Wednesday, December 7, 2011

Bad Assets Hidden in Bank without Action from Bankers


News item collected from Economic Times of 7th December 2011

http://m.economictimes.com/PDAET/articleshow/11002693.cms

Big borrowers of India Inc default on Rs 47,000 crore loans
6 Dec, 2011, 0930 hrs IST, Pradeep Thakur, TNN
NEW DELHI: Large borrowers, who took loans of Rs 10 crore or more, have defaulted on payments to the tune of Rs 47,000 crore, with banks not even pursuing cases to recover over half the amount.

Data available with the finance ministry shows that least 700 defaulters who had borrowed Rs 10 crore or more from public sector banks and cumulatively owe over Rs 26,000 crore have gone scot free despite not clearing their dues. In another 3,400 cases where loans are of the order of Rs 1 crore or more, the lenders have moved courts and tribunals to recover Rs 21,400 crore.

But there are still concerns over the way banks are using options such as one-time settlement scheme to recover the dues. Investigations have shown that in several instances, it was not a simple case of default but even cheating was involved. Bank executives failed to attach personal assets of directors of companies that had defrauded the banks, sources said.

In fact, in several cases, defaulters have gone ahead to get a second loan despite not clearing their past dues. These facts were brought to the notice of the Central Vigilance Commission by CBI sometime ago after many of its cases fell in the courts when bankers reached one-time settlements with its big defaulters.

In one such case in Patna, a PSU bank auctioned a mortgaged property at 20% of the valuation made by its experts. Investigation had revealed a conspiracy involving bank officials, valuators and the borrower as the property mortgaged was an agricultural land used as security against a commercial loan.

The finance ministry has now asked these banks to spruce up their balance sheets given the fact that nearly Rs 14 lakh crore of credit has been outstanding against big borrowers - those who have borrowed Rs 10 crore and above. There are over 22,500 borrowers who owe over Rs 10 crore to nationalized banks.

The RBI has refused to divulge the names of the defaulters against whom no suits have been filed, citing secrecy clauses.

To help the banks recover bad debts, the government has also brought in a bill seeking changes in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, and in the Recovery of Debts due to Banks and Financial Institutions (RDBF) Act, 1993.

The new bill seeks to provide mandatory registration of mortgages and is expected to help reduce the cost of funds for banks and also reduce NPAs.

Friday, November 25, 2011

Non Performing Assets are on rise




Bankers are now shedding crocodile tears after spoiling the bottom line and health of bank,,
"Sau Chuhe Mar kar Billi Haz ko Chali"

Total Amount of Non Performing Assets in Banks have crossed one Trillion rupees in the half year ended September 2011 and there is sign of improvement .



Most of the big value advances are given green signal by top ranked officers and are processed at branch or regional level after telephonic pressure or verbal instruction from some or the other top ranked officers or some minister or some other VIPs.

When advance goes bad it is low level officers who are made scapegoat, it is new branch head who is posted there is made responsible for lack of monitoring , but never the officer who is main culprit behind the bad assets is punished, rather such officers are promoted and given cream posting.

Message is clear, never bother for advance going bad but bother for senior officers who visit the branch or regional office.

Officers who earn wealth , huge wealth from corporate can only spend lavishly on big bosses. Officers who have always ill earned money in their pocket can arrange five star stay, five star hotel and red carpet welcome for bosses and arrange high value vehicles for bosses who visit their office.

Big bosses move from one place to other for getting warm welcome and not for doing something good for the bank.

“Hanthi ke dant dikhane ke kuch aur hai , khane ke kuch aur hai.”
This is an old but popular proverb.

Everyone in the field knows very well what top ranked bosses want and what they are expected to do. I do not talk about some exceptional devoted officers who are very few among a crowd of corrupt officers.

Obviously NPA has to rise, lending has to come down, gross NPA ratio has to go up and profit has to fall.

Most of senior officers who appear to be serious on assets going bad are shedding crocodile’s tears for rising trend in NPA and they are least bothered for recovery but bothered for their safe retirement. In this process a good number of senior executives have already retired from the bank leaving behind a plethora of bad assets worth hundreds of crores of rupees.

Now when vigorous follow up is become inevitable under pressure from Ministry of Finance and RBI, new incumbents at Branch or RO are facing the brunt of top management for none of their fault.

There is an old proverb in Hindi,

“Khet Khaye Gadha, Mar Khaye jo Raha”


If bankers really want to send positive message to ground level officials and other employees , they have to punish officers who for their vested interest lent money to bad borrowers, who gave verbal instructions for sanction of finance to bad borrowers for self interest and prove it that bad officers will not be spared , how big he or she may be.

Senior Officers who have been isolated from mainstream despite good knowledge , sincerity and honesty have to be brought back in the mainstream and given due recognition . Only honest and sincere officers should be made Branch or Regional Head , and not those who are number one flatterer.