Lambasting banks for surging non-performing assets (NPAs), Reserve Bank of India Deputy Governor K. C. Chakrabarty, on Saturday, said credit risk management was lagging behind among public sector banks.

'I am more concerned of the future of banks than the banks of the future,' said Dr. Chakrabarty while speaking on ‘Two decades of credit management in banks: looking back and moving ahead’, at the annual banking conference (BANCON) here.

Narrating the steps taken by the central bank over the years to address the issue of NPAs, Dr. Chakrabarty said that 'whenever we tightened regulations and prudential norms, the asset quality of banks has improved…relaxation is a wrong approach…prudential norms are not to kill banks but to secure their future.'

The sad part, according to Dr. Chakrabarty, was that these banks on their own never tried to analyse the reasons for the surging NPAs. 'Many of them preferred to write-off NPAs, especially large borrowers. But when it comes to small borrowers, they were stringent.'

He dismantled the argument that slow growth in the economy had resulted in mounting NPAs. 'Bad assets of banks started going up much before the GDP has come down…the culprit is industry… more powerful is the borrower, banks’ appraisal should be stringent and appraisal should be ownership-neutral.'

The Deputy Governor asked bankers to stop accusing farmers and retail borrowers for the NPA mess, and asked them to change their approach to small borrowers. 'Be stringent with big borrowers but be sympathetic with small borrowers.'

Dr. Chakrabarty also advised banks to sanction loans at the bank manager’s level, instead of by the head office. He said that write-off should be done ethically for valid reasons. 'To write-off a bad loan, no management is required…and those banks which are able to identify the NPAs quicker, will be able to manage it better.'