Today (25/08/2014) I am writing on a topic on which hardly any journalist from Indian newspapers will venture, mainly because of their lack of first hand experience in the banking. I decided to write this article due to following recent developments in the banking sector:-
(a) Arrest of CMD of Syndicate Bank in a bribery case;
(b) Unearthing of frauds of FD scams in Dena bank and OBC;
(c) Launching of its flagship programme - the Jan Dhan Yojana by new govt.
The above three news may not look to have any relation with each other, yet they are inter-related as far as the future of the bankers in India is concerned. Therefore, Indian bankers and union leaders need to watch these developments carefully, as these are likely to have very long term repercussions. If we ignore these at present, bankers will be in bigger trouble in next two to three years.
Let me now share what I fear and why I fear from above developments. When I say, I fear that does not mean, I expect any personal loss to me. Rather I am immune to these as I am already retired. These developments will affect the serving bankers, specially younger generation more. My fear relates to Aam Bankers sufferings which are likely to compound in days to come.
We at ABS have been writing for long, about the large scale corruption in banking sector, specially at the top level. However, some bankers felt that we are pessimistic and creator of negative feelings for the banking fraternity. However, TRUTH ALWAYS PREVAILS. Now after CBI raids, we are vindicated. Does this means that the arrest of CMD of Syndicate Bank pleased us at ABS ? The answer is Yes and No. I was pleased as it has sent a strong message to other CMDs and EDs that they can not take things for granted now. At the same time, We are NOT pleased because the way things have unfolded, it has brought disrepute the banking sector as a whole. Further arrests and unearthing of scams can be beginning of the crisis period for bankers.
The arrest of a CMD after CBI raids, which has been quickly followed with the FD scam in two public sector banks have completely tarnished the image of the PS Bankers. Frankly speaking I have been the supporter of change of government at the Center on account of deep rooted corruption at all levels during Congress rule. However, it appears the new Government, with a eye to bring major changes in the rotten PS banking system in the recruitment of EDs, CMDs, Board level Appointments, sanction of big ticket loans based on regular bribes through middlemen etc., has chosen the path of giving a shock treatment to the banking sector. The arrest of CMD of PS Bank has certainly sent a strong message among the top brass in the banking sector but at the same time has tarnished the image of banking fraternity which will be difficult to repair.
Let me give here one example quoted by one of my friends. My honest banker friend last week told that he visited some government office recently for renewal of his driving licence. At the counter, he was given the hint for some “seva shulak” (the other name for bribe). He strongly objected. The person on the counter coolly asked our banker friend, “where do you work”. Our honest friend proudly told him that he works in XXXXX PS bank. The person on the counter retorted, “Aaree bhai, I read that CMD of Syndicate Bank has been arrested by CBI in a Rs40 lakh bribery case. Banks are den of corruption. Don’t you agree?”. Our friend who has never accepted even Rs 1 as bribe, became red faced and had to keep mum to avoid any further delay in getting his licence. He decided not to disclose his banker status to anybody any more at least in the near future.
The above is a typical case of reputation crisis for bankers. My honest Syndicate Bankers are already on back foot and feeling ashamed of the corruption at the highest level. With more and more frauds coming to light and other negative news about bankers being highlighted in media, a negative image of bankers is being created among the general public.
Once bankers have such a negative image, bankers can not expect to enjoy respect in the society and there will be no supporters for an honourable wage settlement. Thus, I am afraid now bankers are likely to be caught in a vicious circle where they will get lower wages, which will result in low talented recruitment in banks, which will result in poor quality of service, which will finally be reflected in the poor results. Soon they have to fight for their respectable status in the society.
Thus, there is a need to learn a lesson from here. Government has to take steps in a systematic manner so that there is minimal dent on the reputation of the banking sector as a whole. Some CMDs / EDs whose appointments are clearly related to corruption or there is sufficient evidence of having indulged into corruption, should be asked to resign immediately. However, this has to be done only where there are sufficient material to this effect and not on the grounds that they were appointed by the previous government. Small lot of clean CMDs / EDs should be encouraged and must be allowed to complete their tenure. This does not mean that the corrupt officers, CMD / EDs be let off.
