This refers to news that bankers are demanding freedom to decide interest rate for loan upto Rs.2.00 lacs sanctioned by them.
In 1969, banks were nationalized with sole objective of making it accessible to each Indian, each villager and each town dwellers. It was aimed to give relief to village farmers and small traders from the exploitation in the hands of local money lenders who used to charge heavy interest and who used to give unbearable pain to villages if they failed to repay the loan in time. Landed property of most of the villagers used to be under mortgage with local money lenders. Farmers usually under the burden of interest used to fail in repayment and as a result local moneylender gradually became land mafia in that village.
To stop exploitation, Government of India adopted Lead District approach almost fifty years ago in which lead bank in a district is given the responsibility of all round development of that district and banks are entrusted the duty to lend villagers as per their need to end exploitation by money lenders . In eighties, to give further boot up to development through micro finance , government introduced Service Area Approach in which each branch of each bank was allotted certain number of villages for absolute development of each village, each Panchayat under their service area. For this purpose each bank along with Block Development Officer (BDO) and Lead District Manager of each district use to frame service Area Plan in the month of January for the next financial year.
Such plan is approved by initially BLBC (Block Level Bankers Committee) and then by DLCC (District Level Consultative Committee). Execution of such annual plans is monitored by BLBC, DLCC and finally by SLBC. It is unfortunate that even after making more than 30 annual plans and monthly monitoring of the execution of plans by DLCC as also by SLBC , there is no actual development in the villages and it is pity that still villagers have to depend on local money lender for micro finance. Crores of rupees are spent every year in administrative expenses in implementation of said Lead District Plans and Service Area Plans
It is ridiculous that after lapse of more than three decades of lead bank approach and Service area approach, lenders are requesting Reserve Bank of India (RBI) to allow them to freely decide interest rates on loans below Rs 2 lakh to enable them
reach out to unbanked sections which are presently serviced by microfinance institutions and money lenders at high rates. It is rightly apprehended that interest rate will go up for finance made upto Rs.2.00 lacs to farmers. Banker however pleads that even the increased rate will be competitive with interest rate charged by local money lenders.
I would like to emphasize here that rates charged by banks for loan upto Rs.2.00 lacs is fixed by RBI and it is restricted to BPLR ( Benchmark Prime Lending Rate which varies from11.5% to 14.5% from bank to bank). It is worthwhile to mention here that bankers in general do not hesitate in financing to Corporate, big traders and manufacturers at rate much lower than BPLR rate.
I like to point out here that banks in general normally charge interest ranging from 8 to 9.5% on Home loans, 10 to 11.5% on vehicle loans, 9.5 to 11.5% on Education loans, 7 to 10% on export loans and so. It is bitter truth that more than three fourth of banks lending is at rates less than BPLR under corporate lending or retail lending schemes. Not only this banks are offering one after other discounts on such lending which is rates much lower than BPLR to increase their market share .Even RBI has been suggesting bankers from time to time to further reduce interest rates on vehicles and home finance to increase demand in the market.
I am unable to understand why bankers are demanding freedom for deciding interest rates for farmers.
Do they want to exploit the villagers in the same as money lenders?
Have they discarded the idea, objective and vision of Service Area Approach?
Have they honestly executed last thirty plans and more framed during last thirty years?
Are they ridiculing social objective of government of India?
As a matter of fact bankers have been charging more interest on loans upto two lacs in comparision to loans given to other sectors mentioned above.
Do they want to earn profit from small traders and give discount to big borrowers?
It is true that RBI will not agree to such proposals of the banks in fear of sharp public reaction against increase in interest rates for small loans. But demand made by banks for freedom to decide rate for small loans points towards their real attitude in lending to small borrowers. Their plea to give relief to small borrowers from local money lenders is nothing but deceptive and unreliable.
Demand for freedom made by bankers is against the core objective of bank’s nationalization, Lead Bank approach and Service Area Approach. Not only this it also proves that bankers and government agencies have been simply befooling villagers in the name of service area approach for last three decades and more and the ground reality is that small villagers are still facing exploitation in the hands of money lenders.
Now everyone is talking of Social Inclusion. Political leaders advocate social inclusion when they frame their political manifesto. Ministers cry for Aaam Aadmi when they deliver speech to attract voters. Economists and Banks sympathize poor villagers. Are they shedding crocodile tears for poor and small borrowers?
Mere opening of Zero Balance Accounts in bank or distribution of Rs.300 or Rs.400 as pension to old people cannot serve the purpose of social inclusion. Bankers need to come forward to extend small sized lending at rate lower than BPLR and to make up this loss they should charge a little bit higher rate on lending made for purchase of vehicles, flats , real estate developers and also to big manufacturers, exporters and other service providers and big merchants. Objective of social objective can be fulfilled not by greedy politicians but by bankers.
