Apropos the editorial "The NPA millstone" (June 30), restructuring of banks, both financially and organisationally, will go a long way in resolving issues related to asset quality of banks, particularly public-sector ones. Notwithstanding that, the government and Reserve Bank of India (RBI) need to step forward to deal with the menace by imposing tough measures against banks, non-cooperative and wilful defaulters. On the one hand, the rising level of bad loans points to banks' inefficiency in dealing with loan defaults, on the other, the need for rapid economic reforms in many sectors has led to poor debt servicing capacity.
The judiciary's role in recovering bad loans needs rejigging. It needs to be speedier in disposing recovery cases filed by banks. Measures need to be in place to curtail prolonged legal battles, sometimes deliberately created by defaulters to postpone repayment.
At this juncture, the RBI needs to look for imposing restrictions on banks having current gross NPA (non-performing assets) level exceeding 10 per cent, for lending to sectors other than priority and retail segment.
RBI also needs to bring in more schemes to support NPAs to improve asset quality. Tough and supportive actions from the government and banking regulator are needed to stop erosion of the net worth of the banks, particularly of government-owned banks to sustain.
V S K Pillai Kottayam
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