This refers to the edit “A familiar pattern” (November 29). If the asset quality of public sector banks has deteriorated due to system-based recognition of non-performing assets (NPAs), it only confirms that banks have been manually making under provisions in the past. System-based recognition has removed bias and done away with the discretion of bank managers.
The higher exposure of public sector banks to small and medium enterprises (SMEs) is due to the mandatory requirement. Private sector and foreign banks reach the target under the SME category by resorting to investments in bonds issued by the National Bank for Agriculture and Rural Development. There are, therefore, no slippages in the asset quality of private sector banks. So, it is incorrect to compliment private sector banks on their reported resilience as mentioned in your edit. The way in which priority sector lending targets are reached is different for public sector and private sector banks. And it is improper to compare their performances.
As for the increasing NPAs in the agriculture sector, the Centre has to be blamed for the culture of entitlement and massive loan write-offs. Unfortunately, the Reserve Bank of India remains a mute spectator and has not alerted the Centre on the negative impact of such moves on the banking sector.
K V Rao, Bangalore
