Reform focus

| Updated on September 03, 2019 Published on September 03, 2019

With reference to the editorial ‘Re-think needed’(September 2). It is unlikely that the government will have a re-think on the recent merger of 10 PSU banks into four. At best, it can be called a decision to consolidate banking and ease the government’s own hand in re-capitalisation , but it will never be a major reform as some in the government claim.

At a time when the Indian economy has slowed down considerably and has hit a 15-year low in growth, we need more solid and robust reforms which can bring the economy back on track. We all know that besides external factors, it was poor credit decisions while analysing long-gestation project finance proposals that led these PSU banks to have huge NPAs which have put a break on fresh lending in a big way.

So, what is the guarantee that new entities (post merger) will have a completely transformed credit decisioning process? Rather, it is going to be a long time before manpower and technology integration is done.

There should not be any other priority other than reviving the economy and creating jobs, for which land and labour reforms, the removing of hurdles for the MSME sector and a re-look into the GST rates are needed in order to bring some much-needed change in the economy.

Bal Govind


Reducing NPAs

This refers to the editorial ‘Re-think needed’ (September 2). Except for bringing down the number of PSBs from 18 to 12, the merger may not have any significant impact in terms of providing the required impetus to a sagging economy.

For example, there is no mention of any steps for bringing down the NPA level of banks, which is the main cause of slowdown in credit growth.

With the GDP growth at 5 per cent, a six-year low, in the June quarter, banks should be allowed to get rid of bad loans through the transfer of such loans to SPVs/bad banks created for this purpose. With further capital infusion planned, banks would get the required leg room to start the lending process on a clean slate, which will give a boost to the economy.

There are some banks which are still under PCA (prompt corrective action). In these cases, recapitalisation will only lead to absorbing provisions made for bad loans. For banks which are relatively stronger and are reluctant to extend corporate loans for fear of reprisals, the capital infusion will only boost retail loans/credit card businesses, which may not give any significant fillip to the real economy.

Srinivasan Velamur


Economy issues

The decline in growth is at a six-year low at 5 per cent. The erosion in the economy is wide ranging — banks, business, exports and job creation. The impact on every major investment, private and public, is inexorable. The unemployment rate is the highest in six years and investment and manufacturing indices have steadily dipped. The government is struggling to manage the economy amid global uncertainty, be it in trade, politics or the monetary sectors. Its big-ticket political interventions in sensitive border States left the Cabinet with little time for addressing a highly strained economy. The bank mergers will impose additional strain on effective monetary transmission. Even the best bureaucratic set-up would be hard-put to cope without constant inter-ministerial coordination. But the government keeps piling up issues in quick succession.

R Narayanan


Strategic move

The recent appointment of Tamil Nadu BJP chief Tamilisai Soundararajan as the Telengana governor appears to be a tactical move to challenge the ruling TRS. Earlier, when Venkaiah Naidu was an active politician in the divided Andhra Pradesh, to discourage him from taking sides, the BJP nominated him as Vice-President. Now, after Soundararajan failed to get a strong base for her party in Tamil Nadu, she has been ‘punished’ and put forward for this post.

R Sekar


Published on September 03, 2019
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