“Can the valuable and sizable deposit franchises be sold off to private capital providers so that they can operate as healthy entities rather than be in the intensive care unit under the Reserve Bank’s Prompt Corrective Action (PCA)? Can we start with the relatively smaller banks under PCA as test cases for a decisive overhaul?” Acharya said.PCA is applied to banks which have seen deterioration in key areas like capital, asset quality and profitability of banks. There have been six banks put under PCA restricting then from announcing dividend, opening branches, hiring and giving loans to companies rated below investment grade.Acharya said there needs to be more urgency by banks and is worried about the glacial pace at which things are happening. “Why aren’t the bank board approvals of public capital raising leading to immediate equity issuances at a time when liquidity chasing stock markets is plentiful? “Oft when on my couch I lie in vacant or in pensive mood, the realization that we have put in place a process that not just addresses the current NPA issues, but is also likely to serve as a blueprint for future resolutions, becomes the bliss of my solitude!” he said.

Source: Economic Times September 07, 2017 15:19 UTC