<b>Letters:</b> Restore confidence

I agree with the views of A V Rajwade in his column, "The illusion of bank capital" (June 2). However, despite the depositor's funds turning into bad assets, it seldom induces her to withdraw the amount. So long as the majority stake rests with the government, investors and depositors are least worried about the rapidly growing bad assets and huge losses of public sector banks. The faith of depositors in state-owned banks is their backbone. As the majority stakeholder in such banks, the government is duty bound to protect the interest of depositors.

While the compliance of Basel capital adequacy norms has direct bearing on the lending of banks, the acceptance of deposits is free from those norms. At a time when stressed assets are rising rapidly and profitability is decreasing, the government has to do more to protect the hard-earned money of depositors. Due to bad assets and wilful defaults, public sector banks are incurring losses. Any deterioration in the quality of deployed funds will be harmful to a depositor's interest. The government, banking regulator and banks must seek to recover bad assets to maintain the confidence of depositors as well to ensure flow of deposits into the banks.

V S K Pillai Kottayam

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