Editorial Simplified | 27th March 2017

Editorial Simplified : 27th Day of March 2017

This Series of posts covers the essential Editorial from prominent newspapers. The Editorial from the newspapers are compiled by the Subject Teachers form the Academy and provided in notes format so that the aspirants does not waste their precious time in sifting through the newspapers. 

The Hindu

Editorial : A timely step

Context:

The government has asked 10 state-owned banks to submit turnaround plans for coming out of the deep distress of NPAs or else forsake any further capital infusion from the government

Important Points:

  • As per RBI’s last Financial Stability Report, risks to the banking sector remain worryingly “high”.
  • The deterioration in asset quality has led to poor profitability and substantial erosion of value of the largest shareholder – the government
  • PSBs saw the proportion of their gross non-performing assets to total advances almost double in the period September 2015 to September 2016 to 11.8%.
  • Commercial lenders in the country, especially the public ones, channel public savings towards productive industrial and infrastructure sectors.
  • The Centre has chosen to include the employees’ unions in the proposed MoUs it intends to enter into with the lenders. This is indicative of the seriousness with which it is approaching the resolution this time around
  • Staff is a direct stakeholder in the health of PSBs; bad health result in job losses for them.

Analysis:

  • In the light of the lack of accountability or incentive to the top management to clean up the balance sheet in case of PSBs, it is befitting the government declare an ultimatum.
  • Also, PSB managements would need to be empowered so that whatever restructuring plans they approve of stressed assets, taking certain losses on the asset value, are not looked suspiciously by vigilance authorities.
  • The government has given a three-year deadline to achieve this turnaround. This assumes significance in the light of the fact that our lenders have to meet Basel-III requirements by March 31, 2019.

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