Bold reform: Letter to BS on NPA rules may mean short-term pain for banks

With reference to “RBI cracks the whip” (February 14), the stress in the banking system is very high and the level of non-performing assets (NPAs) is at an unusually high level. Given this, a leaner, simplified, and yet stringent framework announced by the Reserve Bank of India (RBI) for resolution of NPAs vis-à-vis the resolution of stressed assets is a good step in the direction of monitoring and containing such loans.

 

Steps such as banks harmonising treatment across their books of specific accounts, in case of consortium lending and making it necessary for them to report on a frequent basis, and start the resolution process right away will nevertheless bring greater clarity in dealing appropriately with default borrowers in a coordinated manner.

 

It is a wake-up call to the defaulters. Certainly, compared to earlier resolution processes, a more streamlined approach was necessary in view of the grim situation. The revised guidelines will bring much pain to the banks in the short to medium term but there is no gain without any pain. RBI needs to be complimented for initiating this bold reform.

Srinivasan Umashankar  Nagpur

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