The RBI should make banks more accountable by tracking bad loans on a daily basis which will go a long way in streamlining the banking system and providing necessary confidence to the public.

At the panel discussion on the ‘NPA Conundrum’, K Ravi, a chartered accountant and president of Federation of Karnataka Chambers of Commerce and Industry, said bankers, policy-makers and the RBI should ensure that the vigilance and precaution needed to check frauds should not come in the way of legitimate borrowers.

Vageesh NS, the banking editor of BusinessLine , set the tone for the discussion seeking answers to whether all the three institutions — banks, the government and the regulator — were responsible for the current crisis facing the financial sector.

Ravi pointed out that “a clear set of guidelines, especially in public sector banks, have to be put in place with appropriate approvals at higher levels for larger amounts. The government has to make a distinction between criminal jurisprudence and economic prudence.”

He said that among the borrowers, SMEs have quite a good record with 95 per cent of them being good borrowers.

Ashwini Mehra, a former deputy managing director of State Bank of India, said as on September 2017, NPA levels in the country stood at around 10.5 per cent with NPAs in the farm sector at 6.4 per cent, services sector at 5 per cent plus, and 2.1 per cent in retail loans.

He said there was a good degree of honesty and nearly zero defaults in the micro-finance sector. “MFIs are nimble footed. They work on the principle of self-help in groups. By forming joint liability groups, each one is responsible to each other.”

Khaitan & Co’s associate partner for banking practice, Udayarkar Rangarajan, said there is a possibility of something positive coming out of the current crisis involving Punjab National Bank. The Indian Banking Code has clear-cut guidelines, which should help banks improve their performance and clean up the balance sheets on their own.

Prabal Basu Roy, Sloan Fellow of the London Business School and former director/CFO in various companies, traced how NPAs have fared since the country ushered in economic liberalisation.

“The leadership (government) has lost the race. Look at the Satyam scam, scams involving the coal sector and now the Punjab National Bank scam. It is here that the role of the whistle-blower becomes more important,” he said, adding that even though banks have six levels of audit, inability to detect the red flags is a cause for concern.

He also wanted reduction in human intervention. Advancements in fraud detection systems like biometrics, AI, analytics and blockchain opportunity need to be explored, he said. V Nanda Kumar, Vice-President and Zonal Head of Federal Bank, said: “Post 2008-09, we were boasting how robust the Indian banking system is. See now what has happened. The quantum of stressed assets is increasing rapidly.”

“Despite having the SARFAESI Act and KYC, why is the system failing? Of the ₹8.5 lakh crore stressed assets in the country, PSU banks’ share is ₹7.5 lakh crore and the balance is with private sector banks. For this, I think, it all starts with the assessing of the loan portfolio,” he added.

“For farm loans, wavier is another major reason for the NPA pile-up. Instead of loan waiver, why can’t we lower fertiliser prices,” he asked.

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