The government's asking public sector banks (PSBs) to probe all NPA accounts above Rs 50 crore for detecting fraud and wilful defaults will help ensure the "much-required" cleansing of the system as well as a transparent risk management mechanism, Ficci said today. The industry body however said that the exercise needs to be carried out cautiously and the government must ensure that investigations do not cripple lending and dampen business sentiment. The finance ministry has directed PSBs to probe all non performing asset (NPA) or bad loan accounts of over Rs 50 crore for possible fraud and accordingly report the cases to CBI. The direction follows state-owned lender PNB reporting Rs 12,700 crore fraud through alleged misuse of letters of undertaking (LoUs) by billionaire jeweller Nirav Modi and associates. "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," Ficci President Rashesh Shah said. "Overall, the governments 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," he added. However, he observed that the larger and long-term solution lies in the rationalisation, consolidation and selective privatisation of public sector banks.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)
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