Bank NPAS and the medicines
Acceleration of the process of classification of bad loans as NPA(Non Performing Asset), by India’s PSU banks has opened the proverbial Pandora’s box as a result of which many convoluted questions are looming large. Unless some consensus is built around a rational road map from here, the solutions to the bad loans issue can be extremely painful for many stakeholders with lasting negative impact on the broader economy.

Below are some of these questions –
•Is recognition of loan as an NPA, tantamount to write-off of the loan?
No. Conversion of a loan into an NPA is just the cognizance, as per set norms, that the loan has ceased to generate interest for the bank and risk of default has risen. However this does not absolve the debtor of her liability to service the debt.
• Do rising NPAs for Indian PSU banks imply a sharp dip in their financial health?
Mounting NPAs are delayed symptoms – at best- of banks’ ailment. Any attempt to establish causality between NPA recognition, and the state of balance sheet would be erroneous. Similarly, seeing NPA recognition even as a symptom of deteriorating balance sheets is incorrect. That PSU banks’ balance sheets have been worsening has been written on the walls for quite a while now. Performance and trends in income statements, balance sheets and cash flows of some large borrowers in critical sectors like power, metals and infrastructure over last 6-8 quarters have been giving clear and loud signals in this regard. Thus it is not the rising NPA recognition that is implying a sharp dip in PSU banks’ health. Instead it is the ebbing prospects of large borrowers of these banks that have been signifying this deterioration – for almost two years.
• What if the banks do not clean up their books quickly?
Firstly, continued defiance of norms to postpone classification of bad loans as NPA does not change the ground realities of weakness in the banks’ loan books. More importantly, faulty classification of loans sustained over a long time can deny banks the much needed support from the government, RBI and shareholders which can aggravate the matters further. Also hidden bad loans in the banking system – if not acted upon expeditiously- can keep on deflating the credit cycle thus hurting the country’s economic progress on the whole.
• How to think of large bad loans to corporates by public sector banks – aren’t they effectively, subsidy provided to the rich by the government? For the sake of fairness shouldn’t the banks be asked to write off loans of rural debtors in acute distress?
Banks have not been instructed by the government to write off loans to the corporate sector as per some policy and so it is not correct to treat any write off as subsidy to the rich. In fact loans had been driven by business considerations – though with the benefit of hindsight at least, it can be said that in many instances due diligence was not up to the mark. Of course instances of wrong doing in loan sanction and disbursal should be identified and punished. Rising quantum of bad debts on the corporate loan books in itself cannot justify large scale write off of rural debts by PSU banks. However on an unrelated note, the government does need to help the revival of rural economy and to ease the anguish due to two failed monsoons on Indians in rural areas. For this it may need to don its welfare state hat and think of ways for direct transfer of subsidy in geographies facing extreme economic duress.

• How should the burden arising from bad loans be distributed among various stakeholders? To what extent personal liability of promoters be fixed in case of write off of entire chunks of principal?Collateral should be used for recovery of debt and for this purpose takeover of assets should be quick and as per set norms. The proposed bankruptcy code can go a long way in achieving this once it is approved by the parliament. In addition debtors should be asked to pay up to the extent of personal guarantees even by liquidating their personal assets. However stretching this beyond a limit – crossing the principles of limited liability- may be counterproductive for the economy over the long term. In addition, it will be important to differentiate between malfeasance, and poor management of business. Similarly, bad credit decisions by bank officials should be treated as incompetence and not as misconduct – unless there is proof to indicate otherwise. Finally, the role of regulatory issues and a slump in commodity prices too needs to be assessed in analyzing the drivers of bad loans, and possible sharing of the concomitant burden. Under-recovery after this exercise will need to be borne by the banks’ shareholders – government, and others.
• How much, and why, should the tax payers share the burden – of dubious credit decisions by the banks, or poor performance of companies that raised loans?
To the extent of its ownership of these banks the government as a shareholder (and thus, the tax payers) will need to bear the impact of under recovery. This development reemphasizes the need for the government to withdraw from the business of running businesses including banks, and to take the direct transfer route for subsidy distribution as per requirement.

Patratu Connect

Those who have lived the early years of their lives in Patratu will tell you that

childhood was their most joyful time. We were fortunate that our parents

came to live and work in the town, where we grew up as if we were part of a

big family. Patratu had a cosmopolitan culture, with people from every part of

the country living there. Besides temples, there was a church, a gurdwara and

a mosque. We are doing well in our respective fields because of the culture

that nurtured us and the guidance we got while growing up in the town. Each

of us fondly remembers the good old days in the town that came to be

identified with the Patratu Thermal Power Station (PTPS), so much so that

‘Thermal’ became its second name. It has also been known as Shimlatand,

meaning ‘the land of the Shimal tree’. So, here are some of the places etched in

our memories.

