Public sector banks should significantly improve their allocational and operational efficiency and delivery models — the message came across clearly from K.C. Chakrabarty, Deputy Governor of Reserve Bank of India.
Releasing a book, Indian Banking Reforms and After: A Bank Economist’s Take , authored by Dharmalingam Venugopal, Assistant General Manager, Indian Overseas Bank, here on Sunday, he said public sector banks must learn to manage their non-performing assets more efficiently. The banks have forgotten the art of saying ‘no’, except to small borrowers. In reality, NPAs are because of big loans. “How come, all NPAs come to public sector banks,” he wondered. Private sector banks are doing better in this respect. Public sector banks must significantly improve their risk assessment capability. “You must learn to identify the good and bad customers and lend accordingly,” he said.
Loan rejig
On the loan restructuring front, he said, the discrimination by banks is unfair. While a large number of “big borrowers” invariably receive the benefit of restructuring of loans, the number of small and medium enterprises or farmers who get their loans restructured is abysmally low.
On financial inclusion, he said that despite several steps taken by the Government and the RBI, the extent of exclusion in the Indian financial system continues to be unacceptably high. Citing the example of Kerala, which is said have achieved 100 per cent financial inclusion, he said if financial inclusion is achieved in the State, why should there be so many gold-loan companies and private lenders. Banks should approach people with complete financial services, not just credit or deposit alone.
The assessment of the progress in financial inclusion shows that while there has been a considerable progress in the number of accounts opened, the actual number of transactions per account continues to be extremely low. This reduces the viability of the financial inclusion efforts, he said, asking banks to address this issue on a priority basis.
Lauding the author of the book, Venugopal, for his contribution to financial inclusion of the primitive tribes of the Nilgiris district in Tamil Nadu, he said, “we need more such people with a genuine passion for financial inclusion”.
Earlier, introducing Venugopal and his book to the audience, M. Narendra, Chairman and Managing Director of Indian Overseas Bank, explained how he identified him, and realising the need for such a shrewd economist at the headquarters, brought him to the Chairman’s Secretariat.
ravikumar.ramanujam@thehindu.co.in