( Read My Comments below)
The top 10 defaulters account for a staggering Rs 28,152 crore of non-performing assets (NPAs) of public sector banks (PSBs), which have seen their profits coming down sharply due to the bad loans.
As many as 433 borrowers have taken loans of more than Rs 1,000 crore and above amounting to Rs 16.31 lakh crore, minister of state for finance Jayant Sinha said in a written reply to the Rajya Sabha on Tuesday.
The Reserve Bank of India (RBI) maintains data on borrowers, including corporates, who have borrowed Rs 5 crore and above including NPAs if any, Sinha informed.
Indian Overseas Bank (IOB) had last month reported net loss of Rs 516.03 crore for the third quarter as against Rs 75.07 crore in the year-ago period on higher provisions for bad loans.
"The net loss is due to increased provisions for domestic and overseas advances and also due to the conscious decision by the bank in containing its credit growth," IOB had said in a statement.
Oriental Bank of Commerce had announced a staggering 91.2-per cent fall in net profit to a mere Rs 19.56 crore for the third quarter on account of higher provisioning for bad loans and restructuring of assets.
OBC had a reported net profit of Rs 224.30 crore in the October-December quarter of 2013-14.
Gross NPAs of OBC rose sharply to 5.43 per cent from 3.87 per cent in the year-ago period.
Sinha said that to improve the health of the financial sector, reduce the NPAs, improve asset quality of banks and to prevent slippages, the RBI has issued instructions, including designing framework for revitalising distressed assets.
As per the framework, every bank has a Board-approved loans recovery policy and it requires a robust mechanism for early detection of signs of distress, including prompt restructuring in the case of all viable accounts.
It has been stipulated to review NPA accounts of Rs 1 crore and above by the Board and top 300 NPA accounts by the management of the Board, he said
.
Banks to restructure a record Rs 1 lakh crore worth of loans-DNA
Banks are in hectic parleys with borrowers to restructure over Rs 1 lakh crore of loans in the quarter (Jan-Mar) before the financial year draws to a close. Bhushan Steel and Bajaj Hindustan are among the big loan accounts where discussions are underway for a restructuring during the quarter.
From April 1, Reserve Bank of India (RBI) has taken away the special dispensation that allowed banks to restructure accounts and still call them standard loans. Restructured account is where a bank extends the repayment tenure, in certain cases waives off a certain portion of the interest costs, etc, so that the loan is not classified as a bad loan or a non-performing asset (NPA).
A senior banker told dna, "Many NPAs are showing up with the government delaying payments to their vendors who are in turn customers of the banks, and also other mid-sized companies who undertake government contracts. In many cases, the government and other public sector enterprises have failed to adhere to their payment schedule and it has resulted in companies being unable to repay to the banks."
According to bankers, most of the restructured loans will continue to come from mid-corporate companies in the iron and steel category, small/medium enterprises (SMEs) and clients dealing with commodities, among others, and the infrastructure companies led by power firms.
Among the two large loan accounts being restructured, Bhushan Steel's loan account stands at Rs 39,000 crore and Bajaj Hindustan over Rs 6,000 crore.
All banks, including private sector lenders, have given a guidance for a higher pipeline of bad debt with stress being maximum in the mid-corporate and small and medium enterprises.
Deep Mukherjee, director, India Ratings, said the withdrawal of regulatory forbearance could persuade banks to go on a massive restructuring drive by picking out the weak companies that need to be restructured with the timeline of March 31 in mind.
"The RBI guidelines also incentivise banks that quick implementation of a restructuring package would enable them to benefit from the existing special asset classification of such restructured accounts. Thus, there is sufficient economic motivation for banks to undertake the Rs 60,000-100,000 crore worth of loan restructuring, where accounts whose performance may deteriorate could be addressed at one go, enabling banks to start FY16 on a relatively clean slate," said Mukherjee.
Another senior banker said, "Banks will be exercising the restructuring window by picking out all the weak cases. But we need to be cautious as they also need to revive or it is going to take a hit on our books later on."
India's largest lender State Bank of India (SBI) said it has a restructuring pipeline of Rs 5,500 crore in the March quarter.
