There was an excellent Editorial on the subject of NPAs in the banks in Financial Express (FE) of 5th May 2014.To read it go to the following link:

In response to the above this is what I wrote to the Editor by way of a letter to the editor: 

Dear Sir, Your Editorial: ” Cultivating NPAs ” (FE 5TH May 2014) is indeed an eye-opener and if the present state of affairs and the ever-increasing trend of NPAs continues, it would not be out of place to comment that it looks like our banking sector is literally on the edge of a major financial disaster! Warning signals need to be kept in sight of and necessary strategies need to be planned and implemented without any further delay, if such a catastrophe is to be averted. Yes, your contention that the Government’s prescribed / mandated target of 40% of annual lending by all banks to priority sector, needs to be re-visited and overhauled. With the subject of financial inclusion being much debated these days, it indicates that the position may further worsen if exposure to priority sector increases to cater to the new borrowers under the subject. All said and done, it is felt that much heart-burning over large accounts turning to NPAs, can be avoided by following some simple steps: 1. Proper and adequate study of projects, to be sure of their technical feasibility and economic viability, before taking a lending decision. 2. Ensuring meticulous compliance of all terms and conditions of sanction. 3. Carrying out regular and frequent post sanction physical inspections of all accounts by a dedicated team of staff. An element of “surprise” must be kept in such inspections/visits. 4. Regular follow-up and close monitoring of accounts by all banks and “staff shortage” should not be an excuse for not carrying out this meaningful exercise. 5. The present practice of usual Annual Review of all accounts, should be cut down to Quarterly Review, so that problems if any, can be detected timely and necessary corrective action taken. As per media reports, Banks sold over Rs.10,000 crores of bad loans to ARCs (Asset Reconstruction Companies) in March 2014 alone. Banks have also reportedly re-cast nearly Rs.1 trillion worth of loans in the past financial year 2013-14. This is an indicator of the grave malady the sector is suffering from. Like good doctors, let the banks not treat the symptoms but to treat the disease itself so that further deterioration in the quality of assets, is nipped in the bud. J S BROCA, NEW DELHI

FE has published an edited version of my letter in today’s paper. You can read it by going to the following link:


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