Banking stocks plummeted as the top public sector banks released gloomy results for the recent quarter. Although falling profits is a matter of concern for the banks as well as for investors, it is time banks acted conservatively by recognising the true level of their non-performing assets (NPA). Increase in the provisioning of NPAs is the real cause of slipping profit margins. It is not wise to post overwhelming profits while ignoring the real quality of assets.
Making full provisions for bad loans will reflect the banks performance. This will push them to take up measures to improve the quality of assets and also conform to global standards of performance. With the Reserve Bank of India in full swing to clean up balance sheets of troubled banks, let's hope the banking sector prospers in the near future.
Rishika Shankar Moradabad
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