Letters to the editor dated January 25, 2021

This refers to ‘Beyond bad banks’ (January 25). At this point in time, the banking sector is in dire need of fresh capital in any form, be it private equity, infrastructure investment trust, or ARC or all of them as the IBC is under abeyance and to an unknown resumption.

Our fresh tryst with a bad bank, could be asynchronous. It would have been fruitful 3-4 years back, perhaps just after banks’ Asset Quality Review or even earlier, when stress was building and banks were delaying its recognition.

We have a dozen or so asset reconstruction companies for recovery of chronic NPAs. These companies have specialised personnel and knowledge of the law to operate on a war footing. As in other major economies, our bank NPAs too are endemic to specific sectors such as steel and power. In India, it would be better to take the ARC route in such key segments than go for a bad bank catering to all sectors.

Navi Mumbai

It is reported that out of the total NPAs of over ₹10-lakh crore, the share of public sector banks is a whopping 86 per cent. Setting up a bad bank would no doubt help the PSBs shift their focus from the time consuming recovery efforts to ‘quality lending’ — their primary source of income. However, how well-equipped would the proposed bad bank be in recovering the toxic loans and what safeguards will be in place to prevent further reckless lending by banks are debatable points.

Prudent lending by the PSBs would be incumbent on their enjoying functional autonomy, particularly with regard to credit decisions, requiring the total cessation of phone calls to bankers from politicians and bureaucrats. The need of the hour, therefore, is the implementation of the Naik Committee recommendations, by setting up a Bank Investment Company, as a first step, followed by equipping the bankers in the art and science of credit appraisal.

Chennai

Apropos ‘Democratisation of credit through digital lending’ (January 25), there is no doubt that Jan Dhan Yojna has made a significant positive impact and digital innovation has somewhat addressed the under-banked and un-banked set of customers. As the Internet connectivity becomes more affordable and widespread, the rural population will gain from digitisation. But that alone will not suffice. A person in a rural area having a mobile and good internet connectivity need not necessarily make good financial decisions. He/she will have to be taught to make informed choices, as mis-selling is widespread phenomena in our country.

Noida

In 2020, all the countries faced unprecedented challenge due to the Covid pandemic. In some countries like the UK, Covid is raging and hospitals are looking like war zones. It will take some more time for all the countries to recover from this blow.

India’s decision to supply millions of Covid vaccines free of cost to countries like Bhutan, Nepal, Maldives and Myanmar, among others, is laudable. India is clearly upstaging China in Covid vaccine supply. Several countries are heaping praise on India for its crusade against the pandemic by supplying the vaccines to other nations to even before fully vaccinating its own population.

Hyderabad

The tractor rally is being held by protesting farmers on Republic Day to mount pressure on the government to accede to their demand for the repeal of the three new market-friendly farm laws. Farmers have a point — they hold that these laws spell the end of agriculture as they know it for centuries on end and they don’t want to become subservient to corporate behemoths and oligarchs.

Laws aren’t set in stone; they are meant for people and not the other way round. The government must take the tractor parade in the right spirit and roll back the new farm laws.

Maruthancode, Tamil Nadu

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