FOLOWING article of mine was sent today for publication in news paper. CAN banking not be innovatively more truly transparent and be depositor friendly? NPA (non performing asset) ‘adjust’ is an indirect massive cholestrolical deposit on interest on the savings of the depositors in the banks in the medium and long term- one needs to realize this in a right perspective. ARC, an abbreviation for an asset reconstruction company which aims reconstruct and buy and sell the sick asset to a prospective buyer/s in it’s reconstruction exercise to help and earn from such an assets and in order to primarily help the bank to clean it’s profit and loss account YOY( I guess ) through an entity which ultimately purchase the asset through investment. Asset is sold to an ultimate buyer through an invitation by way of an advertisement. It gets sold only as a stressed asset and eventually helps the bank to get rid off it as early as possible. But the big benefit gets passed on eventually to the buyer who gets it at a lucrative price. She (ARC) must be having still a broader definition and I won’t deny but what so ever. What is needed is a right innovative transparent solution for the legitimate rights of the depositors to protect their interest in interest on their deposits in such a way that even the central bank (RBI) can relatively easily assess futuristically health of overall banks to decide on interest rates which are linked to various parameters. The banks which have to otherwise also have to live with ‘NPA decease’ life long. Here is a suggestive controlling method. Suppose for a bank YOY (year on year) or YTD (Year to date) the loan book vs. NPA ratio is 0.02 and the deposits are “x” amount for a rate over period then the relative equivalent amount of NPA should be automatically distributed at a the relative derived percentage and added as a percent of interest in proportion of the deposit. Now let me explain how it affects deposit holders. Answer is as the interest rate are reduced on a time value when the deposit gets mature or carrying an interest there is no transparent way for depositor to know the hidden losses ever. Serving banker can ask for an increment as they are well conversant with every situation and well fair enough but for depositors they can be fair too. This method will justify the depositor’s money and also help the banking system in a prudent way of working innovatively as the time demands it. Yes, it is for banking research department to carry out any such exercise. HEMANT MANOHAR JAMDAR Research Analyst ( Multi-discipline).
Posted on: Wed, 29 Oct 2014 06:05:35 +0000
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