As pointed out in the editorial “Coming clean on NPAs” ( Business Line , July 27), if the panel appointed by the RBI recommends to banks to make all restructured accounts into NPAs immediately, the entire banking industry will be in the doldrums.

This process of restructuring, which started in 2009 in the wake of global recession, allowed the banks to clean up their balance-sheets to the maximum extent possible.

Perhaps, at that time, banks would not have thought that so many restructured accounts would crop up every year. Restructured borrowers, however, are sitting pretty without bothering much about sticking to the revised repayment schedule. Classifying all restructuring loans as impaired overnight may not be feasible as well as healthy for the banking industry. Banks must utilise the two-year regulatory forbearance period to recover restructured loans by adopting stringent methods. They should also stop classifying the irregular advances as restructured loans.

Instead, they must go for a transparent way of either classifying them as NPAs, if unrecoverable, or recover the critical amount so that they are not classified as NPAs.

In future, banks must think twice before classifying an asset as restructured. .

T. S. N. Rao

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