This refers to the report “PSBs told to get tough on defaulters” (June 11). It is amply clear that bad loans eat away banks’ profits. Yet the expenses and losses incurred to maintain and write off bad loans are not given due consideration and even rating agencies do not discuss this aspect. Banks alone can solve the problem of rising non-performing loans. So, the current approach of the government and banks to provide additional capital and make adequate provisioning – which includes the latest concept of dynamic provisioning – does not seem logical. The basic reason for bad loans is “borrower indiscipline” and this can be fixed with appropriate rating, appraisal standards and supervision and follow up. It is time we discipline borrowers.
T V Gopalakrishnan Mumbai
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