American treatment to Indian Banks

American banks have understood the real reason of financial crisis in banks. They have rightly tightened the lending norms and started reviewing, monitoring and taking appropriate steps to recover money from defaulters to improve the health of their asset portfolio.
On the contrary our finance minister is treating the bank still as vote bank. FM pressurizes for more and more lending at lower and lower rate of interest.

There is avoidable competition in lending and also in cut in lending rates among banks to please our FM without taking care of increasing defaults in repayment of loan. Banks are unable to cut in deposit rates due to fund crisis but they are ready to cut in lending rates to please the government. This is Indian style of reformation and freedom to banks.

Actual Non Performing Assets has been increasing rapidly and it is astonishing that instead of motivating banks to recover money blocked in NPA, our FM has promised to buy bad assets by introducing Special Purpose Vehicle (SPV). .Our government is least bothered whether money lent by banks are recycled or not, assets shown in the balance sheets are really healthy or not, money lent by banks in retail sector are productive or not.

Increasing defaults in repayment of loan is the root cause of present liquidity crisis which American Authorities have understood and now making sincere efforts to correct the past mistakes. But our FM is wise enough to pin point global crisis to hide mistakes of Indian banks.

Unfortunately our FM and PM find it easy to write off the bad loans, or provide capital to banks which are below bench mark in Capital Adequacy Ratio. They are mainly bothered of their vote banks. They do not want to displease big corporate who are defaulters but who provide political fund to political parties for fighting election. They do not want to recover the money from farmers because they are poor.

And if banks tighten their tools to recover the money from either farmers or from big companies there will be protests from political workers, pressure on banks and local threatening on bank officers. As such Bank officers as also executive officers in the government think it wise to avoid efforts for recovery of loans from defaulters.

Our banks are therefore kept on ventilator by our finance minister and one after other oxygen cylinder is provided to banks in the form of CRR cut, Repo cut , SLR to keep bank alive at least final outcome of Parliament election. But how long such treatment will keep banks alive is a billion dollar question? America has learnt lesson from the crisis ,they are now actually alert and hope they will reduce the intensity of damage as they did for their country after 9/11 terror attack. On the contrary we have learnt to live with terror attacks or even successive bank failures.