A good number of public sector banks (PSBs) under the RBI's Prompt Corrective Action framework are already insolvent if realistic provision is made on their Gross Non Performing Assets (GNPA). There is hardly any global instance where banks with GNPA exceeding 20% are treated as solvent or viable. In India, we have long been in denial about this reality, which has cost the country’s taxpayers dearly. The fact that PBSs are majority-owned by the government is providing support only to their fund-raising by way of deposits. On the assets side of their business, the quintessential logic of risk seems to be at work: a bank cannot take credit risk which is better than its own.
Himadri Bhattacharya has served in the role of a senior advisor for public institutions. He is a portfolio and risk management specialist with more than three decades of experience, including time spent as a central banker with the Reserve Bank of India and as a senior official of the Tata group. Currently, he works as an external consultant to the International Monetary Fund (IMF) and the African Development Bank. Through his career, he has provided technical assistance to eight Central Banks and governments.