Letters to the editor dated November 12, 2021

| Updated on November 12, 2021

Of incentives and disincentives

This refers to “Sticks, stones, carrots and Covid vaccination” (November 11).

The kinds of incentives envisaged in the article to induce the remaining people to go for Covid-19 vaccination were needed at the initial stages when vaccine hesitancy was highest.

Leaving them unrewarded and incentivising late users will be unfair to the former.

A major factor retarding vaccination is vaccine complacency. Those partially covered feel that it is enough to safeguard them and those who are unaffected think that the vaccine is unnecessary. There should be disincentives for this section, while an extensive awareness drive including door-to-door jab for the old or infirm must be carried out. Incentives may be reserved for the poor only.

YG Chouksey


A sunset for bad banks

With reference to ‘Why a bad bank needs a sunset clause’ (November 11), though the bad bank is welcome it has to be an one-off arrangement only to take care of the accumulated NPAs in the banking system.

After establishment of NARCL the future bad debts should be handled only by respective banks otherwise the lenders will not have a skin in the game. The success of the bad bank will depend upon the extent of realisation it is able to make through their resolution plans and for this its book size must be frozen. Further, unless liquidity for Security Receipts improves transferring bad loans to NARCL is not the complete solution. Instead of looking at the bad bank option, lenders should improve their appraisal and risk management skills.

M Raghuraman


With reference to the article ‘Why a bad bank needs a sunset clause’, the government established bad bank and prescribed its role to become a liquid market for NPAs, with a belief that banks sell their assets at a reasonable price.

The NARCL will acquire the stressed assets by paying 15 per cent cash and the balance in Security receipts.

The government will back up these 85 per cent with a guarantee up to ₹30,600 crore, valid for five years.

For the existing SRs the secondary market is illiquid, due to the low debt recovery rate.

A sunset clause is to be incorporated in the NARCL otherwise it may pose a long term risks to the financial stability of the country.

It seems that the government may have an idea of privatising PSBs after their balance sheets are cleaned up.

That may be the reason for not extending the period of bad bank.

Unless there is a strong political will to recognise bad loans and support legal infrastructure to address wilful defaulters, setting up of a bad bank will not be helpful beyond a point.

Since the major portion of NPAs constitute bug ticket loans in future while sanctioning them a scrutiny of RBI is needed to ensure that they would not become NPAs.


Bhimavaram (AP)

Boosting bank lending

With reference to the editorial ‘Correcting PCA rules’ (November 11), while deposits of the public are a major resource for the banks to deploy in loans, it is imperative for banks to remain financially sound and credible.

Sustaining the trust of the depositors is crucial to the growth of the banking business.

Therefore any adverse financial status of the banks needs to be warned to enable them to initiate speedy corrective actions.

The Prompt Corrective Action framework must not trestrict the stressed banks from expanding their business.

It is essential to bolster the surveillance on the performance of the assets rather than preventing the banks from creating assets.

The criteria formulated for the PCA framework need to be reviewed to ensure that it is business growth-friendly and reasonable.

The government must also strengthen its legal mechanism for speedy resolution of bad assets, particularly the wilful defaults of the banking sector, besides, make more effective the newly set up National Asset Reconstruction Company to relieve the banks from the bad assets crisis.

VSK Pillai

Changanacherry (Kerala)

Published on November 12, 2021

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