Hesla Dam: This was our favourite place for leisurely morning and evening

walks, but changing seasons brought their own reasons to visit the site.

During the monsoon, the dam’s crystal-clear water would change colour. As

the river swelled, the dam gates would be thrown open, with the gushing

water presenting quite a sight. Then, in autumn, during the Chhat Puja,

worshippers of the Sun would throng the dam. The next season would see

picnickers on its banks soaking in the mellow winter sun. The sprawling

Circuit House at the dam site presented to its visitors a slice of good life. Those

who have tasted its desi chicken curry continue to rave about it to this day.

Another highlight was the Damwala Mandir. And no child who has been down

the dam’s ‘tunnel’ can forget the trip.

Hesla School and its vicinity: Many of us have studied at Hesla School. Once

upon a time, it used to be the English medium school in the area, along with

the Adarsh Bal Niketan and the Nursery School. Those who studied at Adarsh

Bal Niketan in the late 1980s will recall that the school would organise Sunday

films shows using video cassettes.

Hesla is an extension of Janta Nagar, and one of the oldest localities of Patratu.

Around 1963, when the dam was being built, workers and engineers used to

stay in asbestos-shed houses in Hesla.

Janta Nagar: The bridge which connected Janta Nagar with the rest of Patratu

used to be the happy hunting ground of teenagers for gossip and news --

Facebook and Whatsapp were science fiction then. Sitting on the railings of

the bridge, we saw how Janta Nagar changed. A mandir was constructed just

next to the market. The market itself has kept spreading and nowadays the

place is as crowded and chaotic as any other elsewhere in India. There used to

be a cycle repair shop at Patel Chowk, where we would often stop to inflate

our bicycle tyres on our way to the dam.

A-Type Bungalows: The four ‘A-Type’ bungalows held a mystery for us, as we

hardly ever saw anyone living in them. In the vicinity, there was a hillock

which had a unique type of sandstone. When we would throw pieces of

sandstones over a hard surface, they used to break into yellowish dust –we

would call this a “bomb blast”.

Middle School: Most of us have either studied at Arvind School, popularly

known as ‘Middle School’, before moving to high school. We can’t forget the

teachers of Middle School and their contribution. The headmaster, whom we

had nicknamed ‘Bagh’, was a terror for those who studied in Middle School in

the early 1980s. A high point of the school calendar was the Saraswati Puja.

Hanuman Garhi and NCDC: The Hanuman Garhi temple, on the top of a

hillock, used to come alive during the Ramnavami celebrations. Besides, the

Hanuman Garhi cricket team was a formidable opponent any day.

The NCDC quarters and the surrounding area were great for roaming around

on bicycles.

New Market: New Market was the place to shop and stroll. Mithila Mishtanna

Bhandar, Agarwal Aata Chakki, Sanjay Sweet House, General Store, ‘Sardarji ka

dukan’, Uphaar, Hauda, Baccha Babu, Ranchi Store were some of the

prominent shops. Later on a vegetable market came up too, with ‘Bangali

sabjiwala’ as the main agent. A stall named Bumbum Chicken did brisk

business on Sundays.

Before Durga Puja, Chaurasia Tailors would be struggling to meet the

deadline. Quite natural, except that many a time the clothes would turn out to

be of totally different from what the customer was expecting.

During Diwali, some of the sweet shops would continue selling their leftover

festival fare even after Chaat Puja.

Situated at one corner of New Market was the town’s only bank, State Bank of

India. Fittingly enough, the road came to be known as Bank Road.

Here’s an anecdote that will tell you something about the small-town India of

those days. There was an eatery popularly known as ‘Jha Hotel’. To make

dosas, they hired a guy whose looks resembled a South Indian’s -- curly hair,

big handlebar moustache, and clad in a white lungi. He would never utter a

word while working. Customers got the impression that unlike the other

eateries which had local cooks, this one had hired one from the South and the

dosa was straight out of a Tamil kitchen. Everyone was happy to have ‘South

Indian’ dosa at Patratu and sales picked up. But then, one evening a guy from

some nearby village was passing by and happened to spot the dosa maker.

“Arrey Ketarwa!” he said. “Toh hiyaan par? Sab tora khojat khojat thak gelak

(Hey Ketar! You are here! Everyone has been looking for you and given up.”

