While the downturn in business environment globally and in India has contributed to this rise, we need to reflect on why our risk management practices during boom time were unable to anticipate future downturns and build up suitable safeguards while giving loans.
I do believe that the rising impaired assets is a “governance” issue as banks have forgotten the art of saying “no”, except, may be, to small borrowers. Banks need to significantly improve their risk assessment capability and their ability to price risks, so that they take on only those risks that they understand and can effectively manage.