FICCI President Mr. Rashesh Shah's Statement on Investigation of PSU Bank NPA Accounts Above Rs. 50 Cr

Feb 28, 2018

Welcome move but need to avoid disruption

 

NEW DELHI, 28 February 2018: The government move asking the PSB (Public Sector Banks) MDs to investigate all NPA accounts above Rs. 50 Cr for detection of fraud and wilful defaults will help in ensuring the much-required cleansing of the banking system and the establishment of a transparent and effective risk management mechanism in the functioning of the state-run banks. 

This whole effort, especially linking of frauds to the wilful defaults, though, is an exercise that needs to be carried out cautiously and the government must ensure that investigations don't cripple lending and dampen business sentiment further.
 
With continuous efforts from the government and RBI, PSBs should strengthen their risk management practices with an immediate sense of urgency. Simultaneously with the action on the existing NPA accounts, an effective time-bound action plan for infusing transparency and a robust risk management system in these banks is a necessity.
 
Overall, the government's strategy towards NPA resolution through IBA, strict action against frauds and wilful defaults, and strengthening of PSBs, will help in dealing with the existing issues.
 
The larger and long-term solution, however, lies in the rationalisation, consolidation and selective privatisation of PSBs.