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.
Friday, December 24, 2010
Banking Scam
Enough time had been given to Mr. Kalamadi and his associates to clean their houses before CBI raids. Enough time had been given to Mr. Raja and his associates as well to do work as per his whims and fancies violating all existing norms for allocation of spectrum before he tendered resignation and before CBI raided his house. CBI raids are nothing but willfully managed dramatic act to demonstrate the people of India that the government is taking action against the corrupt officers. Absolutely non -sensical and dramatic acts are being played by cleaver politicians of ruling party to salvage public image. eventually none will be punished.
In fact none is trustworthy in India. Even judiciary is facing serious charges of corruption. CBI is already blamed to be a puppet in the hands or ruling government.
However it is only Supreme Court and state level High Courts on which people of India are constrained to rely upon to some extent.
Both of Mr. Kalamadi and Mr. Raja have already caused huge loss to the government. Kalamadi has paid hundred times more than what the government proposed in the year 2001 and Raja has realized at rate what was prevailing in the year 2001 in contrast to many times higher rate which the government could have received through open tender. It is very difficult to establish the charges. It is very difficult to assess and establish the quantum of loss which has been caused to India because none of the investigating agencies can tell or imagine what rate government could have got through tender in the year 2010 or in 2009.Similarly it is not easy for CBI to prove that Kalamadi paid extra ordinarily higher rate than the prevailing rate for a particular type and particular quality of goods and services he bought for Common Wealth Games and in return he earned wealth for himself or for his associates.
It is an universal truth that in all contractual work or in government supply work of value of Rs.100 in government offices and government departments ,actual work done or actual value of supplied goods and services is hardly Rs. 20 to Rs.50. Everyone knows that 20% of the allocated fund is actually consumed and used for work and 80% of the fund is consumed in distributing bribes and commissions to various individuals, political workers, top leaders, ministers, local MLAs and MPs, brokers, middlemen, local musclemen called as extortionists, Naxals and mediating or executing agencies.
If one looks into lending made by Public Sector banks and assess the quality of assets of the bank honestly he will find that there are at least ten lac crores worth assets as Non Performing Assets though declared NPA of PSU banks as on March 2010 was only one lac twenty thousand crores rupees. Bankers are not punished because all top executives, RBI officials, Ministers are guilty for making bad lending. In fact only those officers become executive, DGM,GM, ED and CMD in a bank only if he is expert in bad lending , expert in keeping higher authorities happy and maintain a strong lobby of God fathers not only to rise in career but also to get protection in time of crisis or when he is exposed or trapped in CBI net. As such scam of 2G spectrum under investigation by CBI is very small compared to continuing scam in banks. If a CMD or ED of a bank makes a phone call to GM to ensure lending of hundred crores to relative of the Finance Minister, entire processing of sanction of desired lending will take place a shortest period possible. This is called lobby banking or corporate lobby policy. When Ministers or RBI shuts their eyes and ears, none is capable to stop corrupt practices.
Everyone in our country knows that development funds sent by state or central government to district or block level offices are not fully distributed among real beneficiaries.
All are birds of the same feather. Then who will punish whom is a million dollar question.
Root cause of all corrupt practices is whimsical transfer, arbitrary promotions of junior staff by top rank officials to ensure a team of yes-men and flatterers around him so that none can raise the voice against his misdeeds and none can be whistle blower because everyone gets their due share.
Scam of value of hundreds and thousands of crore rupees cannot take place without the support of hundreds and thousands of persons in the system. This is why more and more people will try their best to shut the mouth of CBI officials and court judges. Many more middlemen and brokers will play their role and earn their share in ill earned money. Corruption cannot therefore be reduced at least in the frame work of democracy or by applying soft laws or by delayed action or by inefficient courts.
In fact none is trustworthy in India. Even judiciary is facing serious charges of corruption. CBI is already blamed to be a puppet in the hands or ruling government.
However it is only Supreme Court and state level High Courts on which people of India are constrained to rely upon to some extent.
Both of Mr. Kalamadi and Mr. Raja have already caused huge loss to the government. Kalamadi has paid hundred times more than what the government proposed in the year 2001 and Raja has realized at rate what was prevailing in the year 2001 in contrast to many times higher rate which the government could have received through open tender. It is very difficult to establish the charges. It is very difficult to assess and establish the quantum of loss which has been caused to India because none of the investigating agencies can tell or imagine what rate government could have got through tender in the year 2010 or in 2009.Similarly it is not easy for CBI to prove that Kalamadi paid extra ordinarily higher rate than the prevailing rate for a particular type and particular quality of goods and services he bought for Common Wealth Games and in return he earned wealth for himself or for his associates.
It is an universal truth that in all contractual work or in government supply work of value of Rs.100 in government offices and government departments ,actual work done or actual value of supplied goods and services is hardly Rs. 20 to Rs.50. Everyone knows that 20% of the allocated fund is actually consumed and used for work and 80% of the fund is consumed in distributing bribes and commissions to various individuals, political workers, top leaders, ministers, local MLAs and MPs, brokers, middlemen, local musclemen called as extortionists, Naxals and mediating or executing agencies.
