I feel RBI deserves full credit for digging the surface of the NPA Volcano before it is too late. We as a nation and I in my individual capacity should be and are proud of their action.
A lot is being talked about NPA and therefore I prefer to be brief and to the point.
1. There is a need to redefine and large and willful defaulters. Their wings have to be curtailed. Some of the ways of curtailing or disciplining them can be :
a) Appointment of auditors should be by consortium of lenders. They should be provided additional special terms of reference.
b) The majority in the Board in no case should be with thedefaulting promoters’ group. Even without holding majority in the Board, the promoters can and should run the unit well within the permissible limit.
c) If, the above fails to remedy the situation, the management should be completely taken over and for that matter, out banking system will have to create a pool of professionals and other promoters with proven track record.
2. Over a long period of my career as a professional CA and with the experience of being professional independent director in one of the nationalised banks, I have seen that the name of the ‘consultant’, ‘adviser’ etc functionaries who peddled the Loan is not referred to in the files once the loan is disbursed and turns into NPA. In fact, there should be a directory of consultants etc. who have played a role during the relevant period.I am sure a clear track will emerge.
3. We need to bring in an element of incentive towards the loan which did not get converted in to NPA. The bank officers responsible and associated with such accounts and also the Borrowers need to be given incentives.
4. A time has come to have a relook at the constitution of the boards of the nationalized banks.Too much presence of Controlling authorities bring an element of undue influence as well.
5. As a practitioner, at BIFR, I also observed the tremendous delays in settling ( if at all it is settled ) a bad loan. The entire legal structure and the legal system needs to be re looked. Mere changing of law ( as envisaged in the amended Companies Act 2013 ) will not be adequate. The parties and institutions involved in delivery of justice needs a closer look. This includes the role and manning of DRTs, ARCs , Legal and other professional fraternities’.
These are some stray observations, but the fact remains that in the Banking Sector a major operation is required.If defaulting promoters are allowed to get away with Restructuring the Loan portfolios and Banks are saved through Injunction of more Capital what I fear is that there would be an indirect incentive for a willful defaulter to first commit a default and then take the bonanza of large scale write-offs and settle it.
Even the banks appear to be in a mood to declare a huge NPAs so that more capitalization is justified.
I am sure the readers will appreciate what I’m trying to point out.
