Apropos the editorial “Yet another flip-flop” (December 21), the third quarter of the current financial year is not going to be better for the banking sector, especially the public sector banks, due to crucial issues like mounting stressed assets, sluggishly growing business. Notwithstanding that, the government and the banking regulator have diverted banks from those issues and engaged them in demonetisation. Banks are using most of their time and manpower to comply with the changing guidelines on demonetisation which are being issued by the government and the banking regulator from time to time. Demonetisation has accelerated the outflow of capital from the market, and as a result, among other things the market cap of the banks too have drastically gone down.
Adverse situations like shrinking market capital, diminishing returns or losses, mounting bad assets, declining lending capacity all have to be corrected to restore the credibility and health of the banks. The resolution of the bad assets is more crucial than any other matter. The government and the Reserve Bank of India must lessen the demonetisation burden of the banks to enable the banks to spare maximum time and manpower to accelerate the recovery of the non-performing assets as well as for the recovery of the dues from the wilful defaulters. The woes of demonetisation need to be eliminated to ensure smooth rotation of the wheels of the economy. Since the financial intermediaries are the drivers of growth they must be given freedom to play their roles effectively.
V S K Pillai Kottayam