If one looks into lending made by Public Sector banks and assess the quality of assets of the bank honestly he will find that there are at least ten lac crores worth assets as Non Performing Assets though declared NPA of PSU banks as on March 2010 was only one lac twenty thousand crores rupees. Bankers are not punished because all top executives, RBI officials, Ministers are guilty for making bad lending. In fact only those officers become executive, DGM,GM, ED and CMD in a bank only if he is expert in bad lending , expert in keeping higher authorities happy and maintain a strong lobby of God fathers not only to rise in career but also to get protection in time of crisis or when he is exposed or trapped in CBI net. As such scam of 2G spectrum under investigation by CBI is very small compared to continuing scam in banks. If a CMD or ED of a bank makes a phone call to GM to ensure lending of hundred crores to relative of the Finance Minister, entire processing of sanction of desired lending will take place a shortest period possible. This is called lobby banking or corporate lobby policy. When Ministers or RBI shuts their eyes and ears, none is capable to stop corrupt practices.
Everyone in our country knows that development funds sent by state or central government to district or block level offices are not fully distributed among real beneficiaries.
All are birds of the same feather. Then who will punish whom is a million dollar question.
Root cause of all corrupt practices is whimsical transfer, arbitrary promotions of junior staff by top rank officials to ensure a team of yes-men and flatterers around him so that none can raise the voice against his misdeeds and none can be whistle blower because everyone gets their due share.
Scam of value of hundreds and thousands of crore rupees cannot take place without the support of hundreds and thousands of persons in the system. This is why more and more people will try their best to shut the mouth of CBI officials and court judges. Many more middlemen and brokers will play their role and earn their share in ill earned money. Corruption cannot therefore be reduced at least in the frame work of democracy or by applying soft laws or by delayed action or by inefficient courts.
Thursday, December 16, 2010
Financail Inclusion and Branch Expansion
In seventies and eighties there was huge pressure from government of India and Reserve Bank of India on Public sector banks for opening of branches in rural areas so as to cover all villages. As per policy of Service Area Approach introduced by RBI each branch of a bank had to serve 15 villages and cover 10000 of population. There used to be Block Level Banker’s Committee (BLBC) constituted by Lead Bank Manager, Branch Managers of all banks in the block and block level officials to prepare an annual credit outlay plan for the year for the service area and monitor its implementation. Thereafter District Level consultative Committee (DLCC) and State Level Banker’s Committee (SLBC) were constituted to monitor the quality and quantity of progress.
But unfortunately this entire exercise in the real field proved formal and futile during last thirty years of its existence. Village level, District level and State level plans formulated by BLBC, DLCC and SLBC proved a futile exercise so far as the real welfare of villages, elimination of poverty and idea of social welfare is concerned. This is a bitter truth that all these plans failed miserably and position of villagers did not improve despite several poverty alleviation programes undertaken by PSU banks in one name or the other during last for decades. Officials of banks and state government offices still complete these formalities of conducting meetings, formulating annual plans and there submitting the report to Banking Division and RBI but there is none at field level branches of banks or block offices to take care of plan and its execution.
In the year 1991 government of India adopted the path of economic reformation in line with global policy of liberalization, privatization and globalization (LPG). Banking reformation also was also planned and put into action under the leadership of the then Finance Minister Mr. Manmohan Singh. Banks were given huge freedom, rates were deregulated, licensing policy was reframed, private banks were opened and gradually banks changed their working style from traditional social banking and mass banking to Class banking, from social service entity to profit making unit. In nineties, several branches of banks were closed or turned into satellite branch only because there were unable to earn profit. Villagers who lived in the service area of closed branches were forced to contact other branch of that bank at farther place or to contact some other nearby bank for financial assistance or for any banking operation. During this period not only poor villagers were discarded and left at the mercy of traditional money lenders for exploitation, but even banks were also constrained to write off huge amount of loans and advances disbursed in the villages.
Government of India had to infuse capital several times to make PSU banks strong enough to compete with global banks. Merger of banks were point of debate at all level so that their lending capacity may increase and they may be able to finance to bigger and bigger project .In brief the choice of bankers became top industrialists and top traders and not poor villagers. Banks now consider wholesale and bulk lending instead of retail lending. Ambiance of most of the branches have been changed and decorated to suit rich society and to make it comparable with private and foreign banks which were by birth made to serve rich class people.
Banks were nationalized in 1969 by Late Indira Gandhi to make banks accessible for poor villagers. Unfortunately, poor villagers have again been thrown out of bank’s branches during last twenty years of reformation in banking. In the new set up poor villagers are directed towards Micro Finance Institutes (MFI) or advised to come through newly formed broker called as NGO or form their own Self Help Group (SHG). Banks gradually turned to non banking business like insurance, and demat services to earn more and more profit by less and less staff because they realized that profit earning by PSU banks competing with private banks was not easy .In the changed situation banks are trying to show false and cooked profit by hiding their bad assets or selling their bad assets to ARCs or by imposing service charges for every banking operation they do in the bank.
Banks are trying to earn Non Interest Income because their Interest Income has sharply come down due to unwarranted rate war declared by government under the frame work of reformation policy. Profits of PSU banks are facing continuous erosion due to increase in Non Performing Assets and hence bankers are least interested in rural lending which involves comparatively more manpower and enlarged network of branches.
Now after twenty years of reformation RBI has once again realized that need of the hour is to serve the villagers. New word called as Financial Inclusion has become the slogan of bankers. But as a matter of fact their all field activities indicate that banks are bent upon Financial Exclusion of poor villagers by directing them to MFI or to NGO or to form SHG. Poor people in villages and towns have now to depend on ATM and biometric cards for cash deposits and cash payment and on MFI. NGOs and local money lenders for availing loan facilities. Banks as also government of India think it wise to make finance to MFI and NGOs in hundreds of crores of rupees at base rate or at low rates and the ask MFI to make finance to poor people at many times higher rates.