Moreover it must be kept in mind that if small traders and small farmers do not survive and do not leave in peace, the very existence and rise of big traders, corporate houses, industrialists and exports will be at stake. Entire capitalistic approach of ruling government will be proving disastrous when mass movement and violence is resorted by exploited class of people to demand justice and for their survival.
“Marta kya nahin karta”
Danendra Jain
23rd December 2009
Tuesday, December 22, 2009
Saturday, December 12, 2009
Uniform Interest Rate
Banks are dealing with money deposited by public. Banks are custodian of public deposit. They have got no moral right to lend only to achieve the target set by the management. Government cannot justify its action in courts when it promotes waiver of loans or compromise with recalcitrant and willful defaulters. Non performing assets in all banks have been rising year after year and banks cannot guarantee the correctness of their published balance sheets. Banks cannot justify lending without earning profit or offer whimsical discounts endangering the overall health and overall future of banks. At the same time banks cannot charge discriminatory rate of interest for different home loan borrowers, say old and new.
If all government funds are taken out from banks or at least become eligible for payment of interest by banks, I think most of the banks will face unimaginable loss or at least erosion in their profit. Even in such pathetic condition and poor health of banks, some of CMDs of banks are advocating for lowering of interest rate just to please a few ministers and shying away from accepting uniform interest rate.
Lowering of interest rate by weak banks just to meet the challenge posed by strong banks will tell upon the health of such weak banks and ultimately jeopardize the deposits made by common men. After all who has given banks right to play with public deposits as per whims and fancies of ministers and Government of India. If private banks instigate rate war it is imaginable, but the painful truth is that it is PSBs which are lowering rates without taking care of cost of fund and possibility of erosion in their profitability. In olden days private merchants were accused of labour exploitation. In the modern era banks are earning profit by reducing manpower and exploiting existing manpower. Anyway, if even weak bank collapses due to wrongful policies prevailing in the market or promoted by government, it is none other than depositors who will suffer the most.
As such it is the interest of banking community as a whole that interest rate is made uniform and the focus of bankers is made to concentrate on more and more lending. It is to be kept in mind that a person who is ready to avail loan of Rs.20.00 lac or more is least bothered of one or two percent higher interest charged to him.
If all government funds are taken out from banks or at least become eligible for payment of interest by banks, I think most of the banks will face unimaginable loss or at least erosion in their profit. Even in such pathetic condition and poor health of banks, some of CMDs of banks are advocating for lowering of interest rate just to please a few ministers and shying away from accepting uniform interest rate.
Lowering of interest rate by weak banks just to meet the challenge posed by strong banks will tell upon the health of such weak banks and ultimately jeopardize the deposits made by common men. After all who has given banks right to play with public deposits as per whims and fancies of ministers and Government of India. If private banks instigate rate war it is imaginable, but the painful truth is that it is PSBs which are lowering rates without taking care of cost of fund and possibility of erosion in their profitability. In olden days private merchants were accused of labour exploitation. In the modern era banks are earning profit by reducing manpower and exploiting existing manpower. Anyway, if even weak bank collapses due to wrongful policies prevailing in the market or promoted by government, it is none other than depositors who will suffer the most.
As such it is the interest of banking community as a whole that interest rate is made uniform and the focus of bankers is made to concentrate on more and more lending. It is to be kept in mind that a person who is ready to avail loan of Rs.20.00 lac or more is least bothered of one or two percent higher interest charged to him.
Wednesday, December 9, 2009
Wage Revision and Performance
Government has put stress on salary packages of employees of public sector banks to have performance linked variable component from next financial year. They could not ensure performance in central and state government departments but bent upon linking wage revision of bankers with performance knowing very well that it is still banks where work flows smoothly compared to other departments of government.
Government should first define performance, explain how to measure performance of various segment of officers and non officers, how to ascertain degree of customer service extended by a bank employee, how to correlate deposit mobilized by an officer with non performing assets (NPA) created by him before advocating performance based pay hike or incentive (PLI) to be introduced in public sector banks. There are numerous officers in banking industry who by paying bribe to government departments could mobilize handsome deposit to become performer but who endangered crores of rupees of banks by lending huge money to ineligible borrowers or to fake borrowers or who were found to be indulged in fraudulent activities.
Bitter truth is that an officer in general is treated star performers by an executive is later charge sheeted by another set of executive when exposure of irregularities created by so called star performers takes place or when top executive sitting at the top post do not like the said star performer.
