December 8, 2021
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Burey Din comes for Indian Banks

By Abhijit Roy
Ultimately the Indian banks have accepted the fact that the burey Din has come to Indian economy.

The recent attempt of 27 government banks to writte off non-performing assets of Rs.52,542 crore from their books to clean up their balance sheets during 2014-2015, 52.6 per cent more than the previous year’s.

It is pertinent to mention that NPAs have risen from Rs.2.67 lakh crore to over Rs.3 lakh crore.

This has enormously affected the profitability of the banks.The alarming level of non-performing assets of banks is largely due to the acts of corporates and the rich and the powerful who manage to escape repaying loans.

This section gets kid-glove treatment mainly due to its political clout. It is a fact that the government also exerts pressure to prevent bank managements from taking punitive measures for recovery, which is also one of the greatest drawbacks of bank nationalisation.

Celebrated U.S. economist John Kenneth Galbraith during his stint as the U.S. Ambassador to India in the 1960s had famously said that India is an organised anarchy and it is completely impossible to fathom its working, especially its economy.

With three major public sector banks having declared massive losses due to very high NPAs on their loan portfolio the time has come for finance minister Arun Jaitley to roll up his sleeves and get down to managing the economy with some degree of control.

The Prime Minister can put in abeyance his sloganeering and event management exercises, the latest being ‘Make In India’, which is nothing but old wine in a new bottle, especially as there are no signs of ‘achche din’. In managing the economy, ensuring the health of our banks must come first.

Actually the banking system is in a mess and struggling to find ways and means to put an end to the festering problem of non-performing loans due to a lack of professionalism and political interference. So-called autonomy has been elusive and public sector banks survive because of budgetary support and subsidies provided by depositors and other stakeholders, especially good borrowers.

The economy is the worst sufferer. The solution to the menace of bad debts lies within banks and borrowers themselves by introducing a self-correcting mechanism to liquidate bad debts with fines levied on bad borrowers and steering banks from undisciplined ways of handling the credit portfolio right from loan sanction to their liquidation.

This seriousness of the crisis may be grave if the RBI and the Central government do not initiate immediate measures to arrest this trend. Immediate prosecution and attachment of properties of wilful defaulters, especially corporate giants, will ensure fruitful results.

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