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This refers to your edit, ‘A bankable idea’ (February 13). ‘Bad banks’ are a bad idea to tackle the NPA mess. Merely transferring the bad assets to a new entity will not make them performing assets. It is just a book entry and will amount to window dressing. As long as actual recovery is not made, it is an NPA whether it is with financing banks or ARCs or with the proposed bad bank. In fact, banks may start further lending based on the illusory healthy balance sheet which may again become NPAs.
The problem of NPAs arises due to various reasons: the two main ones are failure of the unit and wilful default by borrowers. Business failures cannot be avoided though timely action can be initiated to minimise the loss to the unit as well as to the financing banks. But wilful defaulters should be taken to task. For this an effective judiciary is required. At present there is no time-bound judicial remedy to take over the assets financed or to prosecute defaulters.
S Kalyanasundaram
Establishing a bad bank or PARA is not a bad idea. With 20 ARCs not showing much progress because of the many restrictions, the Government has no option but to resort to bad banks. Once the menace of NPAs is brought to a minimum, further lending should be done more carefully especially when dealing with corporate and infrastructure loans.
TSN Rao
Bheemavaram, Andhra Pradesh
Asset quality review (AQR) seems to have lost its sheen when it comes to solving the NPA problem. How many more schemes is the Government going to experiment with when existing schemes such as S4A, CDR, JLR, SDR, 5/25 and others have failed to resolve the issue? Creating bad banks will meet the same fate.
It appears that the Government is trying to adopt a ‘shortcut” approach to meeting the Basel III capital adequacy norms. Setting aside a mere ₹10,000 crore in the Budget for bank recapitalisation shows that the Government has lost hopes of resolving the issue and is desperately looking to kickstart the lending process somehow. Banks need to continue with the ARQ process though it is time-consuming. Also when it comes to assessing loan defaults there has to be a clear distinction between genuine defaulters and wilful defaulters. Efforts should be made to improve competency levels of bank staff and there should be no government interference. The creation of ARCs would only postpone the inevitable.
Srinivasan Velamur
Chennai
Unseemly power struggle
Factionalism within party ranks does not augur well for the AIADMK which is already coping with leadership vacuum and identity issues. The power struggle is a sad commentary on the allegiance to the departed leader, Jayalalithaa, who must be turning in her grave now. As both Panneerselvam and Sasikala are pushing for a show of strength to form the government, one wonders if this will lead to a split in the party.
R Prabhu Raj
Bengaluru
Patience will pay
Attributing motives to the delay on the part of the governor to invite Sasikala to form the government is unwarranted. As a key constitutional functionary, the governor of a State cannot be coerced to act. He is now facing an unprecedented constitutional crisis. Under these circumstances, it would be prudent on the part of rival factions within AIADMK to exhibit patience.
It is hoped the governor will arrive at a solution that is legally sustainable and constitutionally unimpeachable and save the State from being plunged into political instability.
M Jeyaram
Sholavandan, Tamil Nadu
Upholding democracy
The report, ‘Narayana Murthy: Have not withdrawn concerns over governance at Infosys’ (February 13), is interesting in the context of some corporate boards making CEOs comply with their interests rather than the interests of stakeholders. His statement reiterates that corporate governance is a democratic process and will go a long way in ensuring that right processes are followed.
Vikram Sundaramurthy
Chennai
LETTERS TO THE EDITOR Send your letters by email to bleditor@thehindu.co.in or by post to ‘Letters to the Editor’, The Hindu Business Line, Kasturi Buildings, 859-860, Anna Salai, Chennai 600002.
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