There is already promotion policy in vogue in all banks which promises promotions based on performances. But the ground reality is that promotions are never given based on performances. Those who are flatterers, who are yes-man of bosses, who earn through bribe and share with bosses, who please bosses with cash and gifts are normally given better marks in Interview and selected for promotion. Similarly top officials are tactful enough to use good officers to clean the malady created and accumulated by their yes-men and justify the promotion given by them to a bad performer at the cost of good performer. If a honest and sincere survey is conducted on bank officers, the outcome will definitely reveal the large scale annoyance of bank officers with their top management and exposes injustices in promotion process. One cannot deny that promotions said to be performance linked in banking is absolutely whimsical and in no way related to work done by any officer.
In a bank it is very difficult to ascertain and measure work done by an employee and make it comparable with others. Different employees in different departments in banks at different branches and different administrative offices require different skill and unique level of handling. Every one is not competent to handle auditing work and similarly every officer is not tactful and efficient enough to handle a branch as Branch head. There are some officers who can be good faculty member in a training college but fail completely when they are posted in a branch and instructed to perform routine work in a branch.
Secondly, position, potential and work nature of a branch differs from village to village and from town to town. Quality of work at administrative offices is entirely a different story because administrative offices need no service to customer but only service and flattery to bosses. In brief each branch and each officer has a different characteristic and need unique treatment, different set of knowledge level and absolutely unique behavior.
I am unable to understand how bank management will justifiably quantify the work done by different segment of workers. It is rather bank management who can easily make or mar the career of any officer or a branch manager just by posting him at normal or critical branch, or by increasing or reducing manpower compared to normally required strength of manpower for a particular branch. Manpower provided to different branches is not uniform and more or less depends on the whims and fancies of higher bosses. An officer in good book of a boss can get surplus manpower whereas another officer when posted at same branch will be deprived of even normal strength of manpower.
There are many banks where even appraisal reports are not in vogue for assessing the work of award staff. Even for officer’s appraisal report is designed in such a manner that he or she is rated in different state in different way depending upon the likes and dislikes of the assessor. Even if appraisal reports on performance is written by his immediate boss, it has got no relevance in case of posting or promotion of an officer considered by the management from time to time. It is in banks that even guidelines for officers issued by government of India regarding Rural posting or North East posting related incentive is misused by the management to punish or isolate an officer who is not serving personal interest of the Boss.
If management wants to give performance linked incentive to any officer of their choice they will extend all cooperative hands and on the contrary they may pull back some good assisting workers from a branch to belittle good work done by a an officer who is though good performer but not in good book of his assessor. A man is not good or bad only because he is good or bad, but it largely depends on how the assessor or the judge perceives his performance. Attractive suit length in a cloth shop is liked by one but may be disliked by other.
Availability of suitable infrastructure and the potential of the area have greater role to play in performance of an officer. Similarly position of all branches is not same. There are branches, which are fraud ridden requiring skill in legal matter. There are branches where bad advances are huge and need focused attention on recovery of advances. On the contrary there are some new potential branches where in a year business rises to what 10 years old branch could not achieve in another town. Some branches are fifty years old having multifarious jobs and some are new requiring no special skill, some are situated in Naxal affected areas and some others are in business wise potential area. After all what will be the criteria for judging the performance of a bank employee which will be uniformly applicable and acceptable to all is a million dollar question.
It is seen in banks that charge sheeted officers are promoted based on caste or religion or closeness to bosses or based on recommendation of some God fathers or based on bribe he or she offers to top management in lieu of promotion he secures. There is no guarantee that the performance-linked incentive as contemplated by government of India will be used for real growth of banks.
As long as banks are unable to decide the framework and uniformly acceptable yardstick to measure the performance qualifying for incentive, mere introduction of such PLI in banks will undoubtedly create more conflicts, confusion and give rise to reign of injustice as perpetuated through promotions and posting by greedy and corrupt bank management in general, I do not talk of a negligible portion of exceptional good officials sitting at the top. Please excuse me. In general any power invested with Indian bosses produces nothing but gives rise to more and more corrupt practices and do not help in creating an environment conducive for real elevation of really good workers and real growth of banks. When incentive in form of promotion is not awarded judiciously, it is difficult to understand that the management will justifiably distribute Performance linked Incentives.
Danendra Jain
Ganaraj Choumuhani Agartala
9th December 2009
Government should first define performance, explain how to measure performance of various segment of officers and non officers, how to ascertain degree of customer service extended by a bank employee, how to correlate deposit mobilized by an officer with non performing assets (NPA) created by him before advocating performance based pay hike or incentive (PLI) to be introduced in public sector banks. There are numerous officers in banking industry who by paying bribe to government departments could mobilize handsome deposit to become performer but who endangered crores of rupees of banks by lending huge money to ineligible borrowers or to fake borrowers or who were found to be indulged in fraudulent activities.
