With reference to the piece, "The flaws in bankruptcy law" (February 8), while all the reasons adduced by the writer, Debashis Basu, are correct, there is one that he has left out: the quality of credit appraisal, follow-up and monitoring of big-ticket loans.
Public sector banks do prepare a well-documented appraisal report vetted by no less than a dozen senior bank officials. Or, these days they adopt a committee approach that does not seek accountability for faulty appraisal. Thereafter, it goes to the board, which okays it without little responsibility.
The above-mentioned appraisal report runs to more than 100 pages, and with more than 30 annexures - each at least five pages long - it becomes a cartload. Credit decisions are taken with reference to future data. If the past data - that is what the actual performance is - does not allow the team to proceed, the appraisal process gets "intellectualised" to justify future assumptions. Of the dozen senior bank officials who vet an appraisal report, only some have the expertise to insert commas and redraft paragraphs without altering the contents.
As for follow-up and monitoring, the less said the better. Bankers are incapable of follow-up and inspection, as they have to handle a variety of industries, each with different physical assets. They do conduct a financial follow-up but all negative variances are beautifully explained to justify their earlier faulty appraisal.
Then comes the day when they have to initiate action. This process becomes a pen-and-paper exercise completely, delaying the matter by another 24 months or so. After this, the set of papers go to a team that was not responsible for the appraisal. This team is happy not to be party to the criminal lapse in the appraisal and follow-up.
In this scheme of things, what can anybody do? So we have workshops, seminars and deliberations that waste reams of paper - now the whole exercise is perhaps digitalised. Feed all important facts into a bulky document to keep it unread.
K V Rao Bengaluru
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