Rsing NPA causes bank's disinterest for small loan

This refers to news item that banks is reluctant to dump RBI’s move to dump BPLR based loans published in Economic Times on 31st of December 2009

It is unfortunate that banks demand freedom to decide rate of Interest for loans upto Rs.2.00 lacs so that they may charge interest rate higher than BPLR on small loans sanctioned to farmers, traders and other service providers .I Say unfortunate because Banks are not ready to accept Base rate only because they prefer lending huge money to Corporate and big trade houses at rate much lower than proposed base rate (8.55% tentatively calculated).It is unfortunate because banks are not agreeable to 5% cap on Non Priority sector lending. All these prove that banks in general have forgotten the basic agenda of banks and national priorities.

RBI and Government of India must ponder over this issue and try to find out the reason behind this change in attitude of bankers .After all what may be the reason behind such irrational attitude of banks. I say irrational because they try to forget common men on whom lies the even existence of big corporate and big traders.

Why are Banks in general afraid of lending money to small traders (loan upto Rs.2.00 lacs) and why they prefer investing in MF or depositing the surplus liquidity with RBI even at repo rate.

Is it not the fact that banks are afraid of increasing Non Performing Assets (NPA) in Priority sector lending which dilutes the profitability prospects of banks?

Is it not true that all legal tools in the hands of banks have proved ineffective so far as recovery from willful defaulters is concerned?

Is it not true that political leaders of our country has polluted the banking culture by announcing one after other waiver of loan scheme or putting pressure on bankers for offering Compromise scheme to from willful or recalcitrant defaulters for recovery of money?

Danendra Jain Ganaraj Choumuhani Agartala 799001 Tripura

31st December 2009