Managing resources crunch

Should we recapitalise the banks?: Our priority should be to address the policy failures that gave our banking crisis...





Recapitalisation: Managing resources crunch

In his column “Snakes & Ladders” (August 21), Ajay Shah has raised a very relevant question, “Should we recapitalize the banks?”. The facts and figures that follows the question, with a feast of links for further reading and the columnist’s association with national level commissions/committees like Financial Sector Legislative Reforms Commission (FSLRC) adds credibility to whatever arguments he may support! So, for once, let us join the chorus from the audience, “No…No…Not at all, if it’s with ‘taxpayers’ money!!’. Still, we have to search out a solution, as we need banks to survive.
Recent revelations show that banks were only conduits in a larger scenario of sweeping out nation’s savings to different pockets within the country and abroad. Bluntly put, like Airlines, Railways and other Transport Systems helping smugglers or thieves shift their ‘loot’ to safer havens. The example is in the context that sizeable bank credit has been deployed in dead investments or were diverted willfully.
At this stage, GOI need to make a realistic assessment of wealth with the nation, by separately accounting assets with each industrial group, each family with wealth above a cut off level, say 50 crores, each  individual whose networth is above Rs10 crore and each institution which has declared assets over Rs100 crore. Those who have illicit wealth could get punished, while others who possess genuine savings can contribute to nation building. This approach is likely to release enough resources to meet the present short-fall in meeting fiscal responsibilities. Details of rewards and punishments could be worked out with the help of eminent economists and concerned ministries.

M G Warrier, Mumbai

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