Financial Inclusion is used merely for opening of No Frill accounts and to serve the purpose of UID (Uniform Identity Number).The word ‘Financial Inclusion’ is frequently used by political leaders and government officials along with bankers. But in fact no real improvement of poor people has taken place during last twenty years of reformation policy initiated by the government in the year 1991. It will not be an exaggeration to say that poor people were better served during the period 1971 to 1990 (after nationalization of banks in 1969). To add fuel to fire RBI is again putting thrust on bank management to open more and more new branches to reach the level of each Panchayat.
Bankers have burnt their fingers in large scale expansion program under Service Area Approach plan of seventies and again they are committing the same blunder by opting unwarranted expansion of branch network to spread it upto Panchayat level without increasing manpower to suit the need of branch expansion. The new word ‘Financial inclusion’ is nothing but is old wine in new bottle and this continue to make mockery of poor people.
Under the umbrella of reformation banks have stopped recruiting fresh staffs to save staff cost and to earn more and more profit in line with other capitalists who are exploiting Indians by way of labour exploitation and by indulging in large scale profit making. Business of banks have multiplied ten times during last five years but number of staff working in banks have come down compared to what it was five years ago inspite of addition of new branches and new businesses in banks. As such employment opportunities available to educated youth are also shrinking in the era of reformation.
Obviously we need to debate whether banks are serving poor people, whether policy of capitalism adopted by Government of India in the name of economic reformation suits to Indians environment and whether growth of five percent of population of Indian is the real motto of the government and the real purpose of GDP growth. We Indian have to ponder over the prevailing policy of capitalism and discuss whether it is more important or we have to revert back to the policy of socialism or to adopt a middle path in unison with the policy of Mixed economy. Poor and middle class of Indians who constitutes 95% of population cannot even afford quality education, quality health care services, quick justice in court and quality food in our country because rich and affluent class have been given complete freedom to exploit consumer and earn profit without any fear of administrative action under the policy framework of reformation called as LPG.As such this large segment of society have to depend on bank’s loan for all their essential needs food, health care, education and so on.
Last but not the least PSU banks in general are running in acute manpower shortage but still management of the bank is least inclined to recruit fresh manpower to keep cost of establishment at the lowest. Besides there is complete lack of devoted, talented and honest workers due to increasing number of corrupt officers sitting at top post who discourage good workers and hence the assets of the bank are undoubtedly at stake and the health of the banks has to face is in way sound. As such large scale expansion undertaken by branches may prove to be suicidal activity and the word Financial Inclusion has become a laughing stock for common men. Neither bankers nor poor people are happy and safe. Even banks are not safe but more confused because they are unable to decide which path they are actually to go when government changes policy so frequently and in a impractical way.
But unfortunately this entire exercise in the real field proved formal and futile during last thirty years of its existence. Village level, District level and State level plans formulated by BLBC, DLCC and SLBC proved a futile exercise so far as the real welfare of villages, elimination of poverty and idea of social welfare is concerned. This is a bitter truth that all these plans failed miserably and position of villagers did not improve despite several poverty alleviation programes undertaken by PSU banks in one name or the other during last for decades. Officials of banks and state government offices still complete these formalities of conducting meetings, formulating annual plans and there submitting the report to Banking Division and RBI but there is none at field level branches of banks or block offices to take care of plan and its execution.
In the year 1991 government of India adopted the path of economic reformation in line with global policy of liberalization, privatization and globalization (LPG). Banking reformation also was also planned and put into action under the leadership of the then Finance Minister Mr. Manmohan Singh. Banks were given huge freedom, rates were deregulated, licensing policy was reframed, private banks were opened and gradually banks changed their working style from traditional social banking and mass banking to Class banking, from social service entity to profit making unit. In nineties, several branches of banks were closed or turned into satellite branch only because there were unable to earn profit. Villagers who lived in the service area of closed branches were forced to contact other branch of that bank at farther place or to contact some other nearby bank for financial assistance or for any banking operation. During this period not only poor villagers were discarded and left at the mercy of traditional money lenders for exploitation, but even banks were also constrained to write off huge amount of loans and advances disbursed in the villages.
Government of India had to infuse capital several times to make PSU banks strong enough to compete with global banks. Merger of banks were point of debate at all level so that their lending capacity may increase and they may be able to finance to bigger and bigger project .In brief the choice of bankers became top industrialists and top traders and not poor villagers. Banks now consider wholesale and bulk lending instead of retail lending. Ambiance of most of the branches have been changed and decorated to suit rich society and to make it comparable with private and foreign banks which were by birth made to serve rich class people.
Banks were nationalized in 1969 by Late Indira Gandhi to make banks accessible for poor villagers. Unfortunately, poor villagers have again been thrown out of bank’s branches during last twenty years of reformation in banking. In the new set up poor villagers are directed towards Micro Finance Institutes (MFI) or advised to come through newly formed broker called as NGO or form their own Self Help Group (SHG). Banks gradually turned to non banking business like insurance, and demat services to earn more and more profit by less and less staff because they realized that profit earning by PSU banks competing with private banks was not easy .In the changed situation banks are trying to show false and cooked profit by hiding their bad assets or selling their bad assets to ARCs or by imposing service charges for every banking operation they do in the bank.
