MANAGEMENT AND GOVERNANCE ISSUE IN PUBLIC SECTOR BANK:
Reserve bank of India and government over bad loans at public sector banks have led to a bitter exchange of notes between the banking regulator and the finance ministry that controls state run lenders.
Bad loans at state run banks have gone up at a brisk pace ,unlike their private sector banks. The RBI says this was because of reckless lending to corporate and allegation that has not gone down well with the ministry which says the banks we only following government advice to help boost the economy.
The RBI said the sharp rise in bad loans can not be just because of the downturn in the economy and blamed what it called sub optimal credit management among public sector banks for the problem.
In its response defending PSU banks the ministry said most private banks had stopped lending post global financial crises in 2008 while PSU banks emerged as the only providers of big ticker loans .
The Central Banks was not convinced .It responded last week maintaining its stand threat PSU banks have week credit management skills.In response to the ministry defensive letter RBI noted that even if the PSU banks were lending at the instance of the government to boost the economy they should have followed the principles of prudent lending which implied giving loans to credit worthy borrowers against adequate security as collateral.
Reserve bank of India and government over bad loans at public sector banks have led to a bitter exchange of notes between the banking regulator and the finance ministry that controls state run lenders.
Bad loans at state run banks have gone up at a brisk pace ,unlike their private sector banks. The RBI says this was because of reckless lending to corporate and allegation that has not gone down well with the ministry which says the banks we only following government advice to help boost the economy.
The RBI said the sharp rise in bad loans can not be just because of the downturn in the economy and blamed what it called sub optimal credit management among public sector banks for the problem.
In its response defending PSU banks the ministry said most private banks had stopped lending post global financial crises in 2008 while PSU banks emerged as the only providers of big ticker loans .
The Central Banks was not convinced .It responded last week maintaining its stand threat PSU banks have week credit management skills.In response to the ministry defensive letter RBI noted that even if the PSU banks were lending at the instance of the government to boost the economy they should have followed the principles of prudent lending which implied giving loans to credit worthy borrowers against adequate security as collateral.
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