1. RBI’s deadline to clean up bad loans may hit banks profit: SBI

RBI’s deadline to clean up bad loans may hit banks profit: SBI

State Bank of India chairman Arundhati Bhattacharya today said banks are apprehensive about the Reserve Bank of India's deadline of March 2017 for banks to clean up their balance sheets as the move may affect lenders bottomline.

By: | New Delhi | Published: January 15, 2016 8:20 PM
Arundhati Bhattacharya

State Bank of India chairman Arundhati Bhattacharya today said banks are apprehensive about the Reserve Bank of India’s deadline of March 2017 for banks to clean up their balance sheets as the move may affect lenders bottomline. (Express Photo by Dilip Kagda)

State Bank of India chairman Arundhati Bhattacharya today said banks are apprehensive about the Reserve Bank of India’s deadline of March 2017 for banks to clean up their balance sheets as the move may affect lenders bottomline.

“Because the regulator has given this call that you need to clean up everything by March 2017, there is some kind of a apprehension that if it is all compressed into a very short period of time then there may be very large hits,” Bhattacharya said today.

It could be noted that in the last policy, RBI governor Raghuram Rajan had said the central bank would want to put something like March 2017 on the table by when clean-up of balance sheets of banks will have to be done.

Bhattacharya further said that there are positive movement happening.

“So we will see how thing pan out and at this point of time it does not make sense to conjecture on these matters,” she added.

  1. D
    Dr.T.V.Gopalakrishnan Krishnan
    Jan 19, 2016 at 5:40 am
    Prevention is always better than cure.With liberalisation of regulation and relaxation of supervion, the accountability for wrong doings has been given a go bye and entertainment of bad loans has been an accepted practice as they can be easily covered up. Sanctioning of abinitio bad loans is a known truth and they will eventually appear as NPAs after a few years and got written of. The Costs incurred by banks to maintain bad loabns in their books of accounts by way of supervsion of bad loans, legal expenses, insurance and maintenance of the ets of large borrwoers and final write off of loans if systematically calculated , would be mind boggling figure and unfortunately the tax payers and the depositors are made to bear the brunt. The issue of bad loans, the reasons behind their generation, how they distort banks balance sheets, how they affect the transmission of RBI's monetary policy , how they affect the cost of funds, the profitability, the morale of honest staff, etc if studied would give a great shock and there cant be any justification to keep the bad debts growing year after year under some pretext or other. Time has come to have a practical solution to prevent the formation of bad debts and nip in the bud itself the reasons behind the bad debts formation by bringing in strict discipline both on the bankers and the borrowers. The loot of money through bad debts needs to be arrested completely with immediate effect and this is possible only by being strict right from the appraisal onwards till the recovery of loans on an ongoing basis and by building up sufficient reserves to liquidate bad debts in case of any by levying a fees for wrong doings both on the part of borrowers and lenders. Ethical deficit crept into the system can be eradicated only with strict punishment and penalty and this needs to be attempted without any fear or favour. Perhaps, the stake holders of banks Viz the depositors, shareholders, good borrowers, general customers, tax payers have to organise and fight the issue of generation of bad debts. Will it happen in our scheme of things?
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