The Bombay High Court has asked the Reserve Bank of India to respond to a petition which seeks CBI probe into fraudulent grant of loans and consequent rise in nationalised banks' non-performing assets.
The division bench of Justices Abhay Oka and GS Kulkarni last week directed RBI to file a reply and posted the matter for hearing on December 9. The PIL, filed by activist Ketan Tirodkar, says the NPAs of nationalised banks jumped from Rs 455 crore in March 2008 to Rs 9,190 crore in March 2012 as per the data obtained under the Right to Information Act.
Tirodkar further says that several banks had reported to CBI at least 140 cases of fraud in loans between 2008 to 2012. However there is no information as to whether cases were registered.
Click Here Read Story How Rs.4000 Crore Became Rs.6.Crore
The nationalised banks have not complied with the Banking Regulation Act which requires that periodically annual reports be submitted to the apex bank. Had the reports been submitted the fraud would have come to light, the PIL says.
This was done to shield the beneficiaries of such bad loans who are in league with bank officials, it alleges.
The bank authorities sanctioned loans in many cases by manipulating the feasibility reports and did not report accumulating NPAs to RBI, it says.
"When such defaults in repayment of loans are brought to the notice of the apex bank, it is not possible at that stage to issue corrections and the banks are forced to write off the loans or settle them for peanuts," the PIL says, seeking a direction to CBI to register criminal cases.
http://www.dnaindia.com/india/report-bombay-high-court-seeks-reserve-bank-of-india-s-response-to-pil-on-non-performing-assets-2027911
PSU bank trio in a spot in UK-The Telegraph
Mumbai, Oct. 20: At least three Indian public sector banks with operations in the UK may have to rejig their structure after the Bank of England’s Prudential Regulatory Authority (PRA) announced new norms last month.
Banking circles fear the new norms can affect the operations of the State Bank of India (SBI), the Bank of Baroda and the Bank of India, which largely serve the diaspora there.
Last month, the PRA had issued a detailed guideline on the supervision of international banks following a draft note in February.
In the UK, foreign banks can operate either as subsidiaries or as branches.
A subsidiary is a legal entity separate from the parent and meets its own capital and liquidity requirements. A branch may not have its own capital base or board.
Such branches are monitored by the home state supervisor (HSS) where the bank is based and the PRA.
Under the latest norms, the PRA will cover both new and existing branches to ensure the safety and stability of the UK’s financial system. It will also assess whether the home country’s supervision is equivalent to that of the PRA.
The PRA said it would allow banks to offer retail services beyond the minimum levels if there is a “very high level of assurance from the HSS”.
Further, such branches will be allowed wholesale banking at a level that is not critical to the UK economy, which means any disruption in their service should not result in financial instability in that country.
The PRA indicated that the new conditions would not apply to international banks with less than £100 million of deposits.
The SBI and other banks have deposits of more than £100 million in the UK. Hence, these lenders will now have to tweak the structure and take the subsidiary route.
These banks can continue to operate as branches, depending on the PRA’s assessment.
“Where an HSS is determined not to be equivalent... the firm will need to operate in the UK as a subsidiary,” the PRA said.
Meanwhile, the State Bank of India has said it is determined to continue retail banking operations in the UK despite the crackdown by the Bank of England, reports PTI.
According to the agency, Mrutyunjay Mahapatra, the UK head of the bank, has told The Times newspaper that the bank will keep serving retail customers in Britain as well as open new branches
My Observation :
Bank Scam Is Bigger Than Coal Scam
Bank Scam Is Bigger Than Coal Scam
Ten times of money what Government has lost in Coal Scam or 2G Scam is likely to be lost in bank lending scam which is slowly and gradually coming to light. CBI, CVC and GOI all are moving very slow on exposure of ill-motivated lending undertaken by bank officials in nexus with top politicians of UPA government during last decade.
This is because big corporate houses are involved in bank scam and they are using their money power and political powers to delay the proceeding on bank scams at all levels.
RBI ordered forensic audit of United Bank, Central Bank, Indian Bank and many other banks but till date has not brought white papers on the findings of auditors and course of action they are planning to take or have taken till now.
Bigger banks like SBI or PNB or BOB may have bigger scams if some powerful body takes initiative to discover the same.
I am submitting below my Blog of October 2013 to refresh the views on bank scam.
This is because big corporate houses are involved in bank scam and they are using their money power and political powers to delay the proceeding on bank scams at all levels.