Once corrupt CMDs / EDs have been forced to resign / sacked, scrutiny by income tax authorities and CBI, for possessing assets beyond their declared source of income, be started. Only after completion of the investigation they should be arrested with a gap of few months of their resignation / sacking.
The scams against FDs are part and parcel of the banking business. They are part of the business risk and thus need not be linked to the corruption in banks. The persons involved in these are actually criminals and should be punished as per law. There is a need for people like SS Mundra, who is hard core banker, to issue statements that such scams are not part of corruption but frauds and these are risks associated with every financial entity and will be tackled by strengthening systems and procedures.
Banks on their part must act swiftly against such fraudesters without any guilt or fearing of backlash for reputation risk of the bank. As swift and strong action against the culprits will send a strong message for others. I still remember a case where a foreigner got encashed stolen US$ 20 or so Traveller cheques from my desk. There was no guilt as we have taken sufficient precautions and got that traveler arrested from the Hotel and FIR was swiftly registered. Although it was a small amount, yet we ensured that culprit is booked though some suggested to let him off as it is petty crime. Thus, banks need to strengthen the fraud detection systems and take even small aberrations seriously. American Express people were so happy with our prompt action that they reimbursed the amount paid by us against stolen TCs and later on even gave gift as they felt obliged that we have helped them nab a criminal. In PS Banks this is missing, we try to frame our staff even if they have taken all the precautions and are afraid of following the criminals.
The culture of bulk deposits and last moment spurt of advances should be curbed. There should not be any targets for the year end. The targets should be only for Average Deposit and Average Advances on a day to day basis. With computerization in place, the calculations of average deposits and average advances can be generated on daily basis for each branch. The half year ending targets give a leverage to the fraudesters to lure branch managers into trap. Gullible branch managers fall into their trap. Thus fraudesters get a chance to run amock with the public money.
My another big worry is the new Modi Government’s announcement to launch Jan Dhan Yojana (Even earlier Congress wanted to launch such a project but failed as conceived it too late and tried to launch merely with elections in mind).
With recent set back due to CBI raids and top management passing through reputation crisis, no serving CMD will dare at this stage to take the government head on for launching of such a scheme with such a poor infrastructure at the PS banks.
The severe shortage of manpower at branches, pressure to contain NPAs, pressure for expansion of ATM network, opening of new branches in rural areas has already put the Bank Staff on the verge of collapse. The IT infrastructure in some banks is already under great stress. With necessity to open crores of new bank accounts, I fear the recovery of NPAs may suffer, which will further deteriorate the financial mess in banks. The issue of Rs 5000 as overdraft in every new account can create new problems at branch level.
In view of the above, I see only hope wherein the newly appointed Deputy Governor, Mr SS Mundra, who is from banking fraternity, steps in save the bankers. He is the person who can impress upon RBI Governor, Finance Ministry officials, the need for creating infrastructure before launching of new Jan Dhan Yojana or restrict its speed.
It is regrettable that Mr K C Chakrabarty (who too was from banking fraternity), Ex-Deputy Governor, who was better equipped to handle this issue and was in better times, miserably failed to protect the interests of the bankers. Rather he was instrumental in bashing the bankers by issuing controversial statements like PS bankers salaries being more than private sector banks etc. He preferred to take confrontation with the then Governor of RBI to satisfy his ego of supremacy and never supported Aam banker.
I hope Mr SS Mundra will not let down the bankers and play a positive role. If he fails to rise to the occasion, bankers will face tough times ahead and Indian banking is likely to suffer irreparable damage in next two years or so. I am of the firm that one post of Deputy Governor has been kept reserved for a banker only such eventualities where the interests of the bankers may be ignored due to lack of knowledge about the problems being faced by bankers.
This is also an opportunity for UFBU to get an honourable settlement from IBA / GoI. Let them show their strength and declare that with the existing infrastructure it will not be possible to go for financial inclusion to the level desired by Government. Let government come out with a proposal to accept 25% increase in wages as demanded by UFBU, and in return let bankers help the government in smooth implementation through outsourcing some of this work and overseeing that KYC norms are not compromised etc.
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