PSB boards focus on tactical issues rather than discussing issues relating to strategy/risk. Board deliberations are driven from the vantage point of compliance rather than business economics. Monitoring of measurable disaggregated business goals in relation to targets is nominal. Worsening of asset quality has been a key area of concern in PSBs. And yet there is a general absence of a calibrated discussion in boards of the sectors within which the greatest stress has emerged, and implications this might have for further loan growth in those sectors. Recoveries through the Debt Recovery Tribunals and under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act are inadequately discussed, and progress in bringing stressed assets back to health are also insufficiently analysed. Scenario analysis through stress-testing is conspicuous by its absence, and specific plans for meeting worst case scenarios find no mention. Little attention is devoted to the design of risk mitigation mechanisms, including whether the risk function should be invested with greater autonomy, including in matters of credit risk.
Posted on: Wed, 07 Jan 2015 15:39:22 +0000
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