ICICI Bank management in a concall after the third quarter results, said, "Our restructuring pipeline for the fourth quarter that is January to March 2015 quarter is estimated at about Rs 2,300 crore, higher than the Rs 1,755 crore that bank restructured in the third quarter. Given the prolonged economic slowdown and uneven economic recovery, banks including us have witnessed slippages from the restructured portfolios." For the bank, most of the additions to bad loans and restructured category have crept in from the SME sector and the corporate book.
Among other banks, Bank of India's restructuring pipeline is over Rs 1,000 crore while Indian Overseas Bank has got Rs 2,000 crore worth of loans to be recasted.
Many banks, according to rating agencies, may end up restructuring higher debt than their projections. But if companies are quick to pick up the relief and revive their companies, it will be an exercise that would not go in vain for both the lenders and bankers.
Jaitley's bank strategy is messy: Weak PSBs may not find many takers in market-First Post
In all likelihood, the laxity on the part of the NDA government to immediately address the re-capitalisation needs of public sector banks (PSBs), especially smaller ones, will eventually open a Pandora’s box for Jaitley and his team, during the course of next few years.
The capital needs of banks, which the government is either underestimating or blissfully ignoring, is only getting bigger beginning this April when the new norms by the Reserve Bank of India (RBI) require banks to classify fresh restructured loans at par with non-performing assets (NPAs) and make provisions accordingly.
This will result in a substantial rise in the bad loan books of the banks, especially the state-run lenders, which have huge pipeline of rejigged loans, and some private banks. The December quarter earnings of banks indicate that the problem hasn’t ended and there is more pain to come.
These banks have been traditionally resorting to restructure a substantial chunk of stressed loans every quarter, to save them from slipping to bad loans and show a relatively healthy balance sheet. This is where the RBI has clamped down.
From April onwards, any such recasts would be treated as bad loans and banks need to make provisions accordingly. This means against the 5 percent provisioning for a standard restructured loan, banks need to make 15 percent straight. For existing stock, the norms will be applicable over a period of two years, but for new cases this will be with immediate effect.
This will sharply increase the provisioning burden of state-run banks and hit their earnings, unless the economy manages to pull a magical recovery, helping reduce the fresh cases of recasts and improvements in the existing ones.
The new rules kick in in the backdrop of the government refraining from committing the much needed capital assistance to PSBs.
On Wednesday, after meeting between the chiefs of public sector banks (PSBs) and the finance minister, on the performance of PSBs, banking secretary, Hasmukh Adhia made it abundantly clear that the government’s coffers are too weak to feed the banks it own. The government wants banks to go to the market and raise funds from public. This doesn’t appear a feasible solution for many banks.
The government, which is unwilling to pare its holding in state-run banks (it holds 56 percent to 84 percent in these banks), seems to underestimate the problem when Adhia observed that banks are adequately capitalised. “There is no immediate need to raise funds from the market,” Adhia said.
Adhia is wrong for a few reasons:
First, many among the PSBs have weak capital ratios and high bad loan levels, which requires immediate capital to service. As per the Basel-III norms, banks need to have minimum equity capital adequacy ratio of 7 percent and Common Equity Tier-1 (CET-1) capital of 5.5 percent.
A Firstpost analysis of Capitaline data shows that at least five government banks have Tier-I capital adequacy less than 8 percent. In addition, banks will also need to build a 2.5 percent capital conservation buffer to be used in bad times. Indian banks need to meet Basel-III norms by 2019 and the incremental burden keeps increasing every passing year.
Second, there will be a substantial increase in the provisioning burden of banks from April onwards when the new RBI norms on restructured loans kicks in. At present, for every new Rs 100 loan restructured, banks have to make a provision of Rs 5. This will go up to Rs 15 from April onwards.
Banks typically recast loans through the corporate debt restructuring (CDR) mechanism and bilateral recasts. While there are no official estimates of bilateral restructuring numbers, an analysis of CDR data of last 12 quarters show that, on an average Rs 22,500 crore fresh loan recast proposals.
Assuming this trend continues, the banking system will add Rs 3,300 crore provision every quarter, under the new rules.