RBI ordered forensic audit of United Bank, Central Bank, Indian Bank and many other banks but till date has not brought white papers on the findings of auditors and course of action they are planning to take or have taken till now.
Bigger banks like SBI or PNB or BOB may have bigger scams if some powerful body takes initiative to discover the same.
I am submitting below my Blog of October 2013 to refresh the views on bank scam.
It is astonishing that Prime Minister and PM office has confirmed that allocation of coal mines to Hindalco was fully and undoubtedly on merit basis and strictly as per the prevailing policy. They loudly and openly claim that Nothing wrong had occurred in allocation of coal mines to Hindalso or other corporate houses and the same has been asserted by Congress Party High Command and gang of ministers working under Prime Minister.
But his Yesman Sri Salman Khursid in a bid to gain good , better and best wishes from PM says that PM was not in a position to read all lines and all papers and documents before signing on allocation papers related to Hindalco or any other corporate allottees. It means he has tried to focus and prove that though the decision taken in favour of Hindalco was wrong ,PM in person may not be held responsible for the same because it was not humanly possible for PM to read all lines before signing on the same.He justifies indirectly the action of CBI of filing FIR and thus trapping of Secretary Mr. Parekh and Kumar Mangalam whose images are as untarnished and unblemished as that of clever PM Manmohan Singh.
He , Mr. Salman Khurshid means to say that his PM’s secretary Mr. Parekh may be involved in conspiracy as alleged by CBI but his boss PM is innocent , PM should be exonerated and considered as honest and above board. he further says that PM only singed as a rubber stamp. Similarly when PM withholds any proposal or declines, he is misguided by Secretary or the proposal was recommended by state government or recommended by BJP. In his opinion or as per wishes of Congress Party ,PM and his ministers and his other colleagues are innocent, CBI may be wrong just as CAG was termed wrong in 2G scam.
If we take lessons from what Mr. Khurshid has tried to place logic in support of PM, the Nation has to redefine the role and function of PM and that of cabinet working under him. Further In such position there is no need to select an educated and talented person for the post of PM and a lady like Rabri Devi may be selected as PM because he or she has not to apply his or her mind before taking any decision or signing any paper. He or she has to read the message as drafted by party high command.
But on the contrary when people of India praises any decision of the government or the volume of growth , or so called rise in GDP or concocted fall in crime the credit must go to PM and his government.
Here I would like to submit one illustration of bank loans. Big amount of loans are sanctioned usually by a Regional Head or a Zonal Head or ED or CMD and only small amounts of loans are sanctioned unilaterally by a Branch Head.
When CMD or ED accepts some bribe or extraordinary gift in cash or in kind for him or for his friends and relatives, he will make a phone call to Zonal Head or Regional Head . As soon as phone call comes, entire work force in Regional Office and Branch become active and loan proposal is prepared in such a way that higher office sanctions the same without raising any eye brow or without asking for reply on any query. This happens in the same way when party High Command or PM or nay ministers desire any work to be done or any contract work has to be allotted to any contractor.All rules and laws may be violated by subordinates when instruction orally pour in from top bosses . Juniors are always ready to honour all wrong or right orders in fear of action in way of transfer or rejection in promotion process.
When CMD or ED accepts some bribe or extraordinary gift in cash or in kind for him or for his friends and relatives, he will make a phone call to Zonal Head or Regional Head . As soon as phone call comes, entire work force in Regional Office and Branch become active and loan proposal is prepared in such a way that higher office sanctions the same without raising any eye brow or without asking for reply on any query. This happens in the same way when party High Command or PM or nay ministers desire any work to be done or any contract work has to be allotted to any contractor.All rules and laws may be violated by subordinates when instruction orally pour in from top bosses . Juniors are always ready to honour all wrong or right orders in fear of action in way of transfer or rejection in promotion process.
If any Branch official or RO officials submits negative points of the proposals and incorporate some financial and factual reality which may cause hurdle in sanctioning, they are fired and threatened on phone to modify the proposal suitably and if some dare officer does not listen to their advice , he has to be hanged , he has to be transferred to the most critical remote place or he has to be rejected in promotion or he has to be trapped in any false and fabricated case in the same way as Mr. Khemka is being served one after other charge-sheet by Harayana Government.
Similary ,on the contrary if any CMD or ED or GM or DGM does not want to sanction a loan forwarded by RO or a Branch of a bank or when they do not get any personal gain from such sanction they will not hesitate in raising hundreds of queries which may not be replied by a simple Branch official without inviting any repercussion from top officials.You may term this culture as reign of terror or culture of flattery and bribery. But such thing happen usually in all offices and all government departments.