Banks are trying to earn Non Interest Income because their Interest Income has sharply come down due to unwarranted rate war declared by government under the frame work of reformation policy. Profits of PSU banks are facing continuous erosion due to increase in Non Performing Assets and hence bankers are least interested in rural lending which involves comparatively more manpower and enlarged network of branches.
Now after twenty years of reformation RBI has once again realized that need of the hour is to serve the villagers. New word called as Financial Inclusion has become the slogan of bankers. But as a matter of fact their all field activities indicate that banks are bent upon Financial Exclusion of poor villagers by directing them to MFI or to NGO or to form SHG. Poor people in villages and towns have now to depend on ATM and biometric cards for cash deposits and cash payment and on MFI. NGOs and local money lenders for availing loan facilities. Banks as also government of India think it wise to make finance to MFI and NGOs in hundreds of crores of rupees at base rate or at low rates and the ask MFI to make finance to poor people at many times higher rates.
Financial Inclusion is used merely for opening of No Frill accounts and to serve the purpose of UID (Uniform Identity Number).The word ‘Financial Inclusion’ is frequently used by political leaders and government officials along with bankers. But in fact no real improvement of poor people has taken place during last twenty years of reformation policy initiated by the government in the year 1991. It will not be an exaggeration to say that poor people were better served during the period 1971 to 1990 (after nationalization of banks in 1969). To add fuel to fire RBI is again putting thrust on bank management to open more and more new branches to reach the level of each Panchayat.
Bankers have burnt their fingers in large scale expansion program under Service Area Approach plan of seventies and again they are committing the same blunder by opting unwarranted expansion of branch network to spread it upto Panchayat level without increasing manpower to suit the need of branch expansion. The new word ‘Financial inclusion’ is nothing but is old wine in new bottle and this continue to make mockery of poor people.
Under the umbrella of reformation banks have stopped recruiting fresh staffs to save staff cost and to earn more and more profit in line with other capitalists who are exploiting Indians by way of labour exploitation and by indulging in large scale profit making. Business of banks have multiplied ten times during last five years but number of staff working in banks have come down compared to what it was five years ago inspite of addition of new branches and new businesses in banks. As such employment opportunities available to educated youth are also shrinking in the era of reformation.
Obviously we need to debate whether banks are serving poor people, whether policy of capitalism adopted by Government of India in the name of economic reformation suits to Indians environment and whether growth of five percent of population of Indian is the real motto of the government and the real purpose of GDP growth. We Indian have to ponder over the prevailing policy of capitalism and discuss whether it is more important or we have to revert back to the policy of socialism or to adopt a middle path in unison with the policy of Mixed economy. Poor and middle class of Indians who constitutes 95% of population cannot even afford quality education, quality health care services, quick justice in court and quality food in our country because rich and affluent class have been given complete freedom to exploit consumer and earn profit without any fear of administrative action under the policy framework of reformation called as LPG.As such this large segment of society have to depend on bank’s loan for all their essential needs food, health care, education and so on.
Last but not the least PSU banks in general are running in acute manpower shortage but still management of the bank is least inclined to recruit fresh manpower to keep cost of establishment at the lowest. Besides there is complete lack of devoted, talented and honest workers due to increasing number of corrupt officers sitting at top post who discourage good workers and hence the assets of the bank are undoubtedly at stake and the health of the banks has to face is in way sound. As such large scale expansion undertaken by branches may prove to be suicidal activity and the word Financial Inclusion has become a laughing stock for common men. Neither bankers nor poor people are happy and safe. Even banks are not safe but more confused because they are unable to decide which path they are actually to go when government changes policy so frequently and in a impractical way.
Tuesday, November 16, 2010
Rising NPA in PSU Banks
It is not easy to stop corrupt practices prevalent in Public Sector Banks .Work done through contractors or goods bought through suppliers either through tender or without tender are more often than not of inferior quality, everyone knows it. Until management, government, judiciary, regulatory agencies, vigilance officials, monitoring officials, auditing officials and the concerned executing officials are honest one cannot imagine of punishment to guilty officials or to contractors who use inferior materials in construction works or to suppliers who supply lesser goods and inferior goods and charge high value. Banks therefore cannot stop corrupt practices in contractual work related to furnishing of premises or renovation of bank’s branches, ATM centers or administrative offices, but it can definitely stop corruption involved in its lending business. Though it is not easy to make the system fool proof of corrupt practices but a little effort in this direction may help in reducing the level of malicious lending and in turn help in keeping the NPA level as low as sustainable.
But the task of purification and punishment must start from top officials who support, propagate, irrigate and promote corrupt practices in lending. We have to punish top officials who indirectly or directly prefer commission in bulk lending, who aspire for costly gifts from junior officials on financing made by branches and who desire red carpet welcome is extended to them wherever they visit. We have to change rules and practices which discourage honesty and loyalty. It is worthwhile to keep in mind that top official who are basically corrupt and possess acute greed for money do not leave any witness or evidence which can be helpful in trapping them or which helps in substantiating charge of corruption against them. Top officials manage bribe through a few hard core flatterers in the organization. Such flatterers have strong liaisoning with all high profile personalities in all departments and they can easily manage closure of any file which may go against them and they can shut the mouth of all protestors.
