Profits in the banking sector are on the decline due to the indiscriminate rise of non-performing assets. Bank managers are under immense pressure and have been given impossible targets to reach in terms of deposits and advances and have little time at their disposal to focus on the more crucial issue of recovering bad loans. Mooting the idea of a “bad bank” will no doubt be a paradigm shift but will certainly be of assistance to banks in addressing the issue (“ >Why a ‘bad bank’ is tricky ”, Oct.10). Frequent changes in economic policy have proved infructuous, where theory and practice of banking fail to complement each other. In India, theory and practice are never ‘in sync’. In the sanctioning of loans, the norms of three ‘C’s’ — conduct, character and creditworthiness — are hardly factored in. The option of an infusion of capital is only a negative strategy.
N. Visveswaran,
Chennai
The “bad bank” idea is being sold as a silver bullet, but its success is doubtful. Even if a “bad bank” solves the issue to an extent, public sector banks will continue to generate NPAs unless the way they are managed is improved. Political interventions are largely to blame, and for which there seems to be no strategy. Defaulters must be acted against strongly, the lack of which is why there is hardly any success in loan recovery.
Kiran Babasaheb Ransing,
New Delhi
Italy fixed its burden of NPAs by setting up a “bad bank” as an asset management company that could strip bad loans off the balance sheet and conduct normal business. A scheme like this is also helping Ireland and Spain overcome their crises.
K.M.K. Murthy,
Secunderabad