But what the government has offered is just Rs 8,000 crore next fiscal, which is nearly half of what banks require to meet capital requirements arising out of Basel-III requirements; provision burden on bad and restructured loans; and rising demand for credit once the economy revives.
The solution that the government has offered is to raise capital from the market. But which investors, apart from state-owned LIC, would want to buy into the state-run lenders that are loaded with NPAs and have weak balance sheets?
To be sure, treating restructured loans as NPAs would indeed do good for the banking system in the long term. Over the years, banks have been pushing many stressed cases into restructured book to prevent them from slipping to bad loans, especially in the infrastructure sector. Since this wouldn’t work from now on, banks’ balance sheets will show the actual state of loan accounts.
The capital concerns of these lenders have just got bigger, whether the government acknowledges the problem or not.
The only way out, as Firstpost has noted several times before, is the government reducing its stake to below 51 percent, as recommended by the P J Nayak committee. They should get full autonomy.
State-run banks should be left to operate on their own and chances of their survival should be based on their competence, not the government aid. Until the NDA doesn’t show the willingness to introduce radical reforms in PSBs, it is only repeating the same mistakes UPA did.
Coop banks grapple with TDS burden of Rs 1,600 cr-FinancialExpress
The income-tax department has served notices on scores of urban cooperative banks as a new provision places an additional tax burden on the 1,600-odd UCBs in the country.
Under the new Finance Bill, 2015, an amendment to Section 194 (A) makes it mandatory for cooperative banks to deduct tax at source on deposits made by members and shareholders.
Earlier, no TDS was required to be deducted for members/borrowers and shareholders on deposits with interest below R10,000 annually. These members could file returns and, then, claim TDS separately, said Mukund Abhyankar, president, National Federation of Urban Cooperative Banks and Credit Societies (NAFCUB).
Abhyankar said local I-T officials have sought data on the last three years of interest payment on deposits of shareholders. He claimed banks were being asked not only to deposit the interest, but also the TDS amount for the last three years, along with a hefty penalty. This figure, he said, ran into crores and could wipe out the entire operating capital of UCBs.
Even small banks are learnt to have received notices for recovery of TDS dues of nearly R20-60 crore and the cumulative amount could run into R1,500-1,600 crore.
NAFCUB says banks are ready to start deducting TDS from the current financial year, but retrospective payment could land them in deep financial trouble. Moreover, as several customers might have claimed this amount in their I-T returns, providing details would be cumbersome for banks, said Vikrant Ponkshe, MD, Cosmos Cooperative Bank.
While NAFCUB has made representations to the Prime Minister, Union finance minister and department of finance on the issue, Abhyankar said five UCBs were planning to file a petition in the Supreme Court.
Hit by sluggish growth, public sector banks’ bad debts soar to 10-year high -Hindu Business Line
March 11:
Indian Overseas Bank (IOB) had last month reported net loss of Rs 516.03 crore for the third quarter as against Rs 75.07 crore in the year-ago period on higher provisions for bad loans.
"The net loss is due to increased provisions for domestic and overseas advances and also due to the conscious decision by the bank in containing its credit growth," IOB had said in a statement.
Oriental Bank of Commerce had announced a staggering 91.2-per cent fall in net profit to a mere Rs 19.56 crore for the third quarter on account of higher provisioning for bad loans and restructuring of assets.
OBC had a reported net profit of Rs 224.30 crore in the October-December quarter of 2013-14.
Gross NPAs of OBC rose sharply to 5.43 per cent from 3.87 per cent in the year-ago period.
Sinha said that to improve the health of the financial sector, reduce the NPAs, improve asset quality of banks and to prevent slippages, the RBI has issued instructions, including designing framework for revitalising distressed assets.
As per the framework, every bank has a Board-approved loans recovery policy and it requires a robust mechanism for early detection of signs of distress, including prompt restructuring in the case of all viable accounts.
It has been stipulated to review NPA accounts of Rs 1 crore and above by the Board and top 300 NPA accounts by the management of the Board, he said
.
Banks to restructure a record Rs 1 lakh crore worth of loans-DNA
Banks are in hectic parleys with borrowers to restructure over Rs 1 lakh crore of loans in the quarter (Jan-Mar) before the financial year draws to a close. Bhushan Steel and Bajaj Hindustan are among the big loan accounts where discussions are underway for a restructuring during the quarter.
