NPA heat

Sir — The Reserve Bank of India (RBI) in its Financial Stability Report reportedly said that the gross non-performing assets (NPA) ratio of scheduled commercial banks will touch 12.2 per cent by March 2019, up from 11.6 per cent a year before. Eleven State-owned banks that are under RBI’s prompt corrective framework are expected to scale their gross NPAs from 21 per cent in March 2018 to 22.3 per cent this fiscal.

It is a matter of grave concern that the health of banks is deteriorating, thanks to rising NPAs. The worsening situation is a serious threat to the security of depositors’ money in banks.

Already, the interest on banks deposits is at a throw-away rate. To make matters worse, even this pittance of interest cannot be fully pocketed by the depositors since a portion of it has to be earmarked to pay Income Tax.

The reason for accumulating NPAs can be traced to the loan given to high-profile people without adequate collateral security. Minute points are observed only in respect of common people while giving loans.

Reduction of interest rate will be reasonable only when prices of goods and services show declining trend, which is impossible at any point of time.

In future, banks should exercise utmost caution in not allowing the NPAs to grow. Steps should be taken to recover bad debts through diplomatic and legal courses.