Finally, action on bad loans: The Hindu
http://www.thehindu.com/opinion/lead/finally-action-on-bad-loans/article17780069.ece
Excerpts:
"Empowerment
and oversight
The Hindu, April 4,
2017
FINALLY ACTION ON BAD
LOANS
T T RamMohan
Excerpts:
"Empowerment
and oversight
There is clarity now that banks must be empowered to resolve the
relatively small number of bad loans that account for a big chunk of the total
in terms of value. In many cases, this would mean that banks write off a
portion of the loans owed to them.
Managements at PSBs have been reluctant to do so for fear of
inviting action from the Chief Vigilance Commissioner, the Comptroller and
Auditor General, the Central Bureau of Investigation and other bodies. To
stiffen their spine, we need to put in place an authority that will vet loan
settlement proposals put up to it. The BBB has constituted a two-person
oversight committee but reports suggest that the committee will not take a view
on write-offs. This is not helpful at all.
We need a larger oversight committee or, as the Finance Ministry
has proposed, multiple oversight committees to speedily vet loan write-offs. It
makes sense to constitute a Loan Resolution Authority by an Act of Parliament.
This must be complemented with other measures. Banks must
develop the discipline of keeping thorough minutes of the proceedings related
to resolution of bad loans. The rationale for particular decisions along with
the pros and cons must be properly articulated. This will serve to give bank
management a measure of protection.
The government must provide adequate capital to the banks to
cover write-offs and also facilitate fresh loan growth. It must end the delays
in appointing Chairmen and Managing Directors of various PSBs. It must also
revamp the boards of PSBs by bringing in independent directors of high quality.
The solutions should have been clear enough long back. It is the
misplaced condemnation of PSBs that has held up resolution of the bad loan
problem. Doing away with majority ownership of government, mergers, creation of
a bad bank — all these are non-starters. The way forward is to empower
management and strengthen governance at PSBs."
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