From April 1, Reserve Bank of India (RBI) has taken away the special dispensation that allowed banks to restructure accounts and still call them standard loans. Restructured account is where a bank extends the repayment tenure, in certain cases waives off a certain portion of the interest costs, etc, so that the loan is not classified as a bad loan or a non-performing asset (NPA).
A senior banker told dna, "Many NPAs are showing up with the government delaying payments to their vendors who are in turn customers of the banks, and also other mid-sized companies who undertake government contracts. In many cases, the government and other public sector enterprises have failed to adhere to their payment schedule and it has resulted in companies being unable to repay to the banks."
According to bankers, most of the restructured loans will continue to come from mid-corporate companies in the iron and steel category, small/medium enterprises (SMEs) and clients dealing with commodities, among others, and the infrastructure companies led by power firms.
Among the two large loan accounts being restructured, Bhushan Steel's loan account stands at Rs 39,000 crore and Bajaj Hindustan over Rs 6,000 crore.
All banks, including private sector lenders, have given a guidance for a higher pipeline of bad debt with stress being maximum in the mid-corporate and small and medium enterprises.
Deep Mukherjee, director, India Ratings, said the withdrawal of regulatory forbearance could persuade banks to go on a massive restructuring drive by picking out the weak companies that need to be restructured with the timeline of March 31 in mind.
"The RBI guidelines also incentivise banks that quick implementation of a restructuring package would enable them to benefit from the existing special asset classification of such restructured accounts. Thus, there is sufficient economic motivation for banks to undertake the Rs 60,000-100,000 crore worth of loan restructuring, where accounts whose performance may deteriorate could be addressed at one go, enabling banks to start FY16 on a relatively clean slate," said Mukherjee.
Another senior banker said, "Banks will be exercising the restructuring window by picking out all the weak cases. But we need to be cautious as they also need to revive or it is going to take a hit on our books later on."
India's largest lender State Bank of India (SBI) said it has a restructuring pipeline of Rs 5,500 crore in the March quarter.
ICICI Bank management in a concall after the third quarter results, said, "Our restructuring pipeline for the fourth quarter that is January to March 2015 quarter is estimated at about Rs 2,300 crore, higher than the Rs 1,755 crore that bank restructured in the third quarter. Given the prolonged economic slowdown and uneven economic recovery, banks including us have witnessed slippages from the restructured portfolios." For the bank, most of the additions to bad loans and restructured category have crept in from the SME sector and the corporate book.
Among other banks, Bank of India's restructuring pipeline is over Rs 1,000 crore while Indian Overseas Bank has got Rs 2,000 crore worth of loans to be recasted.
Many banks, according to rating agencies, may end up restructuring higher debt than their projections. But if companies are quick to pick up the relief and revive their companies, it will be an exercise that would not go in vain for both the lenders and bankers.
Jaitley's bank strategy is messy: Weak PSBs may not find many takers in market-First Post
In all likelihood, the laxity on the part of the NDA government to immediately address the re-capitalisation needs of public sector banks (PSBs), especially smaller ones, will eventually open a Pandora’s box for Jaitley and his team, during the course of next few years.
The capital needs of banks, which the government is either underestimating or blissfully ignoring, is only getting bigger beginning this April when the new norms by the Reserve Bank of India (RBI) require banks to classify fresh restructured loans at par with non-performing assets (NPAs) and make provisions accordingly.
This will result in a substantial rise in the bad loan books of the banks, especially the state-run lenders, which have huge pipeline of rejigged loans, and some private banks. The December quarter earnings of banks indicate that the problem hasn’t ended and there is more pain to come.
These banks have been traditionally resorting to restructure a substantial chunk of stressed loans every quarter, to save them from slipping to bad loans and show a relatively healthy balance sheet. This is where the RBI has clamped down.
From April onwards, any such recasts would be treated as bad loans and banks need to make provisions accordingly. This means against the 5 percent provisioning for a standard restructured loan, banks need to make 15 percent straight. For existing stock, the norms will be applicable over a period of two years, but for new cases this will be with immediate effect.
