Letter to BS: Economic slowdown hits debt-servicing capacity of borrowers

Topics Economic slowdown | PSB | NPA

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This refers to “PSU banks not out of the woods yet” (Febraury 17). The strategy of improving the quality of the assets and bringing down the elevated level of the bad loans in the public sector banks (PSBs) is not adequate. As a consequence, the PSBs are losing business, market capitalisation and credibility. The debt-servicing capacity of the borrowers is getting badly affected by the slowdown in the economy. Since income generation from economic activities and jobs is crucial to the recovery of bad loans, focusing simply on the effectiveness of the recovery tools will hardly make a difference.

The speedy execution of the announced economic reforms is essential to attract more investment in the economy to enable the economy to come out of the deceleration. The focus of the government must be on the stressed sectors and removing the stresses is vital to ensure speedy repayment of the dues to the banks. Bank executives are becoming risk-averse due to the high level of the non-performing assets (NPAs). Making bank executives accountable for the rise in NPAs is a delicate issue and therefore, needs to be done carefully and judiciously to fix the real culprits and to prevent punishing those who have taken prudent decisions. As a result of the capital infusion, public sector banks' capacity to lend has risen and therefore, these banks must be urged to lend to make capital available at lower costs.

VSK Pillai, Kottayam

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