Securitization Act is a fine, comprehensive and an extraordinary piece of legislation. It is a giant leap forward in the realm of financial sector reforms, says Sardar Narinder Singh Gujral, Chairman and Managing Director, Punjab and Sind Bank.
At
the macro level, NPAs have chocked off the supply line
of credit to the potential borrowers, thereby having a
deleterious effect on capital formation and arresting
the economic activity in the country. At the micro
level, the unsustainable level of NPAs has eroded the
profitability of banks through reduced interest income
and provisioning requirements, besides restricting the
recycling of funds leading to serious asset-liability
mismatches. It has inter alia lead to reduction in
their competitiveness and erosion in their capital
base as well.
The
problem of NPAs is not a matter of concern for the
lenders alone. It is a matter of grave concern to the
public as well, as bank credit is the catalyst to the
economic growth of the country and any bottleneck in
the smooth flow of credit, one cause for which is
mounting NPAs, is bound to create adverse
repercussions in the economy. Mounting menace of NPAs
has raised the cost of credit, made banks more averse
to risk and squeezed genuine small and medium
enterprises from accessing competitive credit and has
throttled their enterprising spirits as well.
The
spiraling and the devastating affect of NPAs on the
economy has made the problem of NPAs an issue of
public debate and of national priority. Therefore, any
measure or reform on this front would be inadequate
and incomprehensive, if it fails to make a dent in
NPAs' reduction and stall their growth in future, as
well. |
