Some have blamed banks for going too easy on corporate taipans, and do not want taxpayers propping up the struggling banking sector, which they have been doing so from the time the banks were nationalized . The proposal, being examined by the government and in its early stages, would give the panel power to define the "haircut" a bank should face on a loan gone sour, protecting bankers from critics who want failed Indian firms to pay back in full, two finance ministry and two central bank officials said.
Now we are going to appoint a panel who I hope are ex bankers who do know how to give a proper hair cut and not some select committee of person who have no idea of the banking or the financial system.The second question is how immuned will be the select panel from pressures which will be exerted on it to make the bank give a closer shave rather than a hair cut.
If i were a banker sitting on such a pile of bad debts I would breath a sigh of relief and dump the whole pile on the panel sit back and see them burn the taxpayers money.In any case the looser is always the tax payer.The the question of timing how long is it going to take given the way things work in this nation.And always the question if I do not like the hair cut offered I should run to the nearest court to get a stay and then play the system for the next eternity?
The alternative system is to ask the bankers to come up with the final recoverable figure and hold them responsible to collecting it, you gave the loan so go collect it.However do arm them with more powers to strengthen their hands in negotiating the hair cut.And do make this process time bound that it does not stretch into the next decade.Instead of setting up panels and review boards for bad loans, what does it say about the whole thing, except that we are not serious about the issue but deflecting criticism for the time being.