When above loan is sanctioned and after a year or two the same loan goes bad, the accountability and responsibility will be fixed on junior officers. CMD or ED who were fully instrumental in sanction of loan to bad person will be nowhere in blame list and will be awarded with several prices for loan growth in that bank. When high value loan is sanctioned , credit goes to top bosses for credit growth and when loan is declared as bad , subordinates are accused and punished .
This is small illustration of how high values loans and high value decisions are taken by top ministers and top officials in India and when it is proved that there was corrupt dealing , they will punish juniors or else say that if action is taken against such high profile persons , people will avoid taking any decision and country will suffer.Some of clever ministers are accusing CBI and expressing apprehension that if such FIRs are filed , people will not take any good decisions.
If a scam master or an corrupt officers with ill motivated plan takes a bad decision he is termed as positive minded and creative minded and on the other if someone dares challenge ill-motivated decision , he is punished such as Khemka, or Arvind Kejriwal or Ramdeo or Balkrishna , a disciple of Ramdeo. If corrupt officers and ministers are accused and if court suggests action against them , our clever minister accuse even Apex court of indulging in Judicial activism.Entire system comes forward in support of corrupt officer and corrupt minister and on the contrary none dares speak if some honest officer like Khemka is punished for none of his fault.
If a scam master or an corrupt officers with ill motivated plan takes a bad decision he is termed as positive minded and creative minded and on the other if someone dares challenge ill-motivated decision , he is punished such as Khemka, or Arvind Kejriwal or Ramdeo or Balkrishna , a disciple of Ramdeo. If corrupt officers and ministers are accused and if court suggests action against them , our clever minister accuse even Apex court of indulging in Judicial activism.Entire system comes forward in support of corrupt officer and corrupt minister and on the contrary none dares speak if some honest officer like Khemka is punished for none of his fault.
I therefore not at all surprised by statement made by Mr. Salman Khurshid in favour of PM or any supporting statement given by Manish Tiwari or other spokesman of Congress Party.
The deep rooted flattery and bribery culture has place for corruption and corrupt officials and corrupt ministers only.
It is possible only in India that a secretary is accused of conspiracy in coal allocation case related to Hindlaco but the PM who verbally and through his sign approved the decision is considered as innocent .
I hereby do not mean to blame PM or any other person, neither I mean to declare any person innocent without an honest investigation by investigating agency or police or by court , but I feel government should not interfere in the course of action taken by any court or CBI , if at all they want to save the country from the clutches of criminal and corrupt officers and ministers.Law is same for all , same for PM and that for his secretary, same for CMD of a bank and that for his junior officers.
Lastly it may be true that coal allocation was done in the overall interest of the country without any malicious intention,then in such case , if PM or PMO feel that PM is innocent in coal scam, they should openly say that CBI is wrong , Supreme Court is wrong in ordering investigation in coal allocation files , Congress Party spokesmen should say openly and admit that PM's secretary Mr. Parekh is blameless and FIR filed by CBI against Mr. Parekh and Mr. Kumarmangalam is ill-motivated and wrong from all angle of consideration.
The deep rooted flattery and bribery culture has place for corruption and corrupt officials and corrupt ministers only.
It is possible only in India that a secretary is accused of conspiracy in coal allocation case related to Hindlaco but the PM who verbally and through his sign approved the decision is considered as innocent .
I hereby do not mean to blame PM or any other person, neither I mean to declare any person innocent without an honest investigation by investigating agency or police or by court , but I feel government should not interfere in the course of action taken by any court or CBI , if at all they want to save the country from the clutches of criminal and corrupt officers and ministers.Law is same for all , same for PM and that for his secretary, same for CMD of a bank and that for his junior officers.
Lastly it may be true that coal allocation was done in the overall interest of the country without any malicious intention,then in such case , if PM or PMO feel that PM is innocent in coal scam, they should openly say that CBI is wrong , Supreme Court is wrong in ordering investigation in coal allocation files , Congress Party spokesmen should say openly and admit that PM's secretary Mr. Parekh is blameless and FIR filed by CBI against Mr. Parekh and Mr. Kumarmangalam is ill-motivated and wrong from all angle of consideration.