RBI or any other monitoring agencies can at least identify the executive of the banks whose past and present is bad and who are condemned by all. For this purpose they should prepare a list of bad borrowers (NPA) involving rupee one crore and more (to begin with) and try to find out the name of the executives who are responsible for bad lending .There may be cases of account turning bad due to various reasons which are beyond the control of bankers may be ignored, But advances which turned bad due to faulty and malicious processing must be analyzed thoroughly and honestly by a devoted team of bank officials chosen from other banks. Executives who are instrumental in bad lending and still posted at high places send a wrong message down the line. If corrupt officers are promoted and made organizational head or Branch head or circle head in a bank there is no doubt that junior officials will also indulge in bad lending in greed of money and instances of bad advances will increase. In such system good officials are normally shunted in remote and critical areas and ignored in promotion processes.
It is therefore required to know the name of all loans and advances made by all top executives in past ten years and ascertain whether they are still good or turned bad in a few years or even written off by clever gang of General Managers and cleaver board of directors. Serious analysis of bad borrowers will reveal that creators of all NPA accounts are holding top posts in the same bank of have become ED or CMD of other bank. If bad executives are replaced by devoted officers of the same bank violating existing promotion policy or transfer policies I think the level of NPA will come down in coming years. Otherwise the deterioration cannot be stopped and banks have to face serious financial trouble in near future. As a matter of fact dishonesty has become the best policy in all offices owned by the government partially or fully.
It is disheartening that even officials who are made for stopping malpractices and for punishing corrupt officials are themselves corrupt. Then who will take action and against whom, only God knows. And this is why it is said that corruption has become the accepted system in India. Problem arises only when there are differences over the rate of sharing ill earned money among the team of officials who promote bad culture or when top officials receive bribe money but fail to extend desired help to bribe giver.
Lastly if there is a will there is a way. If one wants to lower corruption level in any office or government department there are several ways to accomplish the same. If the head is clean, he can at least endeavor in this direction to some extent, but if the head is dishonest one cannot dream of healthy practices down the line. Unfortunately honest officers are very rare and even there are a few they cannot survive and prosper in their career.
17.11.2010
But the task of purification and punishment must start from top officials who support, propagate, irrigate and promote corrupt practices in lending. We have to punish top officials who indirectly or directly prefer commission in bulk lending, who aspire for costly gifts from junior officials on financing made by branches and who desire red carpet welcome is extended to them wherever they visit. We have to change rules and practices which discourage honesty and loyalty. It is worthwhile to keep in mind that top official who are basically corrupt and possess acute greed for money do not leave any witness or evidence which can be helpful in trapping them or which helps in substantiating charge of corruption against them. Top officials manage bribe through a few hard core flatterers in the organization. Such flatterers have strong liaisoning with all high profile personalities in all departments and they can easily manage closure of any file which may go against them and they can shut the mouth of all protestors.
RBI or any other monitoring agencies can at least identify the executive of the banks whose past and present is bad and who are condemned by all. For this purpose they should prepare a list of bad borrowers (NPA) involving rupee one crore and more (to begin with) and try to find out the name of the executives who are responsible for bad lending .There may be cases of account turning bad due to various reasons which are beyond the control of bankers may be ignored, But advances which turned bad due to faulty and malicious processing must be analyzed thoroughly and honestly by a devoted team of bank officials chosen from other banks. Executives who are instrumental in bad lending and still posted at high places send a wrong message down the line. If corrupt officers are promoted and made organizational head or Branch head or circle head in a bank there is no doubt that junior officials will also indulge in bad lending in greed of money and instances of bad advances will increase. In such system good officials are normally shunted in remote and critical areas and ignored in promotion processes.
It is therefore required to know the name of all loans and advances made by all top executives in past ten years and ascertain whether they are still good or turned bad in a few years or even written off by clever gang of General Managers and cleaver board of directors. Serious analysis of bad borrowers will reveal that creators of all NPA accounts are holding top posts in the same bank of have become ED or CMD of other bank. If bad executives are replaced by devoted officers of the same bank violating existing promotion policy or transfer policies I think the level of NPA will come down in coming years. Otherwise the deterioration cannot be stopped and banks have to face serious financial trouble in near future. As a matter of fact dishonesty has become the best policy in all offices owned by the government partially or fully.
It is disheartening that even officials who are made for stopping malpractices and for punishing corrupt officials are themselves corrupt. Then who will take action and against whom, only God knows. And this is why it is said that corruption has become the accepted system in India. Problem arises only when there are differences over the rate of sharing ill earned money among the team of officials who promote bad culture or when top officials receive bribe money but fail to extend desired help to bribe giver.
Lastly if there is a will there is a way. If one wants to lower corruption level in any office or government department there are several ways to accomplish the same. If the head is clean, he can at least endeavor in this direction to some extent, but if the head is dishonest one cannot dream of healthy practices down the line. Unfortunately honest officers are very rare and even there are a few they cannot survive and prosper in their career.
17.11.2010
Thursday, November 11, 2010
Identify Bad Bankers
We have seen downfall in net profit of Union bank, Vijaya Bank, Uco bank, Syndicate Bank,Federal bank, Indian Bank and now in SBI. These banks have added 7 to 8 thousand crores worth NPA in their balance sheet and they still talk of being star performer. Executive called as ED, Deputy General Manager, General Manager, Assistant General Manager in banks who has contributed crores of rupees in NPA are treated as star performers.
What is reason behind abrupt rise in NPA?
Is it not due to the fact that quality of asset in banks has suffered continuous erosion though it has been year after year concealed by talented executives?
Bankers have been hiding bad assets for last so many years just to please Ministry and befool innocent public by showing false rise in profits so that their share prices goes up and up like Satyam Computers? But how long? It has to face puncture like Satyam Computers.
