Measures such as these point to the fact that thegovernment has over-extended itself. But at the same time, there is no method of ascertaining the impact of such exposures from the current level of disclosures being made by the banking sector. In a large number of cases, the bank's exposures to projects are still in the nature of contingent liabilities. And in some cases such as State Bank's, contingent liabilities are four-fifths of the advances of the bank. In addition, the time frame given for implementing various proposals is very long drawn out, making it impossible to really assess the impact on bank balance sheets, as a lot of these provisions will be applied only on incremental assets. The provision of a minimum of 0.25 per cent of standard assets by banks by 2000 will not have an impact on banks such as State Bank and Corporation Bank, which have already started doing so. But other banks will be faced with a further squeeze on profitability, beginning with 1999-2000.

The first hint of reform was drawn up by the Narasimham committee, whichintroduced various concepts such a declaring non-performing assets, etc. The sequel to the first report has insisted on the tightening of non-performing assets recognition norms, but once again with a very liberal time frame. This is now being sought to be improved to disclosing the maturity pattern of asset and liabilities, changes in non-performing assets and provisions for the same.

The end result is that balance sheets in the banking sector will emerge cleaner and stronger, especially with the stricter norms such as those for downgrading sub-standard assets to doubtful assets. But, there is no tightening of norms for assets that need to be classified as sub-standard nor any for assets that should be classified as loss assets. In the absence of complete change of asset-recognition norms, the restructuring of the banks' balance sheet will not be complete.