Public sector banks hiding bad loans’ size: Ex-CVC-ETNEW DELHI: Restructuring of loans on easy terms may not be the best solution to tackle the bad loans of public sector banks (PSBs), former central vigilance commissioner Pradeep Kumar said, and expressed concern that state-run banks were probably suppressing the size of the "real crisis involving NPAs (non-performing assets)".
For over two years, the CVC has been pursuing several cases of NPAs, many of which are suspected to be the result of an organized fraud, and has played a key role in referring some of the cases to the CBI for criminal investigation. He has conducted detailed vigilance inquiries into some of the biggest bank loan defaults, and has recommended disciplinary action against dozens of bank officials.
"Willful defaulter is a process. There are two types of things happening — one is the declaration of someone as a willful defaulter, the other is restructuring of loans. Restructuring of loans is taking place with easier conditions. Both are of concern. NPAs are getting suppressed — the RBI has taken note of it," Kumar, who retired this weekend, told TOI in an interview. "There is a lot of corporate restructuring happening, but even then loans are not getting alright," said Kumar.The former CVC's comments come at a time when sources in the CBI and other investigating agencies are also pointing out that PSU banks may be suppressing the extent of bad loans in the sector.
Kumar said, "It comes as a concern when the banking sector is taken for a ride by corporates in connivance with bank officials. There have been a number of cases of bank frauds and that is an area we are looking into closely."
The former CVC said bank officials must act responsibly and have to be accountable for their actions. Kumar said the appointment of bank directors have to be fair and transparent "as they are ultimately responsible for all large decisions of the banks".
A senior investigator recently said banks were reluctant to declare loans as frauds despite overwhelming evidence because of its implications — for its senior staff and the balance-sheet.
CVC inquiries have revealed several cases — Winsome Diamonds which has an NPA of Rs 6,500 crore, Biotor's Rs 1,100 crore and Mahuaa TV with almost Rs 1,800 crore. The government has taken several steps to tame the problem of bad loans. It is also amending laws to help banks recover their dues and stop the fund flow to suspect companies.
http://timesofindia.indiatimes.com/business/india-business/Public-sector-banks-hiding-bad-loans-size-Ex-CVC/articleshow/44146242.cms
Former CVC is right: There is a cancerous growth in Indian banks – hidden NPAs-First Post
The comments of former central vigilance commissioner (CVC) that state-run banks were probably suppressing the bad loans on their books by restructuring these loans with easier conditions is highly critical and gives a hint on how frightening the actual bad loan situation can be in India’s banking system.
“NPAs (non-performing assets) are getting suppressed—the RBI(Reserve Bank of India) has taken note of it,” said Pradeep Kumar, former CVC, in an interview with Time of India on Friday.
What Kumar said is something which every stakeholder in the banking system — the bankers, the companies, the regulator and the finance ministry (which effectively controls 70 percent of the banking industry through public sector banks) knows very well for long, but has conveniently ignored for their own interests.
For several years now, the banking industry, in particular state-run banks, have been subjected to severe, frequent misuse by a nexus of crony capitalists, corrupt bankers, middlemen and politicians.
This typically happened in two stages.
First is when the loan is being sanctioned. The nexus is at work then in the case of companies, which originally didn’t merit the loan. The banker is bribed or influenced by the politician or the firm through the expert middleman, who seal the deal for the beneficiaries.
This happens typically in state-run banks, where officials lack accountability, power, autonomy in their functions and are prone to flouting rules when bribed or pressurized by those with money power.
Logically, a company which secures the loan through this mechanism wouldn’t be able to honor its repayment obligations for long since in the first place, the firm didn’t deserve the loan. If it did, there was no need to trigger the nexus to operate.
Two, when the crores of money thus lent and not repaid by the unworthy borrower are about to turn an NPA, the nexus again returns to work and push the banks to offer additional assistance/ relaxation to the same faulty borrower through some easier terms (slashing lending rates, extending repayment period, offering a moratorium and taking a haircut), commonly known as loan restructuring.
This is something, again, the company doesn’t deserve, since loan recast facility is originally intended for companies in genuine trouble not cronies.
As Firstbiz has argued in the past (here and here), there are strong reasons to believe that a sizeable chunk of the current stressed asset mess is attributable to criminals in the banking system.
If one take a closer look at the major bad loan cases that have been now investigated for charges of wilful defaulting/ criminality/ fraud such as Rs 7,000 crore loan owed by Vijay Mallya-led Kingfisher Airlines, Rs 6,500 crore loan of Winsome Diamonds and Rs 40,000 crore of Bhushan Steel, Rs 2,500 crore loan owed by Mumbai-based Tayals and several other similar cases, one needn’t take much effort to understand how the current pile of publicly stated bad/ restructured loan happened.
