There is an old proverb: ‘If you owe the bank a few thousands, you have a problem. If you owe the bank 100 million, the bank has a problem’. This is precisely the position in which nationalized banks find themselves. NPAs in commercial banks stood at Rs 3.02 lakh crore which is 4.6 of total advances. Couple this with bad loans, that is loans which need to be reconstructed, and the figure jumps to 11.3 per cent. This precarious position is making it difficult to extend credit to private enterprises and the Centre is thinking of setting up an asset reconstruction company with equity contribution from the government and RBI to excise the NPA tumour. While bad loans need to be dealt with before they hemorrhage the banking system, a white paper on the cozy nexus between bankers and the private sector which grew the NPA tumour is also required.
