Budget to bring surgical measures for NPA ridden PSBs

With banks’ bad debts becoming the biggest macroeconomic risk facing the country, RBI and Government are making coordinated efforts to settle the problem.

NPA is the highest for Public Sector Banks. Last week, the Parliamentary Committee headed by Veerappa Moily recommended several measures including forensic audit. But most of these are supplementary measures to immediately injecting money to meet the bad assets.

According the committee, Gross NPAs with PSBs is nearly 2.97 lakh crores or around 6.1% of assets.

For the government, it has to make some extra measures as NPA levels are the highest for the PSBs. It is expected that the government may inject more money to the PSBs in the next budget to clean the loan book of ‘least performing banks’.

Indications are that such measures will be made for worst performers; at the same time, they should undergo more disciplinary measures including injecting professionals at higher management levels.

Existing best practices like provisioning and ARCs are good as bailout arrangements. To stop NPA generation, more accountability with removal of political control should be made according to experts in the industry. 

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