Bankers have been well aware of several cases going into loan recasts without merit but kept silent until recent past for fear of their jobs and for the sake of their own career development/ post-pension vocation programmes.
A change in this scenario happened only in the last 2-3 years, when the lead lenders at the corporate debt restructuring (CDR) forum took up the issue with the RBI seeking change in rules to prevent companies from misusing the system.
But that’s about companies. What about banks themselves misusing credit recast facility to rescue a non-meritorious firm? That’s what the former CVC has highlighted now.
If indeed banks were honest in stating the actual status of many of their loan accounts and showed the guts to call a spade a spade, the actual figure of bad loans would have been much higher than the Rs 2.5 lakh crore gross NPAs disclosed by them till June.
As RBI governor Raghuram Rajan said in the post monetary policy presser on last Tuesday, banks shouldn’t postpone the bad loan problem for tomorrow and instead deal with it today, because “tomorrow will be worse”.
But that’s precisely what banks have done all these years. The total chunk of loans restructured in the banking system is about Rs6 lakh crore (Rs 3 lakh crore through CDR and the rest through bilateral route).
Only a thorough investigation can reveal how much of this chunk is actually hidden NPAs. Identifying the problem is critical to find remedies. A Firstbiz estimate shows about 14 percent of the loans given by banks until June is under the stressed asset category. That’s not a good signal for an aspiring economy like India.
Bad loans make banks weak.
If banks fail to detect or pretend not to have them on their books, that can be even more fatal for the whole economy at a later stage. Banks are the backbone of an economy and the managers of public money. Hence, safeguarding them should be the utmost priority of the policymakers.
As Firstbiz noted earlier, the only way out to come out of the current situation plaguing India’s private sector banks is to privatise them and change them as better governed institutions.
Putting good money after bad and understating the financial health do not often happen in private sector banks like in the case of state-run lenders.
Hidden bad loans are like cancer. The problem with the cancer is, if left undetected, it lives merrily with the victim for a considerably long period, before manifesting one day with its full might.
That day comes with a cost
http://firstbiz.firstpost.com/biztech/former-cvc-is-right-there-is-a-cancerous-growth-in-indian-banks-hidden-npas-103154.html
For over two years, the CVC has been pursuing several cases of NPAs, many of which are suspected to be the result of an organized fraud, and has played a key role in referring some of the cases to the CBI for criminal investigation. He has conducted detailed vigilance inquiries into some of the biggest bank loan defaults, and has recommended disciplinary action against dozens of bank officials.
"Willful defaulter is a process. There are two types of things happening — one is the declaration of someone as a willful defaulter, the other is restructuring of loans. Restructuring of loans is taking place with easier conditions. Both are of concern. NPAs are getting suppressed — the RBI has taken note of it," Kumar, who retired this weekend, told TOI in an interview. "There is a lot of corporate restructuring happening, but even then loans are not getting alright," said Kumar.The former CVC's comments come at a time when sources in the CBI and other investigating agencies are also pointing out that PSU banks may be suppressing the extent of bad loans in the sector.
Kumar said, "It comes as a concern when the banking sector is taken for a ride by corporates in connivance with bank officials. There have been a number of cases of bank frauds and that is an area we are looking into closely."
The former CVC said bank officials must act responsibly and have to be accountable for their actions. Kumar said the appointment of bank directors have to be fair and transparent "as they are ultimately responsible for all large decisions of the banks".
A senior investigator recently said banks were reluctant to declare loans as frauds despite overwhelming evidence because of its implications — for its senior staff and the balance-sheet.
CVC inquiries have revealed several cases — Winsome Diamonds which has an NPA of Rs 6,500 crore, Biotor's Rs 1,100 crore and Mahuaa TV with almost Rs 1,800 crore. The government has taken several steps to tame the problem of bad loans. It is also amending laws to help banks recover their dues and stop the fund flow to suspect companies.
http://timesofindia.indiatimes.com/business/india-business/Public-sector-banks-hiding-bad-loans-size-Ex-CVC/articleshow/44146242.cms
Former CVC is right: There is a cancerous growth in Indian banks – hidden NPAs-First Post
The comments of former central vigilance commissioner (CVC) that state-run banks were probably suppressing the bad loans on their books by restructuring these loans with easier conditions is highly critical and gives a hint on how frightening the actual bad loan situation can be in India’s banking system.
