Wrong signals

My View on  "Top 30 NPAs form one-third of total bad loans": 

The following issues need study in a wider context:

i) To the FM’s embarassment, October review revealed that one-third of all NPAs of PSBs were contributed by top 30 NPA accounts in each bank. There is still no indication that any action is under way, beyond 'monitoring'.

ii) While much ado is there about base rates, deregulation of savings bank interest rates did not add to the interest income of real SB account holders.

iii) The Net Interest Margins enjoyed by banks in India are among the highest in the world.

iv) The theory that ‘interest cost is not the major ingredient in project cost’ is interpreted to mean that small borrowers can afford to pay higher rates of interest.

v) Big depositors get preferential rates of interest and big borrowers get attractive terms for borrowing including special attention when their loans become NPAs.

vi) The impact of changes in base rates on ground level interest rates(both deposit and credit) administered by banks during the last 3 years needs a closer examination.

vii) The finance ministry’s recent linking of interest rates on festival season consumption loans to release of additional share capital to PSBs (Secretary Rajiv Takru made an open statement on the issue during 3rd week of October) has sent wrong signals to stakeholders in the banking sector. 

- M G Warrier, Mumbai