The dosa maker replied, “Arrey Jamuna! Hiyaan aaker phans geliyau. Chhutti

na miltau. (Hey, Jamuna! I got stuck here. Haven’t got any holiday.” The crowd

at the hotel was like, “Arrey beta, local hau (Oh boy, he is a local).” Jha Hotel’s

dosa sales continued to beat competitors’, but only for a few months

thereafter.

Paanch Mandir: Paanch Mandir is a landmark of Patratu. The Durga Puja

there was a big attraction because of the huge idol, with the lion’s head

moving up and down in tune with a the roaring sound in the background. In

the 1980s, a ‘Meena Bazaar’ was also held at the back of the temple premises.

The paan stall known as Lallan paan gumti and the roads close to Paanch

Mandir still make us nostalgic because of the childhood memories associated

with them.

Children’s Park, Shram Kalyan Kendra and PTPS Club: The very mention

of these places used to get us all excited because they meant entertainment

and fun. Every Saturday, Shram Kalyan Kendra would hold an open-air film

shows. Spectators sat on the grassy ground, and from Road No. 10, you could

watch the mirror image of the movie. Whenever we came across Ramtacha,

who used to manage the show, we would try to get a scoop on what was

coming up next. There used to be film shows at the PTPS Club, too. While the

spools of the film were being brought from the Shram Kalyan Kendra in a

rickshaw, many of us would already be occupying our seats at the club. Often

some guy would play spoiler and insist on narrating the plot of the film. The

club used also organised an annual indoor sports event, including badminton,

table tennis, carom and chess. For the grown-ups, there were rummy and

bridge as well. Often we used to play till late night to compete in the

tournament. The club would also be the venue for cultural programmes as it

had the town’s only big hall for such shows.

Badka Field, Russian Hostel, Officers’ Hostel and PTPS Hospital: The

Badka field (big field) was the Eden Gardens of Patratu. It was the venue for

the town’s main sports events, including the Republic Day annual sports meet,

the Kurien Challenge football tournament and the PTPS cricket matches.

When there was a cricket match, typically a limited overs game, we used to

report at the ground as early as seven in the morning. The teams were local

but the vibe was big. Such was the craze for the game that the tennis court at

the Officers’ Hostel was often used for cricket net practice.

Similarly, during the Kurien Challenge, our excitement was akin to that of

European football club fans. Spectators would line up just outside the

demarcation line drawn with chalk powder and when a goal was scored, kids

would somersault to the middle of the field. Panday, Jamuna and Vikas were

some of the big names in local football.

The Russian Hostel was built as the residence of the foreign experts visiting

Patratu for the construction of the power station, but many Indian engineers

also used to stay there. Whenever we saw the Russians, we would wave at

them. For most of us, it was our first encounter with a foreigner.

The PTPS Hospital was the only health centre of the town.

Sah Colony, Patratu Bazaar and the Railway Station: A white statue of

Gandhiji was a landmark of Sah Colony, which extended till Bawandhara,

which marked the end of PTPS property. From there onwards was the Patratu

Bazaar area. Besides its cloth stores and tailoring shops, this area was well-

known for Veena Talkies. Going to watch a movie there used to be quite an

event. The Monday haat at Patratu Bazaar was the biggest shopping event, in

which farmers and traders from outside the town participated.

Quite a few long-distance trains would stop at the Patratu railway station,

which was clean and well-maintained.

Patratu has changed a lot over the last two decades, not to mention that the

power plant around which the town flourished is itself showing its age now.

However, we are optimistic that our town will regain its charm. Through

Patratu Connection we hope to share our memories of the years spent there

and strengthen our bonds for a better tomorrow.

GDP blues

With no dedicated economic roadmap it really seems tough to achieve 7.6-7.8% GDP. Subsidies are not the only culprits for blocking the way of speedy economic growth.Government need to focus on strengthening rural economy otherwise at one point of time things will be beyond control.the govt may go for more stake selling in PSUS to curb fiscal deficit but this will be a cosmetic approach towards the issue

The recent Lok Sabha election has made a drastic socio economic chnages in India. The poor and havenots voted against the netas who didn't perform in their five year term of parliament membership. Now every neta has to show his/her ability to work for their electorates. No caste or religion divide worked in this election because positively people of my country are now really choosy and

Designer rajesh

Hi,

Buddies

This is designer rajesh working with a media house.I have spent my childhood in a beautiful place called Patratu Thermal Power Station located in Jharkhand.Further I did my graduation from BHU.I started my career with Hindustan Times ,my next job was with India Today Group and currently m working with Economic Times.I will be posting my illustrations, cartoons, graphics , pages and text blogs.

Thanx.

Rajesh