“NPAs (non-performing assets) are getting suppressed—the RBI(Reserve Bank of India) has taken note of it,” said Pradeep Kumar, former CVC, in an interview with Time of India on Friday.
What Kumar said is something which every stakeholder in the banking system — the bankers, the companies, the regulator and the finance ministry (which effectively controls 70 percent of the banking industry through public sector banks) knows very well for long, but has conveniently ignored for their own interests.
For several years now, the banking industry, in particular state-run banks, have been subjected to severe, frequent misuse by a nexus of crony capitalists, corrupt bankers, middlemen and politicians.
This typically happened in two stages.
First is when the loan is being sanctioned. The nexus is at work then in the case of companies, which originally didn’t merit the loan. The banker is bribed or influenced by the politician or the firm through the expert middleman, who seal the deal for the beneficiaries.
This happens typically in state-run banks, where officials lack accountability, power, autonomy in their functions and are prone to flouting rules when bribed or pressurized by those with money power.
Logically, a company which secures the loan through this mechanism wouldn’t be able to honor its repayment obligations for long since in the first place, the firm didn’t deserve the loan. If it did, there was no need to trigger the nexus to operate.
Two, when the crores of money thus lent and not repaid by the unworthy borrower are about to turn an NPA, the nexus again returns to work and push the banks to offer additional assistance/ relaxation to the same faulty borrower through some easier terms (slashing lending rates, extending repayment period, offering a moratorium and taking a haircut), commonly known as loan restructuring.
This is something, again, the company doesn’t deserve, since loan recast facility is originally intended for companies in genuine trouble not cronies.
As Firstbiz has argued in the past (here and here), there are strong reasons to believe that a sizeable chunk of the current stressed asset mess is attributable to criminals in the banking system.
If one take a closer look at the major bad loan cases that have been now investigated for charges of wilful defaulting/ criminality/ fraud such as Rs 7,000 crore loan owed by Vijay Mallya-led Kingfisher Airlines, Rs 6,500 crore loan of Winsome Diamonds and Rs 40,000 crore of Bhushan Steel, Rs 2,500 crore loan owed by Mumbai-based Tayals and several other similar cases, one needn’t take much effort to understand how the current pile of publicly stated bad/ restructured loan happened.
Bankers have been well aware of several cases going into loan recasts without merit but kept silent until recent past for fear of their jobs and for the sake of their own career development/ post-pension vocation programmes.
A change in this scenario happened only in the last 2-3 years, when the lead lenders at the corporate debt restructuring (CDR) forum took up the issue with the RBI seeking change in rules to prevent companies from misusing the system.
But that’s about companies. What about banks themselves misusing credit recast facility to rescue a non-meritorious firm? That’s what the former CVC has highlighted now.
If indeed banks were honest in stating the actual status of many of their loan accounts and showed the guts to call a spade a spade, the actual figure of bad loans would have been much higher than the Rs 2.5 lakh crore gross NPAs disclosed by them till June.
As RBI governor Raghuram Rajan said in the post monetary policy presser on last Tuesday, banks shouldn’t postpone the bad loan problem for tomorrow and instead deal with it today, because “tomorrow will be worse”.
But that’s precisely what banks have done all these years. The total chunk of loans restructured in the banking system is about Rs6 lakh crore (Rs 3 lakh crore through CDR and the rest through bilateral route).
Only a thorough investigation can reveal how much of this chunk is actually hidden NPAs. Identifying the problem is critical to find remedies. A Firstbiz estimate shows about 14 percent of the loans given by banks until June is under the stressed asset category. That’s not a good signal for an aspiring economy like India.
Bad loans make banks weak.
If banks fail to detect or pretend not to have them on their books, that can be even more fatal for the whole economy at a later stage. Banks are the backbone of an economy and the managers of public money. Hence, safeguarding them should be the utmost priority of the policymakers.
As Firstbiz noted earlier, the only way out to come out of the current situation plaguing India’s private sector banks is to privatise them and change them as better governed institutions.
Putting good money after bad and understating the financial health do not often happen in private sector banks like in the case of state-run lenders.
Hidden bad loans are like cancer. The problem with the cancer is, if left undetected, it lives merrily with the victim for a considerably long period, before manifesting one day with its full might.
That day comes with a cost
http://firstbiz.firstpost.com/biztech/former-cvc-is-right-there-is-a-cancerous-growth-in-indian-banks-hidden-npas-103154.html
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