CVC asks banks to be extra cautious while sanctioning loans-Times of India
-(Read My Views Below)
NEW DELHI: The Central Vigilance Commission (CVC) wants banks to be extra cautious while sanctioning loans, in light of the recent scandal involving alleged bribes in exchange for credit limit enhancement at Syndicate Bank.In a letter to the finance ministry, the vigilance authority has pointed out that some banks were not following procedures while approving loans.
This has put the state-run banks in a bind. The economy is poised to revive and the Reserve Bank of India has prepared the ground for an expected surge in loans on account of this, kicking off a virtuous cycle of investment leading to more jobs and further acceleration in growth. It is in this scenario that banks are being asked to closely adhere to the rules. A chairman of a state-run bank said such messages will further erode the confidence of employees — already shaky given the push to open up cases where wrongdoing may have occurred — and that credit growth will suffer as a consequence.
"Some months ago we were talking about policy paralysis now we will see 'loan paralysis' if we continue to scrutinise every business decision from a vigilance point of view," said the executive, who didn't want to be named. Annual credit growth has fallen below 10% for the first time since October 2009. As of September 5, it stood at 9.68% from the previous year. RBI expects credit growth to pick up in the second half of 2014-15 as industrial recovery gains momentum and has eased norms to free up the amount of money banks can lend.
According to a government official aware of developments, the vigilance authority has pointed out a case where a loan was sanctioned before it was documented in the minutes of the credit appraisal committee meeting.
"While the credit appraisal committee had approved the loan sanction, later there were differences between the executive director and the bank chairman, and therefore it did not find place in the minutes of the meeting," said the official, adding that this led to vigilance complaints. Bankers are alarmed about the renewed message on abiding by the rules.
"What one should understand is that banking is a dynamic business. Certain decisions need to be taken in principle and the paperwork can follow," said the executive director of a state-run bank, adding that waiting for the paperwork to get done can lead to loss of business.
Another banker said banks follow all prudential lending norms before sanctioning any loan, indicating that the CVC message was unnecessary. "There may have been some cases where there was regulatory oversight but most bankers follow all the norms as it is their job which is on the line," he said, asking not be named.
The scrutiny on banks has increased in recent times after then Syndicate Bank chairman SK Jain was arrested in August by the CBI for allegedly accepting bribes to enhance the credit limit of some companies.
CBI has highlighted allegations that some candidates were appointed to senior banking posts despite adverse annual confidential reports (ACRs), suggesting that this could have been achieved through the manipulation of the marks awarded during the interview process.
"In a scenario where bad loans are increasing, there ought to be some concern over lending practices. Banks can avoid such instances if they follow the laid down norms," said a finance ministry official.
Gross non-performing assets of state-run banks touched Rs 2.16 lakh crore at the end of March, an increase of 39% over the previous fiscal
Link Times of India
Central Vigilance Commission vigil slows bank credit growth-DNA
Constant circulars – six in the last three months – are playing on bankers' psyche, forcing them to put off credit decisions
After the Syndicate Bank bribery case, the Central Vigilance Commission (CVC) has stepped up its vigil over banks. The commission has sent a series of letters to banks on vigilance issues and prevention of fraud, asking them to follow the procedures while sanctioning loans, which has resulted in banks sitting on credit sanctions.
Many banks are seeing negative credit growth as a result of these constant directives from the investigation agency, bankers have told dna.
The credit growth during the first half of 2014-15 -- from April to September -- stood at 1%, much lower than the 4.8% reported during the corresponding period last year. The credit to services sector had a steeper fall of 1.9% according to RBI data.
Head of a public sector bank said, "Constant circulars -- at least six in the last three months warning banks of fraud detection, directing them how to follow the exposure norms and the procedures for credit sanctions -- are playing on the psyche of bankers, preventing them from taking any credit decisions. There is demand for credit from certain quarters of industry, but banks are postponing credit sanctions."
Bankers agree that most of the sectors are over-leveraged and the demand is coming from companies with rather weak balance sheets or with high component of debt. Textiles, steel, cement and real estate are some of the segments that require credit but banks are refraining from taking any decisions.
Another banker said, "The stress is visible in companies which have grown in the boom years from 2000 to 2010. The older companies have stronger balance sheets. But the Supreme Court ruling on the coal blocks is a proof that credit decisions which may be over a decade old may be called to question. Banks and companies will be affected by the coal block cancellations."
