Why To Put Taxpayer Money After Bad Public Sector bank ? Said Uday Kotak

Kotak Mahindra Bank chairman, Uday Kotak has said that why Government is unnecessary putting Taxpayer Good money for bad strategic loan of Public sector bank. He further said that the government will have to choose between putting more money into public sector banks or making some ‘strategic’ decisions for these lenders besieged by rising bad loans and shrinking capital. He also advocated that as there are norms relaxed for many financial services including banking why not passage is being provided for exists in this sector with potential systematic risks.

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He said that  The time has now come to bite the bullet. The state, sooner or later, may have to make the difficult choice between putting in more good (tax payers’) money after bad or being open to ‘strategic’ choices. I wonder whether that can happen now or sometime after 2019.

“The system’s inability to recognize the inconvenient truth that banking is an economic and commercial activity with high leverage, and that years of ‘kicking the can down the road’ in high risk areas, mixing of social objectives and weak governance have all contributed to bringing this industry to a weak position,” Kotak said.

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As on previous quarter Total stressed loans in the Indian banking system stand at more than Rs 12 lakh crore including restructured loan. Bad loans in the banking sector crossed Rs 7 lakh crore in the quarter ended March 2017 largely from corporate and sectors linked to infrastructure and metals like steel and power.