Flattery culture prevalent in banks and in government departments including Ministry of Finance has resulted in growth of bad assets and bad man power. Lobby of corrupt bosses is so strong at controlling offices that only corrupt officers are chosen as Branch Heads, Regional Heads, Zonal Heads, EDs and who in turn freely indulge in bad lending .improper waiver of loan, dishonest compromise with so called bad borrowers to earn bribe , buy deposits from government offices and manage their survival. Big bosses are indulged in earning commission not only from their team of corrupt manager but also from contractors, suppliers and what not.
It is true that corruption prevalent in banks cannot be proved because of so many legal hurdles and shortcomings in the system.
But RBI or CMD of the bank who treat them as honest and star performer should at least prepare a list of executives who is instrumental directly or indirectly in sanction of maximum bad advances. Borrower wise thorough investigation will reveal the name of corrupt officers and will at least reflect the name of real culprits behind sudden spurt in NPA and considerable fall in profits in banks. It is not that banks who are showing rise in profit or fall in NPA are really healthy but in fact they are master in concealment of bad assets and they are master in manipulation. As such, sooner or the later Indian government like US government has to understand the ground reality. Regulators of banks have to understand why private banks are showing rise in profit, fall in NPA and rise in share prices too.
Now Mr. Clean Prime Minister Mr. Manmohan Singh and Finance Minster Mr. Pranab Mukherjee should therefore ask CMDs of all banks to prepare and provide the reason of increase in rise in NPA along with the name of sanctioning officials and controlling circle head of that bank. List so prepared will at least expose the corrupt top officials who are inculcating wrong culture in the banks and who are really responsible for rise in NPA. Name of Branch Head or circle head whose advances are invariably bad will come to light so that government can take corrective steps even now before it is too late.
Deso anyone in India you feel that all bad advances are caused due to due to global recession or due to bad monsoon?
Don’t they believe from the core of heart that bad advances are also due to corrupt practices, wrong management, wrong promotion culture, inadequate safety measures, deficient monitoring, and inefficient legal system and so on. Don’t they feel that posting of good officers at wrong places and bad offices at sensisitive places has caused a great loss to banks? Top executives are incapable as also unwilling to work honestly and devotedly because they have unlimited greed for money and power and this is why they select bad officers who can earn bribe and share with big bosses as happens normally in all government offices.
I therefore reiterate that RBI should now collect a list of bad borrowers where amount of NPA involved is more than one crore or five crores and ask the name of officers who sanctioned such loans. RBI may also collect the names of sanctioning authority in all big amounts NPA account which has come on the floor during last year or during last five years. It is the duties of RB to identify all those officers who are holding executive post in banks and who are behind bad advances. An officer who is capable to lend to bad borrowers is promoted quickly by big bosses because such officers are corrupt and think it wise to take care of personal interest of big bosses and number one in flattery of big bosses for quickest promotion and best posting.
Until strong punitive action is taken against top officers, culture in juniors cannot improve. Corrupt culture is the rot cause of deteriorating bank's health. Cancer of corruption has been killing PSU banks. It is unfortunate that auditors,CBI officials, even officers in RBI and Banking Division has shut their eyes and ears because they are given warm welcome whenever such big officers visit such banks. Even selection of ED and CMD is not based on merit but based on relation .Every successful officers at top posts has a God father to back and support him even if he or she is caught on wrong footing.
If hidden bad debts are declared by all banks there is no doubt that visible profitability of all PSU banks will vanish and all tall claim of shining banking industry in India decoupled from the global recession prove to be farce.
Banks in USA has seen closure or erosion in their capital and share value in the year 2008 and 2009 not because of a sudden hear stroke but due to sickness in the banking system continuing since last one or two decades. Similarly in India PSU banks has started adding NPA worth thousands of crores every quarter. It is astonishing that SBI management proudly say after declaration of their September 2010 half yearly results that thousand of crores of NPA can be managed and tolerated every quarter and RBI accept their logic blindly.
If the existing trend continues NPA in banks will grow upto many lacs of crores of rupees and to add fuel to fire there is no in built fool proof legal and administrative system to ensure recovery from bad borrowers. Continuous rise in NPA will no doubt block circulation of good money of good investors and in future adversely affect liquidity of banks. Ultimately the small investor and small depositors who has reposed faith in government banks will have to suffer. Small borrowers are already victim of wrong policies of the government because they have to borrow money at higher rate from newly introduced Micro Finance Companies. These MFIs use to charge interest rate at more than 24% and upto 2400% from small borrowers whereas bulk financing made by PSU banks is around base rate of 8%.Financial inclusion policy propagated by PSU banks has become useless for rural people because it allows only zero balance account opening facility and nothing else. Rural people, poor farmers and small traders still depend on local money lenders and they are still in clutches of local exploiters as they used to be before nationalization of banks. Reformation started in banks in India in 1991 by cleaver Manmohan Singh has made the life of poor more miserable.
Until flattery culture in promotions and posting is stopped there is no power on earth which can stop erosion of bank's health. Every year government has to infuse capital in banks for their survival. But how long such ventilators will be provided to dieing banks. Government has to punish bad lenders sooner or later to salvage banks, otherwise they will face the same fate as banks in USA faced in the name of Subprime Crisis and as Satyam Computers faced two years ago.Obama in USA has tightened the bankers in USA despite huge protest from bankers after facing severe Subprime crisis. It is true that our government kept Indian banks unaffected by global crisis but all these could happen only after sacrificing lacs of crores of rupees by RBI in favour of sinking PSU banks. After all the core value of banks has not shown any real improvement and neither there is any improvement of position of common men in India.
