Prem Shankar Jha: Lower interest rates or die

Prem Shankar Jha: Lower interest rates or die: What will happen if policy interest rates are brought down to the point where they halve the current 11 per cent-plus average cost of borrowing?


Distorted view

This refers to Prem Shankar Jha's column "Lower interest rates or die" (Business Standard, February 20). Please do not scare
readers with figures. If the additional liability from VII CPC is x, the money
dumped into industry/infrastructure and is now ‘unproductive’ is 8x. The
following excerpts from the article gives some idea about the background for
the present situation:

“Mr Rajan himself set the ball of blame rolling in 2013 by remarking,
"Promoters do not have a divine right to stay in charge regardless of how
badly they mismanage an enterprise, nor do they have the right to use the
banking system to recapitalise their failed ventures".

makers in North Block, by contrast, are putting most of the blame on the poor
quality of managers in the public sector banks and pinning their hopes on
selling up to half of their shares and inducting more independent professionals
onto their boards. But this argument too is largely specious, for while the
proportion of bad debt is higher in the public sector banks, it is now rising
at a faster pace in the private sector. This is because a larger share of their
loans is concentrated in heavy industry and infrastructure projects. The longer
gestation period in them means that their insolvency takes longer to surface.
A second reading of the above will reveal:
The first
warning came from the present RBI Governor, within months of his arrival at
Mint Road. This was not heeded.
Poor quality
of management in government and public sector is a reality. But, a sell-out is
no solution. The need of the hour is an HR-overhaul from Secretary to Section
Officer and from Board Room to front desk.
sector banks have an option to choose clientele which they are exercising. This
is evident from their stagnant business share also.
for funds by infrastructure projects which have long gestation periods and the short-term
nature of banks’ resources is an issue to be addressed not just from the narrow
angle of ‘NPAs’.
G Warrier,


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