This refers to the editorial "Making banks safer" (July 25). As rightly observed, capital adequacy and tighter regulation are just one step forward to ensure safe banking. But they need to be amply supported by different parameters necessarily customised to ensure that banks do not indulge in camouflaged acts of instability. There are areas such as the expansion of off-balance sheet items, indiscriminate lending against inflated assets such as securities, continuous deterioration of customer service, indulging in speculation in between the accounting closure dates, gross underestimation of liabilities and over-estimation of riskless assets on balance sheet dates by resorting to creative accounting and so on. These are some practices that can escape the scrutiny of the Reserve Bank of India. To make sure that banks are really in the safe zone, it would be ideal to factor in the assessment to be given by the banking codes and institutions such as the Insurance Regulatory and Development Authority, Securities and Exchange Board of India and so on.
T V Gopalakrishnan Bangalore
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