‘Bad bank’ set up
The Government is mistaken if it thinks that setting up a National Asset Reconstruction Company Limited (NARCL), or ‘bad bank’, backed by its guarantee of ₹30,600 crore will end the NPA problems of the Indian banking industry (Page 1, “Govt. sets up ‘bad bank” to clear the NPA mess”, September 17). The root causes have still to be addressed.
Targeted and directed lending, abrupt policy changes, alleged collusion of top bank managements with business people and grey areas in lending to huge projects are some of the issues of Indian banking. Even though the professionalisation of the boards of public sector banks had a good beginning, the problem is far from being tackled.
The regulator ought to have opted for an asset quality review of banks so as to bring out the realistic position of quality of the lending portfolio and also initiated holistic steps to improve the quality of lending and professionalisation of the operational and credit risk management aspects of banks.
V.P. Bhaskaran,
Kozhikode, Kerala
A separate institutional arrangement for handling stressed assets can be harmful for the financial sector in the long run. Put bluntly, besides acting as a disincentive for professionalising appraisal and credit delivery and recovery departments of the banks, the institutionalisation of ‘stressed assets’ can further weaken the supervisory and regulatory efforts of the already stressed authority, namely the Reserve Bank of India.
M.G. Warrier,
Mumbai
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