Letters to the editor: Fixing NPAs

May 07 2014, 21:04 IST
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SummaryYour editorial “Cultivating NPAs” (FE, May 5) is an eye-opener and if the current state of affairs and the ever-increasing trend of NPAs continues

Your editorial “Cultivating NPAs” (FE, May 5) is an eye-opener and if the current state of affairs and the ever-increasing trend of NPAs continues, it would not be out of place to comment that it looks like our banking sector is literally on the edge of a major financial disaster. Warning signals need to be kept in sight of and necessary strategies need to be planned and implemented without any further delay, if such a catastrophe is to be averted. Your contention that the government’s prescribed/mandated target of 40% of annual lending by all banks to priority sector needs to be revisited and overhauled is correct. With the subject of financial inclusion being much-debated these days, it indicates that the position may worsen if exposure to priority sector increases to cater to the new borrowers under the subject. It is felt that much heart-burning over large accounts turning into NPAs can be avoided by proper and adequate study of projects before taking a lending decision; ensuring meticulous compliance of all terms and conditions of sanction; and carrying out frequent post-sanction physical inspections of all accounts; monitoring of accounts by all banks. Also, the practice of annual review of all accounts should be cut down to quarterly review, so that problems can be detected timely and necessary corrective actions taken. Like good doctors, let the banks not treat the symptoms but treat the disease itself so that further deterioration in the quality of assets is nipped in the bud.

JS Broca

New Delhi

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