I hope government will investigate and find out the real reason of rising NPA and take immediate steps to reverse the trend before it is too late.
11.11.2010
Danendra Jain
1.List of bad accounts(npa) 2.where oustanding is more than one crore rupees
3.name of borrower 4.name of sanctioning officer 5.name of regional head
list of branches where total bad loan is more than five crores or where total npa added during last one year is more than one crore or new branches (less than 3 years) where npa is fifty lacs and more
1. name of branch 2. name of branch manager 3.name of regional head
Sunday, October 31, 2010
Survival of PSU banks is stake
In the quarter ended June 2010 Indian Bank posted unexpected spurt in NPA, in the quarter September 2010 banks like U Co bank, Vijaya bank and Union bank has exhibited unparallel growth in NPA and in coming quarter many more banks will follow the same way to register addition of maximum hidden bad assets in NPA portfolio to include their bank in the list of worst (hitherto called as best ) performing banks. Government in USA realized the guilt after much damage and Obama openly admitted that banking culture in USA was not as good as it was portrayed by financial experts. Similarly Indian government will also realize after losing lacs of crores in NPA and when most of the banks will face survival crisis. Already government of India has infused lacs of crores as capital in PSU banks to keep them healthy during last one decade.
Now CMD of the bank which has shown abnormal fall in profit and abnormal increase in Non Performing Assets (NPA) should introspect and assess policy of allowing recruitment of direct officers in scale II,III and scale IV and even scale V or VI superseding and humiliating several working officers who have been devotedly working in the bank for last two three decades but who are not having any God father to ensure promotion and good posting .Such high profile CMD and ED should get the work of existing executives assessed from unbiased honest team of officers of other banks and also ascertain how much NPA has been added by existing team of executives only due to their malicious intention. The outcome of such inquiry will make it clear that selection of executives was wrong and judgment of such executives is naturally always ill motivated and against the interest of the bank. Top executives are mostly indulged in corrupt practices and hence there is no doubt that stinking and polluted water is flowing from the top. They allow lending , purchase of goods and services or allow and contractual work only when they get their due share .
It is top officials who have inculcated bad practices in the bank and are mainly responsible and punishable for wide spread frustration and depression in officer community. Employees in general are not interested to give their all to the bank. They think it better to keep patience till the corrupt lobby is exposed or kicked out. “Na Nau Man Ghee Hota Hai Aur Na Radha Nachti Hai” this is why entire talk of growth of Bank appears Bakwas to the banker who works at ground level.
In conclusion one can say comfortably that Nav Nirman is the mask of such Bank but the real story is entirely different. Without stopping flattery culture and without punishing corrupt officer and without stopping corrupt tradition of promoting flatterers using Interview powers, one can change the hoardings, banners, posters but cannot imagine of real reformation. Bank can exhibit lesser percentage of NPA by making bulk advances to corporate but ultimately slow poison of rising NPA will puncture entire strategy of manipulation and expose the real health in near future. Of course it will be too late then and real culprits and gang of General Managers and Deputy General Managers of that bank will get peaceful retirement from the bank leaving behind bank fighting for survival like Satyam Computers. Employees working in Satyam Computers and clients associated with the company are slowly leaving the company and new connections are very limited and that too for short period. Once image is lost, it is hard to regain it and very much difficult to rejuvenate dormant employees.
However, even now, If bank’s big bosses are still not ready to accept their guilt, bank should prepare a list of Regional Heads and rank their performance on the basis of total amount of NPA they have added during last three year or five years. Regional Head who contributed maximum NPA should be ranked as number one star performer as per tradition of the Bank. Gold medal should be given to the Regional Head who has contributed maximum NPA in last one decade. Even those officers who indulged in reckless lending and now retired from the bank but whose advances became NPA should be given some extra incentive like double of pension or gifted some golden jewel. It is difficult to make a list of corrupt officers because there is no proof written or verbal to establish the charges of corruption. Birds of same feather flock together. It is therefore better to award those officers whose contribution in rise in bad assets is considerably good.
Hitherto officers mobilizing maximum deposits were treated as Star Performers even though they indulged in bad quality of lending. Now the time has come to identify officers who contributed maximum NPA. Time has come to identify Top ten Regional Heads whose selection of BM and whose ‘Kabile Tarif’ management helped in addition of maximum NPA in the bank .Gold medal should be given to those Branch Manager who have contributed maximum NPA in shortest span of time and also to those BMs who have a track record of generating NPA in branches. Special prize should be given to BM (and regional head) who has produced crores of NPA in one year to three years of opening of Branch. Human Resource Department should now find out the name of such officers advances made by whom have mostly become bad. Bank should peep into each NPA account to find out maker of such advance and prepare a list of such executives existing or retired which can precipitate the name of executives and Branch Managers who have contributed maximum bad assets to bank.
Similarly list of Branch Heads (scale wise and regional wise) should be prepared to know the top one hundred Branch Head who contributed maximum amount of NPA during the period under review. These top performers should then be promoted to higher scale as per whims of CMD or ED of the bank because they are the real adventurer and they can do whatever instruction is given by GM or by orders on phone. Such star performers can only arrange costly gifts for bosses and government top officials to tap handsome deposits.
