With reference to the editorial, "Beyond the banks" (August 12), at a time when margins are shrinking, it is prudent for companies to mobilise finance through bonds and commercial paper at rates less than the base rates of banks. Despite sluggish credit growth and accumulating bad loans, the Centre seems languid about taking appropriate action to address the issues. The government and the banking regulator need to come up with radical reforms to save the banking sector.
Business entities and other segments of the economy that depend exclusively on banks for their credit requirements are facing high interest cost, which is hampering their profitability and growth, besides their capability to service debts on time. As such, banks are contributors to the rising loan delinquency. One can't overlook the difficulties they are facing in lowering lending rates. Banks are under pressure due to rising cost of funds, operating expenses, provision for bad assets and declining yield on assets. The crux of the issue is growing bad assets. The need of the hour is to find radical ways to recover/reduce bad assets.
V S Kesava Pillai Kottayam
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