Write-offs no solution to NPA problem

In an effort to clean up their books, banks will resort to write-offs in a big way in this fiscal as well. Union Bank of India, Punjab National Bank and UCO Bank have all written off loans to keep the non-performing assets (NPAs) lower during the quarter. Banks now call it technical write-offs and say that recovery in all these cases is underway. In the meantime the asset quality improved, although taking a hit on profitability.

Banks need to be aggressive to take on the promoters as in many cases the promoters settle the dues of the foreign lenders, and the domestic lenders are left with whatever is remaining. Write-off is not the answer in such cases. By writing off you are actually signalling errant borrowers that a prolonged default could be just written off.

But the NPA issue is hard to shed.

After the corporate loans now the retail delinquencies are also increasing, resulting in banks turning cautious on the retail loans as well.

But retail or corporate banks will have to take some hard steps to book the promoters and force them to bring the money on the table.

The much-talked about NCLT is also not yielding much results with all 11 cases under the Insolvency and Bankruptcy Code yet to be resolved.