Evergreening takes place where banks lend loans so that corporates can repay their outstandings to banks and prevents the account from becoming classified as a non-performing asset (NPA).

Vasudev admitted that the public sector banks--which had shown handsomerise in profits in 1997-98-- are likely to take a beating in the current financial year because of the industrial slowdown. "Flexiblity cannot be imparted just to tide over the slowdown. It is like sweeping things under the carpet. Banks should make provisions and show the true picture of their liablities," Vasudev said in reply to a plea from United Western Bank chairman PN Joshi.

Joshi had earlier in his presentation on the recomendations of Narasimham Committee-II said that authorities should allow occasional greening of assets--if not evergreening of assets. "If corporates like SAIL, Tisco and Telco run into losses and corporates are facing problems because of the slowdown, some flexiblity in the NPA norms are needed," Joshi said.

According to Vasudev, if corporates are facing problems, these should be reflected in banks balance sheets. The RBI governor Bimal Jalan had in the mid-term review of the monetary and credit policy said that the banks should stop evergreening of assets.

Vasudev said thatbanks now needed to move towards micro levels adjustments from macro levels changes that has taken place so far. He expects banks to cope with the new asset-liablity managament (ALM) systems when it is in place and hoped that these banks can rise to the challenges of universal banking as and when it comes. "Banks also need to rise to the challenges in the fields of Information Technology and Human resource developements", he said.