Regional Heads, zonal Heads or General Managers or ED or CMD who had selected above hundred Branch Heads (who contributed maximum NPA) should now be awarded with golden gifts and cash prize and promoted to higher scale and made ED. Because such officers contributed their best in making it possible for the bank to become number one in banking industry at least on the parameter called as “growth of NPA”
Similarly RBI should make a list of star performer CMDs and EDs who helped in excellent rise in NPA in their bank. Another angle of consideration may be number of unhappy employees, unhappy customers and growth in number of cases and complaints against the bank. The more employees are unhappy, the more customers are unhappy and the more complaints are lodged against the bank the best will be CMD or ED of that bank compared to other banks. At least they can manage certificate of excellence on all parameters which RBI desire to have on record to save their skin.
31st October 2010
Now CMD of the bank which has shown abnormal fall in profit and abnormal increase in Non Performing Assets (NPA) should introspect and assess policy of allowing recruitment of direct officers in scale II,III and scale IV and even scale V or VI superseding and humiliating several working officers who have been devotedly working in the bank for last two three decades but who are not having any God father to ensure promotion and good posting .Such high profile CMD and ED should get the work of existing executives assessed from unbiased honest team of officers of other banks and also ascertain how much NPA has been added by existing team of executives only due to their malicious intention. The outcome of such inquiry will make it clear that selection of executives was wrong and judgment of such executives is naturally always ill motivated and against the interest of the bank. Top executives are mostly indulged in corrupt practices and hence there is no doubt that stinking and polluted water is flowing from the top. They allow lending , purchase of goods and services or allow and contractual work only when they get their due share .
It is top officials who have inculcated bad practices in the bank and are mainly responsible and punishable for wide spread frustration and depression in officer community. Employees in general are not interested to give their all to the bank. They think it better to keep patience till the corrupt lobby is exposed or kicked out. “Na Nau Man Ghee Hota Hai Aur Na Radha Nachti Hai” this is why entire talk of growth of Bank appears Bakwas to the banker who works at ground level.
In conclusion one can say comfortably that Nav Nirman is the mask of such Bank but the real story is entirely different. Without stopping flattery culture and without punishing corrupt officer and without stopping corrupt tradition of promoting flatterers using Interview powers, one can change the hoardings, banners, posters but cannot imagine of real reformation. Bank can exhibit lesser percentage of NPA by making bulk advances to corporate but ultimately slow poison of rising NPA will puncture entire strategy of manipulation and expose the real health in near future. Of course it will be too late then and real culprits and gang of General Managers and Deputy General Managers of that bank will get peaceful retirement from the bank leaving behind bank fighting for survival like Satyam Computers. Employees working in Satyam Computers and clients associated with the company are slowly leaving the company and new connections are very limited and that too for short period. Once image is lost, it is hard to regain it and very much difficult to rejuvenate dormant employees.
However, even now, If bank’s big bosses are still not ready to accept their guilt, bank should prepare a list of Regional Heads and rank their performance on the basis of total amount of NPA they have added during last three year or five years. Regional Head who contributed maximum NPA should be ranked as number one star performer as per tradition of the Bank. Gold medal should be given to the Regional Head who has contributed maximum NPA in last one decade. Even those officers who indulged in reckless lending and now retired from the bank but whose advances became NPA should be given some extra incentive like double of pension or gifted some golden jewel. It is difficult to make a list of corrupt officers because there is no proof written or verbal to establish the charges of corruption. Birds of same feather flock together. It is therefore better to award those officers whose contribution in rise in bad assets is considerably good.
Hitherto officers mobilizing maximum deposits were treated as Star Performers even though they indulged in bad quality of lending. Now the time has come to identify officers who contributed maximum NPA. Time has come to identify Top ten Regional Heads whose selection of BM and whose ‘Kabile Tarif’ management helped in addition of maximum NPA in the bank .Gold medal should be given to those Branch Manager who have contributed maximum NPA in shortest span of time and also to those BMs who have a track record of generating NPA in branches. Special prize should be given to BM (and regional head) who has produced crores of NPA in one year to three years of opening of Branch. Human Resource Department should now find out the name of such officers advances made by whom have mostly become bad. Bank should peep into each NPA account to find out maker of such advance and prepare a list of such executives existing or retired which can precipitate the name of executives and Branch Managers who have contributed maximum bad assets to bank.
Similarly list of Branch Heads (scale wise and regional wise) should be prepared to know the top one hundred Branch Head who contributed maximum amount of NPA during the period under review. These top performers should then be promoted to higher scale as per whims of CMD or ED of the bank because they are the real adventurer and they can do whatever instruction is given by GM or by orders on phone. Such star performers can only arrange costly gifts for bosses and government top officials to tap handsome deposits.
Regional Heads, zonal Heads or General Managers or ED or CMD who had selected above hundred Branch Heads (who contributed maximum NPA) should now be awarded with golden gifts and cash prize and promoted to higher scale and made ED. Because such officers contributed their best in making it possible for the bank to become number one in banking industry at least on the parameter called as “growth of NPA”
Similarly RBI should make a list of star performer CMDs and EDs who helped in excellent rise in NPA in their bank. Another angle of consideration may be number of unhappy employees, unhappy customers and growth in number of cases and complaints against the bank. The more employees are unhappy, the more customers are unhappy and the more complaints are lodged against the bank the best will be CMD or ED of that bank compared to other banks. At least they can manage certificate of excellence on all parameters which RBI desire to have on record to save their skin.
31st October 2010
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