Big Loans Under Lens

As usual , top management of public sector banks are trying to put carpet on their evil deeds. They (IBA Chairman Mr. T N Bhasin ) have promised Ministry of Finance to introspect and carry out audit of big ticket loans and there is no doubt that they will issue a certificate of good health to save their brothers and sister who caused loss to bank by indulging in bribe led lending .

This is to mention here almost each branch of each bank is audited by internal auditors ever year, majority of them by audited by Statutory auditors too and many of them audited by concurrent Auditors. Even RBI inspectors used to audit various branches of banks. They all ignored bad accounts in the past and  issued good health certificates and they will undoubtedly  issue same certificates in future too to please MOF.

But they cannot stop rise in bad debts, this I can say now. Because evil doers and inspectors of evil deeds are if sane breed, they supplement each other.

Read full text at the bottom... 

Banks to put mid-size, big loans under lens-Hindustan Times

Mahua Venkatesh,September 02, 2014

With the loan books of public sector banks coming under scrutiny in the wake of the Syndicate Bank scam, top managements and even branches of state-owned lenders have decided to inspect all mid- and big-size loan books to ensure there are no discrepancies or unfair play.

Most banks have undertaken aggressive internal audits of their loan books and non-performing assets (NPA), as several bank frauds have been exposed.

The finance ministry has also said the banking system would be cleansed.

“We are looking into the issue, we will tighten the system and put in place a mechanism to increase accountability and transparency,” said GS Sandhu, secretary, financial services.

“Banks have undertaken scrutiny on their own and systems have been tightened to maintain quality and ensure there have been no lapses even in the past.

In case any case comes to the notice of any official, he would have to report the incident immediately to the management,” TM Bhasin, chairman, Indian Banks Association told HT.



The Central Bureau of Investigation recently arrested Syndicate Bank CMD SK Jain for allegedly accepting a bribe to enhance the credit limit of a private company.

On August 20, the finance ministry ordered forensic audits of the Oriental Bank of Commerce and Dena Bank for allegedly misappropriating Rs. 436 crore of deposits belonging to private and public sector companies.

Last week, a forensic audit was ordered into a few NPAs of UCO Bank as well.

“We are taking all necessary steps and we are carefully monitoring the assets,” RK Dubey, chairman and managing director, Canara Bank, said.

Banks would now have to indicate and highlight even those accounts that are performing as of now, but could be showing signs of stress.

This means that even if the borrower repays debt on time, she could come under the scanner if the bank notices early signs of uncertainty either in the company of the sector. The RBI has asked banks to classify such accounts as “special mention” accounts.

Reserve Bank of India: Banks must set loan timeline

To expedite credit decision, the Reserve Bank on Monday asked banks to set a timeline for disposal of loan proposals but did not ascribe a particular time frame for the same. “Banks should clearly delineate the procedure for disposal of loan proposals, with appropriate timelines, and institute a suitable monitoring mechanism for reviewing applications pending beyond the specified period,” RBI said in a notification.

The central bank also asked banks to make suitable disclosures about timelines by conveying credit decisions through their websites, notice boards and product literature, among others. However, it said that banks should not compromise on due diligence requirements. The move came after RBI noticed that there have been inordinate delays by banks to convey credit decisions, leading to delays in project implementation.

In its earlier guidelines, the RBI had stipulated that the timeframe within which loan applications up to Rs 2 lakh ought to be disposed of, should be indicated while accepting loan applications. “It is felt that a similar practice of time-bound decision making may be required in the case of other loans too,” the regulator said, adding that banks must put in place the required system within 30 days.

Meanwhile, the Reserve Bank also said bank accounts will not become inoperative if a dividend cheque has been credited in it in the previous two years. “Since dividend on shares is credited to savings bank accounts as per the mandate of the customer, the same should be treated as a customer induced transaction. As such, the account should be treated as operative account as long as the dividend is credited to the savings bank account,” Reserve Bank of India said in a notification.

