I agree with A V Rajwade's view in his column, "Recapitalising public sector banks" (March 17), that the main illness plaguing banks is their bad loans, which have been increasing since they were nationalised.
The panacea for bad loans is not the consolidation of banks. The eventual consolidation of stressed assets will in no way help banks overcome their current elevated levels of bad assets and ever-diminishing returns.
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To target bad loans and its negative impact on the capital and health of banks, the government needs to undertake radical measures. The realisation of bad assets is related to the speedy growth of interdependent segments of the economy. Not only banks but also other authorities that are part and parcel of recovering bad assets need to be strengthened more to avoid inordinate delays in recovering the dues. No leniency or favouritism should be shown while taking action against wilful delinquents.
Capital-deficient banks need to be adequately recapitalised. At present, public sector banks are short of staff and lack professionalism. A thorough evaluation of the available human capital and level of implementation of technologies is necessary to improve efficiency. Instead of consolidation of public sector banks, the government and the banking regulator should strive to implement banking reforms.
V S K Pillai, Changanacherry
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