I have no doubt that reason behind rise in bad debts in public sector banks are not always economic slowdown or higher interest rate or failure of project due to reason beyond control of the business men or poor administrative support. It is also due to poor credit appraisal, ill-motivated lending, poor quality of bank officials, faulty Human Resource Policy and faulty execution of good rules, corruption led lending or pressure led lending or political lending etc.
Pressure caused by rise in bad debts, stressed assets, restructured assets or impaired assets in public sector banks is mounting day by day and due to huge pressure for improving quality of assets from RBI and Government of India, top officials are passing through painful days for last few months.
Management of every bank has undoubtedly been awakened by Government of India and RBI and they are doing their best to recover the money from genuine defaulters, bad borrowers and willful defaulters.
Still management of all banks have to do a lot not only to create an atmosphere for timely recovery of dues from their borrowers but also have to create an atmosphere conducive for credit growth with quality , adequate monitoring mechanism and finally for timely recognition of bad accounts and initiation of proper action to recover the dues. As on now bitter truth is that banks are totally negligent on quality of manpower posted in branches and quality of lending undertaken by branch officials. Banks do not have adequate manpower well versed with the intricacies of sanctioning process of loan.
Sanctioning of loan at branch level or at administrative level still takes place keeping in view the target. Quality of proposal, creditworthiness of loan seeker and prospect of the project for which finance is sought are not adequately and honestly assessed to ascertain the quantum of finance to be sanctioned or not to be sanctioned. This is why slippages are more than recovery in bad accounts. Bankers are making some efforts for recovery of loan but due to reckless and careless fresh sanctions and due to quick mortality of fresh loans, the slippages outpace recovery.
Government and all banks will have to stop assessing the value of an officer based on volume of lending or volume of business they mobilize but focus on the quality of business they mobilize, of course keeping in view the potential of the area where an officer is posted. Bank will have to stop allotting target uniformly to all branches , say 25 to 30 percent growth on last year performance.
Target may not be same for all officers and for all branches because potential of all areas and all officers is different. As long as assessing officers are not honest, it is foolish to expect good result from any top ranked official. A clever and cunning officer who has malicious intention in the core of his or her heart can manipulate all policy and all rules as per his or her comfort sacrificing the interest of the bank and public money.
Lastly Government of India will have to ensure that all district and black level officials extend their whole hearted support to bank officials in recovery of dues from defaulting borrowers.
GOI will have to provide quality and devoted officials and judges in various courts to ensure time bound court verdict in any case filed with them to recover the dues from bank defaulters.
Present position is so much rotten and pathetic that none of courts, none of Debt Recovery Tribunals and District Certificate Officers or District court or civil court treat the bank cases related to recovery seriously and this is why lacs of bank cases are not decided even after lapse of two or three decades. Court orders and decrees are not executed and police officials or District magistrate do not take cognizance of complaint made by bank officials.
As such Government before preaching sermons to bankers has to introspect and start reformation and modification in the system from their own offices and then expect the same from banks.
Politicians will have to stop the culture of using banking channel to garner votes and completely stop the habit of making poll eve announcement of waiver of loan scheme.
It will not be an exaggeration to say here that loan mela culture of Congress Party of seventies and eighties, waiver of loan culture of eighties and nineties and bulk loan culture thereafter in the name of liberalization and globalization have all spoiled the bank and darkened the future of Public sector bank in the same way as BSNL, Indian airlines and other Public sector undertakings.
Banks' slippage-recovery-upgrade ratio at all-time high: RBI--Business Standard
The central bank says that the banks have failed to implement efficient and speedy measures for recovering stressed assets
The banking system's slippage to recovery and upgradation ratio has shot up to 257 as of March 2013 from 217 in March 2011 as banks have failed to implement efficient and speedy measures for recovering stressed assets, according to the Reserve Bank.
This increase in the slippages ratio was a tad above March 2012 when the slippage to recovery and upgradation ratio stood at 255.9.
"The extent to which banks are able to reduce NPAs through recovery efforts is deteriorating, which is evident by the increasing ratio of slippages to recovery and upgradation," RBI deputy governor KC Chakrabarty told the annual banking event over the weekend.
The average slippages to recovery and upgradation ratio for public sector banks during the six-year period of 2007-13 stood at 220.6 as against 211.3 in the comparable period (2001-06) earlier, he said.
The average slippage to recovery and upgradation ratio for old private sector banks during 2007-13 stood at 202.7 as against 179.6 in 2001-07.
