NPAs - The bane of banking industry.

The NPAs in banking industry is the hot issue that is being debated at the highest quarters whether be it in bank board rooms, RBI or the finance ministry. All are obsessed with how to contain and reduce this growing monster. The issue of NPAs is not addressed appropriately by the powers that be. The genesis and growth of NPAs are not entirely due to the real banking and economic reasons. But then there are some big sharks in the system who willfully withhold repayment. These wilful defaulters are often has the  protection of and shielding from the politicians. The NPAs occur broadly on account of the following situations.
1. Ineligible / undeserving selection of borrowers often to meet the budgeted targets.
2. Stiff and unrealistic targets stipulation.
3. Lack of proper post sanction/disbursement monitoring often due to inadequate manpower.
4. Fulfillment of social responsibility concomitant with public nature of the government owned banks where the economic / commercial viability of the proposal takes a back seat in Sanctions.
5. The real unforseen adverse economic environment which stiffles the growth thus making the funds employed unproductive (NPAs). The inordinate delay, inertia and redtapism (read corruption) while clearing / sanctioning the projects /proposals also add up to NPAs.
6. Last but not the least the willful defaulters. The politician - industrial houses nexus of all hues is the real hard nut to crack. They have the capacity to pay and at the same time has the muscle and the power NOT to pay. Sometimes politicians shield and protect them and in some cases politicians themselves are at play. These have the legal, political and financial wherewithal to thwart, to tweak, to manipulate and evade the long arm of the law. A case in point is Kingfisher saga.

Then, what is the remedy / solution to this menace? The following proposals / suggestions could be thought of.

1. De link social banking from commercial banking. Establish a separate arm for social lending outside of the Basel norms. After all any government cannot absolve itself of the welfare responsibility for economic and commercial considerations. Free banks from this responsibility and make them truly commercial and business entities. I am afraid if I am flogging a dead horse by suggesting this. The enormous and omni present network of banks is too difficult for any government not to resort to this low hanging fruit to implement their welfare schemes.

2. Make stringent laws and amend existing laws to enable quick disposal of suits related to money and finance. This is of utmost importance because many wilful defaulters are taking shelter under loopholes in law.

3. Establish fast track courts to adjudicate money and finance suits. Amend law to give them Supreme powers so that Judgements given by these fast track courts are not appealable in civil courts. They should be made appealable only in a similar fast track higher courts. This will avoid long drawn legal battles and enable quick resolution of cases. This will also works as a deterrent to borrowers who often resort to legal route on some flimsy grounds with chief intention of avoiding repayment. This will enable the blocked funds to enter banking system and recycle them for further lending.

4. Courts also should view these cases with larger good in mind than the individual good because banks at the end of the day are the trustees and custodians of public money.

These I believe though seems to be *far-fetched* will definitely yield good results if implemented. It requires political will to do that. But then it is a million dollar question. These will make the banks sound and healthy and also make the economy vibrant. But every body seems to *bury their head in the sand*.