Chennai: Public sector bankers are wary of writing down bad loans for fear of "referee institutions" like CBI and CVC going after them, Chief Economic Advisor Arvind Subramanian said today.
"The referee institutions have become strong and one consequence of bad governance we face in banking system is the writing off of the assets or NPAs," Subramanian said at a function organised by the Institute of Public Auditors of India here.
"We have to write down these assets. But no public sector manager in India will write down the assets because he is aware that the referee institutions will go after him. So referee institutions have acquired certain legitimacy for some historical reasons in India", he said while speaking on 'Governance and Economic Development'.
Public sector banks are grappling with bad loans problem and there have been efforts both on the part of the RBI and the government so that the lenders could clean up their balance sheets.
As per the data from corporate database provider Capitaline, gross NPAs of 39 listed banks rose to Rs 4.38 lakh crore in the quarter ended 31 December from Rs 3.4 lakh crore at the end of the September quarter.
RBI has asked the banks to conduct asset quality review and set March 2017 deadline to clean their balance sheets, leading to spike in NPA levels of the lenders.