The concept of a “bad bank” for “bad loans” is intrinsically a bad idea (“ >Why a ‘bad bank’ is tricky” , Oct.10). The quality of lending is bound to deteriorate if those who lend are not held accountable and spared the pains of recovery; band-aid solutions will only prove counter-productive. Also, it is absurd to suggest that bankers who process huge corporate loans do not have the expertise for recovery. It is a fact that many of the compromise settlements and restructuring approved by public sector banks are “brokered” by influential politicians. If the government can insulate banks from such pressures, display the political will to iron out systemic bottlenecks and remove the fear psychosis gripping bankers, banks themselves can effectively tackle NPAs. Asset reconstruction companies are also entering the fray because of the huge scope for profits. If this is the case, then why shouldn’t public banks themselves undertake recoveries? Moreover, private ARCs are bound to forge a nexus with bankers to bag soft NPAs and make easy profits.
Manohar Alembath,
Kannur, Kerala
Seizure of assets does not arise when assets are “pledged”, as suggested by the writer. When the pledged goods are already with the bank, where is the question of seizure? Seizure arises only when the goods are hypothecated or where the properties are mortgaged. Restructuring of loans does not make banks to forego any income. It is only in the case of a ‘one-time-settlement’ (OTS) that there is a possibility of some write-off. Is there some confusion between OTS and restructuring?
S. Kalyanasundaram,
Chennai
It would be prudent to create separate departments within the respective banks, similar to currency chests, which are considered as a representative office of the RBI. These departments should be manned by officers who are technically and legally qualified so that the economic viability and technical feasibility of failed loans can be properly studied and rehabilitated wherever necessary. Further, it will enable better accessibility to files and the customer-banker relationship will be smoother.
T.S. Aravamudan,
Chennai
