There
has been lot of talks on growing NPA cases in the Indian banking industry. I wish to share my views in regard to this
which need to be addressed at the earliest possible .
1. ARCs should
be scrapped with immediate effect and an enquiry should be initiated as to how
many accounts have been revived or reconstructed by them? ARCs have caused
tremendous loss to the economy as their sole purpose was to encash the dying
units and avoid the accountability of the banker. No more assignment of Loans
to ARCs unless they come out clean. If an unit is acquired by ARC and the same
is not revived within 3 years, the same shall be returned back to the Bank.
There is no point in paying the management fee to the ARCs for no achievement.
There are many other flaws in ARC rules and regulations.
2. Appraisal
Systems should be revisited. There are lot of flaws in the current loan
appraisal systems. Bankers have only developed the machines to make better
presentations not the content.
3. Forensic
audits done in the past and also being done currently are by the agencies/ CA
firms appointed by the Bankers themselves. In this situation, the independent
views can’t be accepted. The forensic
audits must be carried by the CA Firms/agencies empanelled with SFIO/CBI/EOW or
any other government agencies.
4. Accountability
of the bankers in case of defaulting accounts should be ensured along with the
borrowers.
5. Bad Loan
Asset Bank shall be created to handle the distressed assets and sincere efforts
should be made to revive the sick units.
6. Sector specific
banks are need of the hour. What is logic behind 28 Banks owned by the
government competing each other in same market and trying to prove better than
others. This way these bankers are creating borrowers’ market and ending in
huge losses.
7. Banks should
be better used for their infrastructure. They are generating deposits, carrying
out business operations and hence why they should be allowed to lend the money
they collected against the sovereign guarantee of the GOI. Is it not funny that
the banks using the sovereign guarantee of the GOI become owner of the public
funds and then deploy on their own.
8. No banker can
be expert in lending to all the sectors at a time. There is urgent need of
segregating the sectors. It is surprising to see that one banker manages all
the sectors on his own and tries to prove himself expert of all.
9. Most of the
NPAs are towards the loans sanctioned between 2008-12. What different was done during
this period so the loan got bad to this extent.
10. Strategic
Debt Restructuring (SDR) policy is good but needs to be revised urgently. The
SDR policy should not fix the time of exit with in 18 months. There should be
minimum 60 months’ time limit.
11. In case of closed units/sick units, the
efforts should be made to revive with the help of employees. Employees shall be
offered equity in the units at the cost of promoters to revive the units. This
will give employments and ownership.
12. Loan
Settlement process should be smooth and short.
13. Credit
Information Bureau Ltd. (CIBIL) has helped a lot in grading the borrower but it
has also acted as big hurdle for lending. The banks should be flexible enough
in regard to CIBIL particularly for NPA cases.
14. Accounts
passing through the stress and currently falling under SMA-1 or SMA-2 should be
extended immediate support so they can be saved from falling under NPA.
15. So far the
consultants are blamed for huge NPA and corruption but the fact is that
consultants can help in revival too. Bankers generally lend funds with the
support of consultants but settlement or revival are done without any
consultant. This is fueling corruption and covering the accountability. If , an
advocate can represent the client in court of law why a consultant can not
represent to the bankers? A panel of consultant shall be made by RBI to take
the services.
Sir there are many such suggestion which need immediate attention to
handle the NPA issues.
C P Jain
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