According to the estimates by the credit rating company India Ratings & Research, the committed sanction to power projects in the private sector that are impacted by the SC judgement is around Rs 140,000 crore. Of this, the committed exposure of banks is estimated to be around Rs 90,000 crore (accounting for around 1.2% of banking system loans) while the balance would be accounted for by non-banking finance companies (NBFCs) such as Power Finance Corporation and Rural Electrification Corporation.
The large public sector banks (such as State Bank of India, Bank of Baroda, Bank of India, Canara Bank and Punjab National Bank) account for 46% of this exposure compared with 39% for the 10 mid-sized public sector banks in terms of assets. The risk, however, is much higher for the latter group.
Read my views in following links
Why Bankers Are Afraid of CBI and CVC if they are honest and true
CVC CBI And Bank Officers
Are Banks Full of Scams? If Yes Who Are Guilty? If Guilty of bribery , why they should not be punished?
Top Bankers want that government should not look into their corruption and stop CVC and CBI to make inquiries into their unfair deals in lending decisions. They mean to say that bad debts are rising not because they were negligent and ill-motivated in sanctioning loans , they mean to say that they are fully honest and did not indulge in bribe based lending and they mean to say that it is only due to interference of CVC , they lost enthusiasm to take decisions in loan proposals.
Who will believe it? Only politicians who are shareholders in corruption can understand the pain of bankers and accept their hidden agenda.
Private banks are flourishing but pubic sector banks are contributing more and more Non Performing Assets . Still top officials of the PS banks are not ready to accept that their bad lending and bad monitoring have only resulted in accumulation of stressed assets..Yes there are other hurdles like legal constraints also which cause delay in recovery from willful defaulters. Yes it is also true that politicians are exploiting banks for their vested interest. But none can deny that corruption in banks at top level has polluted culture down the line in the same way as ministers have polluted culture in administrative system all over the country.
Now when bankers are getting exposed, they are approaching Finance Minister to stop CVC and CBI making inquiry and investigation into actions and intentions of corrupt bankers.Thieves are asking police officers to shut their eyes when they act.
I simply ask government of India and Finance Minister to order assessment of wealth of all CEOs and top ranked officers who have retired during last ten years .The finding of such assessment will make it crystal clear whether bankers indulged in corrupt practices or not.
It will also make it clear whether CVC and CBI are real hurdles in the path of honest lending . It will also expose the bad intentions of politicians who ruled over banks during last ten to twenty years. It will make it clear how bankers and politicians together raped honest and talented officers in the name of merit oriented recruitment and promotion policies.
Not to speak of CEOs of bank, even assessment of top executives will tell how much deep rooted corrupt culture has damaged the fundamentals of banks and why honest officers are not getting elevated in public sector banks. Honest investigation of promotion process which took place during last ten to twenty years will tell how flatterers and bribe earners got promotions at the cost of good and devoted performers.
Last but not the least if bankers are afraid of CVC and CBI and if they want to get rid of CVC and CBI inquiry , why politicians and other administrative officers should face the inquiry from CVC and CBI when they are found indulged in corruption. It means the structure of CVC and CBI and all anti corruption bodies should be dismantled. Government of India after all cannot have discriminatory rules and laws.
Demand of time is to weed out corrupt officials to pave the way for honest workers and devoted performers. For this purpose Government of India will have to ensure respect for honest performers and will have to remove discriminatory clauses in recruitment and promotion processes which empowers top officials to act as per their whims and fancies. Because it is only unregulated powers to top officials which has made officers corrupt and which has resulted in a culture which promotes only flattery and bribery .Government of India will have to make laws strict and non-discriminatory so that honest officers like Ashok Khemka are not bought to task .
Yes it is desirable that honest officers are not trapped on flimsy ground by mischievous politicians and or mischievous CVC or officials of CBI. This is why I reiterate that rules and policies should be such which is more and more transparent and which does not permit corrupt officers to act as per his or her whims and caprices.We have to devise such methods which gives more justice to honest workers and which weed out dishonest officers to the best extent possible. We do not dream of ideally full proof system , but can dream of best possible system to ensure reign of justice
No comments:
Post a Comment