It was a memorial lecture in honour of a legendary banker remembered for his practices guided by ethical behaviour and Krishnamurthy V Subramanian, the chief financial adviser, government of India, left no stone unturned to drive residence the value of abiding by core values of staying very principled. He was delivering the 11th R K Talwar memorial lecture organised by the Indian Institute of Banking and Finance. Raj Kumar Talwar headed the State Bank of India (SBI) among 1969 and 1976 and continues to be regarded as a very principled banker.
Responding to a query on what bankers need to have to discover of governance provided the existing challenges in the banking sector with reports of bank failures and banks constrained by increasing non-performing assets, he urged bankers to be guided by their dharma. Pointing to the most recent financial survey, he stated, it has a chapter of regulatory forebearance. As a outcome of the forebearance, he stated, not only did the zombie lending take place in the banking sector but also there was the labelling of non-performing assets as restructured assets adding to the complications.
Referring to R K Talwar and his principles and stature, he stated, had been Talwar to be heading any of the banks today, it would have carried out none of this and stuck to suitable conduct and would have had the moral courage to lend suitable and paint a correct image of the balance sheet and be incredibly transparent when it came to generating disclosures on bank functionality.“Such people (like Talwar) don’t need incentives and just do the right thing because that is what their dharma demands and their karma is driven by their dharma,” he stated.
His comments in relation to governance in banks also add weight provided that Subramanian has also previously served as a member of the P J Nayak Committee on governance of banks for the Reserve Bank of India and the Uday Kotak Corporate Governance Committee of Securities and Exchange Board of India. The most recent Economic Survey that he referred to talks in detail about the P. J. Nayak Committee (2014), constituted by RBI, and says it “highlighted in its report submitted in May 2014 the twin concerns stemming from the forbearance regime: ever-greening of loans by classifying NPAs as restructured assets and the resultant undercapitalization of banks.” It also goes on to say that “once the forbearance policy was discontinued in 2015, RBI conducted an Asset Quality Review to know the exact amount of bad loans present in the banking system. As a result, banks’ disclosed NPAs increased significantly from 2014-15 to 2015-16. In the absence of forbearance, banks preferred disclosing NPAs to the restructuring of loans.”