Bank nationalisation a failure; NPA problem bigger: Vaghul

Vaghul says the size of bad loans in the banking industry is at least twice of what is being disclosed officially.

 

The problem of bad loans in the banking industry is much bigger than what is being disclosed, and the government needs to act urgently, feels Narayan Vaghul, former Chairman, ICICI Bank.

In an interview with CNBC-TV18, Vaghul says it is time to admit that nationalistion of banks has failed.

“We should have the courage to learn the lesson from the past; I think bank nationalisation has failed,” he says.

On bad loans, Vaghul echoes what many bankers and analysts have been saying: that the disclosures don’t reveal the complete picture.

“Based on the impressions I would concede that the actual problem of the banking industry is very very serious,” he says, adding,”it is at least twice of what is officially known from the data.”

According to Vaghul, the problem is much worse than the crises seen in 1997 and 1989.

“More important than passing the law is to create the infrastructure such as the commercial courts and the insolvency practitioners to back up the law,” he says.

“But in the short term in the next three to six months, we should think in terms of pooling all this NPAs; not leave it to the bankers.