Bitter truth is that an officer in general is treated star performers by an executive is later charge sheeted by another set of executive when exposure of irregularities created by so called star performers takes place or when top executive sitting at the top post do not like the said star performer.
There is already promotion policy in vogue in all banks which promises promotions based on performances. But the ground reality is that promotions are never given based on performances. Those who are flatterers, who are yes-man of bosses, who earn through bribe and share with bosses, who please bosses with cash and gifts are normally given better marks in Interview and selected for promotion. Similarly top officials are tactful enough to use good officers to clean the malady created and accumulated by their yes-men and justify the promotion given by them to a bad performer at the cost of good performer. If a honest and sincere survey is conducted on bank officers, the outcome will definitely reveal the large scale annoyance of bank officers with their top management and exposes injustices in promotion process. One cannot deny that promotions said to be performance linked in banking is absolutely whimsical and in no way related to work done by any officer.
In a bank it is very difficult to ascertain and measure work done by an employee and make it comparable with others. Different employees in different departments in banks at different branches and different administrative offices require different skill and unique level of handling. Every one is not competent to handle auditing work and similarly every officer is not tactful and efficient enough to handle a branch as Branch head. There are some officers who can be good faculty member in a training college but fail completely when they are posted in a branch and instructed to perform routine work in a branch.
Secondly, position, potential and work nature of a branch differs from village to village and from town to town. Quality of work at administrative offices is entirely a different story because administrative offices need no service to customer but only service and flattery to bosses. In brief each branch and each officer has a different characteristic and need unique treatment, different set of knowledge level and absolutely unique behavior.
I am unable to understand how bank management will justifiably quantify the work done by different segment of workers. It is rather bank management who can easily make or mar the career of any officer or a branch manager just by posting him at normal or critical branch, or by increasing or reducing manpower compared to normally required strength of manpower for a particular branch. Manpower provided to different branches is not uniform and more or less depends on the whims and fancies of higher bosses. An officer in good book of a boss can get surplus manpower whereas another officer when posted at same branch will be deprived of even normal strength of manpower.
There are many banks where even appraisal reports are not in vogue for assessing the work of award staff. Even for officer’s appraisal report is designed in such a manner that he or she is rated in different state in different way depending upon the likes and dislikes of the assessor. Even if appraisal reports on performance is written by his immediate boss, it has got no relevance in case of posting or promotion of an officer considered by the management from time to time. It is in banks that even guidelines for officers issued by government of India regarding Rural posting or North East posting related incentive is misused by the management to punish or isolate an officer who is not serving personal interest of the Boss.
If management wants to give performance linked incentive to any officer of their choice they will extend all cooperative hands and on the contrary they may pull back some good assisting workers from a branch to belittle good work done by a an officer who is though good performer but not in good book of his assessor. A man is not good or bad only because he is good or bad, but it largely depends on how the assessor or the judge perceives his performance. Attractive suit length in a cloth shop is liked by one but may be disliked by other.
Availability of suitable infrastructure and the potential of the area have greater role to play in performance of an officer. Similarly position of all branches is not same. There are branches, which are fraud ridden requiring skill in legal matter. There are branches where bad advances are huge and need focused attention on recovery of advances. On the contrary there are some new potential branches where in a year business rises to what 10 years old branch could not achieve in another town. Some branches are fifty years old having multifarious jobs and some are new requiring no special skill, some are situated in Naxal affected areas and some others are in business wise potential area. After all what will be the criteria for judging the performance of a bank employee which will be uniformly applicable and acceptable to all is a million dollar question.
It is seen in banks that charge sheeted officers are promoted based on caste or religion or closeness to bosses or based on recommendation of some God fathers or based on bribe he or she offers to top management in lieu of promotion he secures. There is no guarantee that the performance-linked incentive as contemplated by government of India will be used for real growth of banks.
As long as banks are unable to decide the framework and uniformly acceptable yardstick to measure the performance qualifying for incentive, mere introduction of such PLI in banks will undoubtedly create more conflicts, confusion and give rise to reign of injustice as perpetuated through promotions and posting by greedy and corrupt bank management in general, I do not talk of a negligible portion of exceptional good officials sitting at the top. Please excuse me. In general any power invested with Indian bosses produces nothing but gives rise to more and more corrupt practices and do not help in creating an environment conducive for real elevation of really good workers and real growth of banks. When incentive in form of promotion is not awarded judiciously, it is difficult to understand that the management will justifiably distribute Performance linked Incentives.
Danendra Jain
Ganaraj Choumuhani Agartala
9th December 2009
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