The dilemma of Public Sector Banks in India is behaving like an ostrich in front of the political masters.
The stranglehold of government and bureaucrats is so overwhelming that the majority of subsidy loads are expected to be absorbed by the banks by extending credits to parastatal units in fertilizers, energy, distribution and to the farmers.
Not that all the farmers are lucky and clever to avail the subsidy or the loans that are on offer; but only a handful of them with some political connections are smart to pick that up & almost immediately starts demanding write off on frivolous counts of drought, flood, death of animals etc. showing the input of fertilizers, pesticide etc. as waste.
On top, hardly in rural India users pay for electricity and majority would prefer a hooked up free connections leading to rampant power theft.
The energy distribution and generating companies managed by state are in a limbo not knowing how to go about it due to vote bank politics.
The story is similar for all segments. The political will to recover doesn't exist & reducing the subsidy load is never tinkered around for vote bank again.
In some states power is available in villages for unlimited use for just about one dollar a month to every household. Another issue that on an average 20 days the power is not available.
Unless macro fiscal adjustments and policy enactment to deal with the situation is politically enforced & professionally dealt, India would continue to languish & all the savings pumped in by nationals in PSU banks would one day just vaporise if the recovery mechanism and subsidy issue is not tackled in right earnest and urgently.
Thankfully RBI, the central Bank, is a very strong and yet an independent body,to a large extent, and acts a watchdog to the economy and tabs the bankers, but how long if the political interference for subsidy loads forces the bankers to lend further knowing fully well that the lending is a delinquent one from beginning.
Restructuring is only delaying the inevitable. The wake up call to Indian Banks have been given long time back but if they do not put their foot down on some issues focussed on recovery mechanism, then surely to see the banking system collapse is not a unforeseen event.
And then infusion of capital in any structure & leverage to bank would be a task in futile.
The most important issue is to take a hard fiscal decision and strengthen the recovery mechanism to enable bankers to enforce recovery and invoke guarantees to defaulters.
At least it would increase the urge on part of borrowers to repay in time in the fear of a consequences.
The stranglehold of government and bureaucrats is so overwhelming that the majority of subsidy loads are expected to be absorbed by the banks by extending credits to parastatal units in fertilizers, energy, distribution and to the farmers.
Not that all the farmers are lucky and clever to avail the subsidy or the loans that are on offer; but only a handful of them with some political connections are smart to pick that up & almost immediately starts demanding write off on frivolous counts of drought, flood, death of animals etc. showing the input of fertilizers, pesticide etc. as waste.
On top, hardly in rural India users pay for electricity and majority would prefer a hooked up free connections leading to rampant power theft.
The energy distribution and generating companies managed by state are in a limbo not knowing how to go about it due to vote bank politics.
The story is similar for all segments. The political will to recover doesn't exist & reducing the subsidy load is never tinkered around for vote bank again.
In some states power is available in villages for unlimited use for just about one dollar a month to every household. Another issue that on an average 20 days the power is not available.
Unless macro fiscal adjustments and policy enactment to deal with the situation is politically enforced & professionally dealt, India would continue to languish & all the savings pumped in by nationals in PSU banks would one day just vaporise if the recovery mechanism and subsidy issue is not tackled in right earnest and urgently.
Thankfully RBI, the central Bank, is a very strong and yet an independent body,to a large extent, and acts a watchdog to the economy and tabs the bankers, but how long if the political interference for subsidy loads forces the bankers to lend further knowing fully well that the lending is a delinquent one from beginning.
Restructuring is only delaying the inevitable. The wake up call to Indian Banks have been given long time back but if they do not put their foot down on some issues focussed on recovery mechanism, then surely to see the banking system collapse is not a unforeseen event.
And then infusion of capital in any structure & leverage to bank would be a task in futile.
The most important issue is to take a hard fiscal decision and strengthen the recovery mechanism to enable bankers to enforce recovery and invoke guarantees to defaulters.
At least it would increase the urge on part of borrowers to repay in time in the fear of a consequences.