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Letters: A futile exercise

Full capitalisation is risky in India because here the 'wrong' bank managers are punished

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Business Standard
Last Updated : May 16 2017 | 11:50 PM IST
In the article, “Don’t dither on bank recapitalisation” (May16), T T Ram Mohan notes that chief executive officers (CEO) were replaced at several banks when the US government rescued them from non-performing assets (NPA) by investing $245 billion in one go. He advises the Indian government to appoint the “right people” as CEOs in banks and follow a similar path as the US government.
 
Full capitalisation is risky in India because here the “wrong” bank managers are punished, if at all, for corruption and not for their inefficiency or carelessness. Thus, the ratio of gross NPA to gross advances (loans) in banks has shot up from 3.8 per cent in 2013-14 to 8.4 per cent in 2015-16 during Modi’s rule and just a few CEOs have been replaced even as the government keeps pumping money into the banks.
 
On the other hand, despite mounting NPAs, public sector bank officers and staff were given a raise of 17.5 per cent in salary and more holidays without any commitment from them to be accountable for performance and results.
 
With respect to the Economic Survey report quoted in the article (which traces the “vast bulk of problem to unexpected changes”) the fact that NPAs are rising in public sector banks faster than in private sector banks indicates that the reasons are a toxic mixture of political self-interest and an acquiescing or irresponsible top management.
 
Wrong risk assessment and slow or no acknowledgement of defaulting companies point towards political pressures. As the top personnel are ultimately appointed by the government, yielding to such pressures is not uncommon. Look at the way Vijay Mallya’s case is being handled. What is the purpose of full recapitalisation in such a case by using the taxpayers’ money? Y G Chouksey Pune
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