 

Andhra Bank readies to take hit as farmers stop repaying loans

Ninety per cent of the bank’s farm loan book is made up of loans to farmers in Andhra Pradesh and Telangana

 

Viswanath Pilla

 

Hyderabad: State-run Andhra Bank is bracing for a hit after farmers in Andhra Pradesh and Telangana stopped repaying agricultural loans even before the new governments of the two states release money to follow up on loan waivers promised in their budgets for the year to 31 March.

 

Ninety per cent of Andhra Bank’s agricultural loan book of Rs.21,215 crore is made up of loans to the two southern states that are its home market, making it highly vulnerable to defaults by farmers. Farm loans accounted for 19% of the lender’s total advances of Rs.1.14 trillion as of 30 June.

 

“Neither the farmer is paying nor is the government paying,” said C.V. Rajendran, chairman and managing director of Andhra Bank, in a recent interview. “It’s a challenging phase.”

 

Promises of farm loan waivers in their election campaigns helped the Telugu Desam Party (TDP) come to power in Andhra Pradesh and the Telangana Rashtra Samithi (TRS) form a government in Telangana, which became India’s 29th state in June after the division of the former.

 

Andhra Pradesh has promised to waive farm loans worth up to Rs.1.5 lakh in addition to a loan of up to Rs.1 lakh advanced to self-help groups (SHGs or savings and credit groups); together the waivers would cost the state Rs.43,000 crore. Telangana promised a loan waiver of not less than Rs.1 lakh to farmers. The cost is estimated at between Rs.17,000 crore and Rs.20,000 crore.

 

Andhra Bank accounted 14% of total agricultural advances in Andhra Pradesh before its division and the grant of statehood to Telangana. The total farm advances in united Andhra Pradesh of all banks put together on 31 March was Rs.1.37 trillion, of which Telangana made up 40%.

 

Andhra Bank classified agriculture loans worth Rs.1,076 crore as non-performing assets (NPAs) in the fiscal first quarter and expects another Rs.1,000 crore to turn bad in the July-September period if the issue of the loan waiver scheme is not resolved.

Farm NPAs, which typically made up around 2.5% of total NPAs at Andhra Bank, rose around three times in the first quarter, Rajendran said.

 

Farm loans are classified as NPAs if the loan repayment is delayed over two agricultural seasons.

The bank said it has exposure of Rs.13,000 crore in terms of agricultural loans and Rs.4,400 crore worth of SHG loans in Andhra Pradesh. In Telangana, the bank has an exposure of Rs.7,000 crore to agriculture.

 

Andhra Pradesh is struggling for funds in the face of a revenue deficit of Rs.6,064 crore in the year to next March and a fiscal deficit of Rs.12,064 crore in the previous fiscal year. The state government made a provision of Rs.5,000 crore in the state budget towards the farm loan waiver, which covers only 12% of total loan waivers. The state government is exploring options, including bond sales, to raise money to repay banks. Telangana is relatively comfortable because the state has a revenue surplus of Rs.3,555 crore .

 

Andhra Bank is seeking to de-risk its business model by focusing on retail loans and expanding aggressively beyond its home base, which accounts for 60% of its total business. Rajendran said the bank is focusing on reducing the “concentration risk by expanding aggressively” outside of Andhra Pradesh and Telangana and seeking to build a pan-India presence.

 

“Though we continue to expand in Andhra Pradesh and Telangana, we want to bring the overall exposure down to 35% from current levels of 60% and double the size of our pan-India portfolio,” Rajendran said.

 

The bank has opened nine new zonal offices, of which eight are outside of its home base—in Ahmedabad, Bhopal, Coimbatore, Jaipur, Kochi, Ludhiana, Patna and Pune.

“Our plan is to open at least 30-40 branches under each zonal office,” Rajendran said, adding that the bank would open 60 branches in the next 18 months.

The farm loan waivers have come in for criticism.

 

“Farm loan waiver is the worst form of populism to win votes,” said Rajesh Chakrabarti, executive director at the Bharti Institute of Public Policy at the Indian School of Business. “It completely destroys credit culture because it creates an environment where farmers become more prone to taking loans and assuming that government will come and bail them out.”

