Public sector bankers wary of writing down bad loans: Arvind Subramanian

"The referee institutions have become strong and one consequence of bad governance we face in the banking system is the writing off the assets or non-performing assets (NPAs)," said the Chief Economic Adviser at a function on Saturday.

Arvind Subramanian, Chief Economic Adviser, Ministry of Finance, Government of India Image Source: IANS

Public sector bankers are wary of writing down bad loans for fear of "referee institutions" like Central Bureau of Investigation (CBI) and Central Vigilance Commission (CVC) going after them, Chief Economic Adviser Arvind Subramanian said on Saturday.

"The referee institutions have become strong and one consequence of bad governance we face in the banking system is the writing off the assets or non-performing assets (NPAs)," Subramanian said at a function organised by the Institute of Public Auditors of India.

"We have to write down these assets. But no public sector manager in India will write down the assets because he is aware that the referee institutions will go after him. So referee institutions have acquired certain legitimacy for some historical reasons in India," he said while speaking on 'Governance and Economic Development'.

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Public sector banks are grappling with bad loans problem and there have been efforts both on the part of the Reserve Bank of India (RBI) and the government so that the lenders could clean up their balance sheets.

As per the data from the corporate database provider Capitaline, gross NPAs of 39 listed banks rose to Rs 4.38 lakh crore in the quarter ended December 31, from Rs 3.4 lakh crore at the end of the September quarter.

RBI has asked the banks to conduct asset quality review and set March 2017 deadline to clean their balance sheets, leading to spike in NPA levels of the lenders.

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