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’Banks should not take haircuts, focus on recovering loans’

Author: IANS/Thursday, October 26, 2017/Categories: Banking & Financial Services

’Banks should not take haircuts, focus on recovering loans’

Chennai, Oct 26 - The Centre's Rs 2.11 trillion recapitalisation for public sector banks though a welcome move, the focus should not be lost on recovering the loans by allowing the banks to take a "haircut" (a euphemism for loan write offs), said a top leader of All India Bank Employees' Association (Aibea).

"The recapitalisations announced by the central government on October 24 is welcome. The government should take care that such loan profligacy to corporates is not repeated at the cost of tax payers.” 

"It is time the government starts fixing responsibility for bad decisions taken in the guise of commercial decisions," C.H. Venkatachalam, General Secretary, Aibea said on October 26.

He also said it was high time the top government bank executives --Chairmen, Managing Directors, Executive Directors -- were also brought under service/conduct/disciplinary rules.

According to Venkatachalam, lack of capital and the non-recovery of the corporate loans were afflicting the banks.

He said the non-performing loans (NPL) of the government banks is over Rs 800,000 crore and focus should be on recovering the same than going in for write-offs on the back of fresh funds infusion announced by the government.

Referring to Finance Minister Arun Jaitley's comments that steps would be taken so that further NPL was not created Venkatachalam said: "It is time to fix accountability on those sanctioning loans. 

"The credit committee and the Board of Directors should be made accountable for their decisions. They should not be allowed to escape under the guise of commercial decision for sanctioning loans without prudence."

According to him, bad loans in the banks, particularly, the big ticket accounts were a potential zone for corruption and there was no defined regulation to take action on top executives like Chairmen, Managing Directors and Executive Directors of government-owned banks.

"The top officials are not government by common Officers Conduct Rules," Venkatachalam said.

"There should be separate conduct rules for the top executives as they are dealing with tax payers monies," Venkatachalam said.

Terming the current procedure to fix responsibility on top executives of government banks as cumbersome, Venkatachalam said: "A transparent and effective rule is to be evolved to deal with the complaints against these officials."


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