 

Andhra Bank’s gross NPAs stood at 5.98%, or Rs.6,827 crore in the quarter ended June, higher than the average gross NPA of the banking industry, which stood at 3.9%. Around 11% of total advances are being recast.

 

“The agricultural NPAs have spoiled the asset quality of Andhra Bank, which was otherwise on a steady path of recovery with most asset quality concerns seemed to be factored in,” said Mona Khetan, banking analyst at Mumbai-based Elara Securities (India) Pvt. Ltd. “Concentration risk in Andhra Pradesh and Telangana is a concern, but that was Andhra Bank’s strength so far because they understand this region well,” Khetan added.

 

Andhra Bank said it needs a capital infusion of Rs.800 crore this year. “We are expecting around Rs.200-300 crore from the Union government; the rest we are planning to raise in form of selling shares to institutional investors, on which the board has to take a decision,” Rajendran said.



My opinion on news mentioned above is given below

This refers to news item which says that IBA Chairman has assured Ministry f Finance that every bank will now introspect into their asset portfolio and carry out audit in their banks to find out whether any case of bad lending exists.

　

There is no doubt that clever top officials of every bank along with Secretary MOF are trying to throw dust in the eyes of media and critic of the banks by giving such false statement. Work of audit is a regular phenomenon and it is not new that IBA Chairman will do to stop evil deeds .

　

As usual , top management of public sector banks are trying to put carpet on their evil deeds and hence they (IBA Chairman Mr. T N Bhasin ) have promised Ministry of Finance to introspect and carry out audit of big ticket loans and there is no doubt that they will issue a certificate of good health very soon to save their brothers and sisters who caused loss to bank by indulging in bribe led lending as also to save the skin of RBI officials .
 This is to mention here that almost each branch of each bank is audited by internal auditors every year, majority of them are also audited by Statutory auditors too and many of them audited by concurrent Auditors whose task to verify the working of every day of big branches. Even RBI inspectors used to audit various branches of banks. Inspite of all these stereo type auditing and inspection , Banks could not stop health of assets moving from bad to worse. None can deny that they all wilfully and strategically ignored bad accounts in the past and falsely and fraudulently issued good health certificates.

　

It is only due to implementation of Core Banking Solution in the bank and insistence of RBI to identify health of asset by using advanced technology that slowly and gradually bad accounts are coming to light. And I have no doubt that clever bankers will once again issue same certificates of good health in future too to please MOF. They know how to manage and taper with machine results too. This is why bank are slowly bringing bad loans of the past and that too in phases so that image of the bank may not face a jolt .

　

Several cases of fraudulent lending have come to light , several cases of cheating like that by Harshad Mehta or by Satyam Computers came to light in the past, none of clever bankers and neither RBI officials took lesson and none of them tried in real sense to improve the health and to stop evil doers from causing loss to banks. Volume loss caused by fraud or by bad lending or by cheating by loan taker have been increasing quarter after quarter and top officials also promise to stop it or control it but in fact that rather add fuel to fire.
 
　 
This is why I use to say that clever bankers cannot stop rise in bad debts. I can say so because evil doers including bankers, auditors, and inspectors of evil deeds are of same breed, they supplement each other and they safeguard mutual interest. After all most of them are birds of same feather. Bankers will therefore submit certificate of checking which RBI and MOF will keep in filing for record which usually happens in all cases of fraud and losses.
 
This is proper to mention here that Bank management of each bank has advised all branches to hang at least three  boards  in prominent place of the branch which will mention address of Ombudsman , Vigilance Officers and of head of Controlling offices. These boards give message to customers of bank that if they have any grievance or any case of bribing they may directly write to controlling offices or Ombudsman or Vigilance Officer against any bank staff who resort to evil ways and means. GOI and Bank management pose to believe that  each branch will function without indulging in corrupt practice and none of bank staff will indulge in corrupt practices.
But unfortunately they fail always to achieve what they mean to say and they mean to convey the message .. It is open secret that despite all such good boards displaying good messages, corruption is all where , in all offices and in all departments.