If interest rate is made uniform, public sector banks will try for giving best service to customers of banks to attract more and more business and stop unhealthy practice of giving concessions in interest and other charges to take over business from other public sector bank. It is important to point out here that if one out of 28 PSU banks loses and other gains, it is finally not a gain to the government or to bank staff. Ultimately such banks compromise with quality of lending and pave the way for account turning to Non Performing Asset at a later date.
This is why quick mortality in all banks has been increasing quarter after quarter. Here Quick mortality means Advance given by a bank goes bad in the same financial year or in next year. But clever bank officers hide its for two to three years to avoid action from bosses and finally write it off on flimsy ground Or enter into compromise settlements with defaulters sacrificing all interest earned and even principal amount of loan . Bank officers normally try to keep loan account in standard category by hook or by crook till his is posted in that branch or till he is promoted or retired from bank's services
Some officers in bank raise a question why merger is not the solution to problem of interest rate competition among various PS banks. It is true that merger of all PS banks to form a big banking company will solve the issue of interbank competition in interest rat or in other charges for various services. Bank thus formed will strive hard simply for business and there will be end of unhealthy practice of taking over business from other banks. Any bank will not fear that if they do not reduce interest rate ,other bank will attract the client.
There is good point if the business is snatched from a private bank. It is rather true that private banks are snatching business of PS banks at a greater speed even though their charges are higher and interest rate is more.
If merger is done of all PS banks, PS banks will then try to serve the customers in better way or face the fate what BSNL or AIR INDIA is facing. But if merger is not done but only uniformity of interest rate is maintained as per national priorities of various loan segments, I hope banks will save money in loss of interest and reduce chances of account turning bad to a great extent. Not only this, there will be genuine competition in standard of service of various PS or private banks.
Business men want excellent , quick, comfortable, hassle free and personalised service , they do not bother charges or interest rate hike .They know how to earn profit and hence they focus on capital which they get from bank , they do not focus on interest load they have to bear. Contribution and role of interest in profitability of their business is minimum.
It is also true that in case of mergers in parts or mergers done selectively without taking car of conflicting work culture will spoil overall culture and ignite fire among union people. Therefore GOI have to convince bankers with pros and cons of merger and then take a bold step to merge all banks and tell bank staff clearly that their wage will be protected and linked with CPC. Majority of bank staff will slowly agree to it if it is found to be loaded with more positive points than negatives points.
GOI has to be serious and not only do only politics on it. GOI just want to save their face from tarnishing if some of PS banks fail to comply Basel III norms for capital. If merger is suggested by government only to avoid capital infusion in weak bank, they are prescribing wrong and harmful step to solve capital issue and they will have to face repercussion of this wrong step which will be more disastrous than they will face without opting selective mergers.
GOI has to be serious and make the legal machinery effective to recover the money from defaulters. If this is done entire problem of capital deficiency will be solved. After all tool of merger of PS banks may solve issue of capital or interest rate risk temporarily and give some relief to GOI for some time. But it may not be a permanent solution until they decide to plug all loopholes and stop all pilferages from banking system in loaning , recruitment and promotion processes..
Bankers will have to focus on profit and not on achievement of target of deposits and advances through manipulations and through window dressing. Banks are meant for doing business and particularly PS banks are to focus on social banking and not entirely on only profit making.They will lhave to stop non-banking business like insurance or demat service and focus on only lending and lending .Doing non-banking business may earn them a few crore of rupees as non-interest income but at the same time they may adversely affect the health of asset portfolio which may result in loss of hundreds of crores of rupees of the bank. Banks as such have to stop being penny wise and pound foolish.
Last but not the least is that GOI cannot stop public sector banks going from bad to worse merely by changing policy framework or by changing system or by changing CMD or ED or by merger or by changing location. Any system is not fool proof and all system have some merits and some demerits.. GOI will have to learn how to execute its policy honestly and in true spirit. They have to learn how to assess an individual's performance potential and post him at suitable place where he or she may give maximum output. They have to learn to properly assess the quality of an employee and give him timely promotion without punishing anyone only because he or she did not act as perfect Yesman. They have to allay the fear in the minds of field officials that if they do not achieve credit or deposit targets imposed on them unrealistically , they will be transferred to critical and remote place or they will be rejected in promotion process. Management of banks have to focus on quality of lending rather than volume of lending.
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Banks cannot be run by a person who possess maximum degree or who can deliver good speech or who is best flatterer and yesman. It is a service oriented industry where skill to serve the customer in best way keeping bank's interest intact is an unique art which is not derived merely by degrees or speaking expertise but by culture, attitude and character which is imbibed in his or her blood by natural parent and official guardians .
Banks cannot prosper until the management of banks as well as GOI stop promotions and postings based on flattery and bribery .Officials of GOI , ministers and RBI have to be active and effective in their roles and make administrative and legal set up strong and effective. Similarly officials of Bank managements should learn from private counterparts how they recognise the potential of junior individual and how they get maximum output by their employees without inviting any industrial problem. Pay package is not that much significant as far as performance of a person is concerned. Had it been so, PS banks could have done far better than private banks because average pay of PS bank employees is even now more than that of private banks.
Therefore it is totally the faulty HR management which is to a great extent responsible for current ill-health of PS banks. There are thousands of such instances when an officer is not promoted or transferred to inferior post only because he or she did not extend red carpet welcome to top officials during their visit. A GM rank Officer of Indian Bank was suspended only because he forgot the keys of the car inside when he went to receive CMD at airport. Many more such examples are in all banks.
Neither low interest rate nor merger plan of GOI can save banks from disaster in isolation. For overall and consistent growth of PS banks doing all social welfare schemes it is necessary to motivate each element of work force from time to time and award them for unique work done by a unique person. After all , PSBs have greater responsibility towards the society and the nation. They cannot be perfectly a profit making entity.This has to be kept in mind by all assessing , regulating, auditing, inspecting, vigilance , law enforcing and all monitoring agencies.
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