Average slippage to recovery and upgradation ratio for new private sector banks during 2007-13 stood at 418.7 as against 376.6 in 2001-07, the deputy governor said, adding the numbers for foreign banks stood at 430.3 and 350.6, respectively.
Chakrabarty, however, said the write-offs have contributed significantly in reducing NPAs.
Write-offs as a percentage of reduction in NPAs stood at 37.8 as on March 2013 for entire banking system as against 33.4 as on March 2012, 42.4 in March 2011 and 50.2 in March 2010.
"In the aftermath of the 2008 crisis, the slippage ratios rose, especially for foreign banks and new private sector banks," the deputy governor said.
However, foreign banks and new private sector banks quickly arrested deterioration in the asset quality post-crisis through improved credit risk management, Chakrabarty said.
Average slippage ratio for foreign banks during 2007-13 stood at 3 as against 2.4 during 2001-07.
New private banks average slippage ratio during 2007-13 stood at 1.8% as against 5.7% during 2001-07.
According to the latest data, as of the September quarter, net bad loans of 40 listed banks soared 38% to Rs 1.3 trillion.
"The net bad assets of the 40 listed banks have jumped 38% to Rs 1,28,533 crore during the first half of this fiscal, from Rs 93,109 crore at the end of the last fiscal, and is likely to be Rs 1.5 lakh crore by the end of the fiscal," according to the data collected by NPAsource.Com.
Out of the total 40 listed banks, 14 banks have reported more than 50% jump in their net NPAs during these six months, the study said.
"The share of top 10 banks in net NPAs has come down to 67.8% in September from 70% in March 2013. Net NPAs of seven banks were higher than 3.5% at the September quarter as against none at the March quarter," it said.
Gross NPAs as of the September quarter stood at Rs 2,29,007 crore, 27% higher when compared to Rs 1,79,891 crore as of March quarter for these 40 listed banks.
According to the study, gross NPAs of listed banks have doubled since September 2011, while net NPAs have risen by 140% during the same period.
This increase in the slippages ratio was a tad above March 2012 when the slippage to recovery and upgradation ratio stood at 255.9.
"The extent to which banks are able to reduce NPAs through recovery efforts is deteriorating, which is evident by the increasing ratio of slippages to recovery and upgradation," RBI deputy governor KC Chakrabarty told the annual banking event over the weekend.
The average slippages to recovery and upgradation ratio for public sector banks during the six-year period of 2007-13 stood at 220.6 as against 211.3 in the comparable period (2001-06) earlier, he said.
The average slippage to recovery and upgradation ratio for old private sector banks during 2007-13 stood at 202.7 as against 179.6 in 2001-07.
Average slippage to recovery and upgradation ratio for new private sector banks during 2007-13 stood at 418.7 as against 376.6 in 2001-07, the deputy governor said, adding the numbers for foreign banks stood at 430.3 and 350.6, respectively.
Chakrabarty, however, said the write-offs have contributed significantly in reducing NPAs.
Write-offs as a percentage of reduction in NPAs stood at 37.8 as on March 2013 for entire banking system as against 33.4 as on March 2012, 42.4 in March 2011 and 50.2 in March 2010.
"In the aftermath of the 2008 crisis, the slippage ratios rose, especially for foreign banks and new private sector banks," the deputy governor said.
However, foreign banks and new private sector banks quickly arrested deterioration in the asset quality post-crisis through improved credit risk management, Chakrabarty said.
Average slippage ratio for foreign banks during 2007-13 stood at 3 as against 2.4 during 2001-07.
New private banks average slippage ratio during 2007-13 stood at 1.8% as against 5.7% during 2001-07.
According to the latest data, as of the September quarter, net bad loans of 40 listed banks soared 38% to Rs 1.3 trillion.
"The net bad assets of the 40 listed banks have jumped 38% to Rs 1,28,533 crore during the first half of this fiscal, from Rs 93,109 crore at the end of the last fiscal, and is likely to be Rs 1.5 lakh crore by the end of the fiscal," according to the data collected by NPAsource.Com.
Out of the total 40 listed banks, 14 banks have reported more than 50% jump in their net NPAs during these six months, the study said.
"The share of top 10 banks in net NPAs has come down to 67.8% in September from 70% in March 2013. Net NPAs of seven banks were higher than 3.5% at the September quarter as against none at the March quarter," it said.
Gross NPAs as of the September quarter stood at Rs 2,29,007 crore, 27% higher when compared to Rs 1,79,891 crore as of March quarter for these 40 listed banks.
According to the study, gross NPAs of listed banks have doubled since September 2011, while net NPAs have risen by 140% during the same period.
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