This will sharply increase the provisioning burden of state-run banks and hit their earnings, unless the economy manages to pull a magical recovery, helping reduce the fresh cases of recasts and improvements in the existing ones.
The new rules kick in in the backdrop of the government refraining from committing the much needed capital assistance to PSBs.
On Wednesday, after meeting between the chiefs of public sector banks (PSBs) and the finance minister, on the performance of PSBs, banking secretary, Hasmukh Adhia made it abundantly clear that the government’s coffers are too weak to feed the banks it own. The government wants banks to go to the market and raise funds from public. This doesn’t appear a feasible solution for many banks.
The government, which is unwilling to pare its holding in state-run banks (it holds 56 percent to 84 percent in these banks), seems to underestimate the problem when Adhia observed that banks are adequately capitalised. “There is no immediate need to raise funds from the market,” Adhia said.
Adhia is wrong for a few reasons:
First, many among the PSBs have weak capital ratios and high bad loan levels, which requires immediate capital to service. As per the Basel-III norms, banks need to have minimum equity capital adequacy ratio of 7 percent and Common Equity Tier-1 (CET-1) capital of 5.5 percent.
A Firstpost analysis of Capitaline data shows that at least five government banks have Tier-I capital adequacy less than 8 percent. In addition, banks will also need to build a 2.5 percent capital conservation buffer to be used in bad times. Indian banks need to meet Basel-III norms by 2019 and the incremental burden keeps increasing every passing year.
Second, there will be a substantial increase in the provisioning burden of banks from April onwards when the new RBI norms on restructured loans kicks in. At present, for every new Rs 100 loan restructured, banks have to make a provision of Rs 5. This will go up to Rs 15 from April onwards.
Banks typically recast loans through the corporate debt restructuring (CDR) mechanism and bilateral recasts. While there are no official estimates of bilateral restructuring numbers, an analysis of CDR data of last 12 quarters show that, on an average Rs 22,500 crore fresh loan recast proposals.
Assuming this trend continues, the banking system will add Rs 3,300 crore provision every quarter, under the new rules.
But what the government has offered is just Rs 8,000 crore next fiscal, which is nearly half of what banks require to meet capital requirements arising out of Basel-III requirements; provision burden on bad and restructured loans; and rising demand for credit once the economy revives.
The solution that the government has offered is to raise capital from the market. But which investors, apart from state-owned LIC, would want to buy into the state-run lenders that are loaded with NPAs and have weak balance sheets?
To be sure, treating restructured loans as NPAs would indeed do good for the banking system in the long term. Over the years, banks have been pushing many stressed cases into restructured book to prevent them from slipping to bad loans, especially in the infrastructure sector. Since this wouldn’t work from now on, banks’ balance sheets will show the actual state of loan accounts.
The capital concerns of these lenders have just got bigger, whether the government acknowledges the problem or not.
The only way out, as Firstpost has noted several times before, is the government reducing its stake to below 51 percent, as recommended by the P J Nayak committee. They should get full autonomy.
State-run banks should be left to operate on their own and chances of their survival should be based on their competence, not the government aid. Until the NDA doesn’t show the willingness to introduce radical reforms in PSBs, it is only repeating the same mistakes UPA did.
Coop banks grapple with TDS burden of Rs 1,600 cr-FinancialExpress
The income-tax department has served notices on scores of urban cooperative banks as a new provision places an additional tax burden on the 1,600-odd UCBs in the country.
Under the new Finance Bill, 2015, an amendment to Section 194 (A) makes it mandatory for cooperative banks to deduct tax at source on deposits made by members and shareholders.
Earlier, no TDS was required to be deducted for members/borrowers and shareholders on deposits with interest below R10,000 annually. These members could file returns and, then, claim TDS separately, said Mukund Abhyankar, president, National Federation of Urban Cooperative Banks and Credit Societies (NAFCUB).
Abhyankar said local I-T officials have sought data on the last three years of interest payment on deposits of shareholders. He claimed banks were being asked not only to deposit the interest, but also the TDS amount for the last three years, along with a hefty penalty. This figure, he said, ran into crores and could wipe out the entire operating capital of UCBs.
Even small banks are learnt to have received notices for recovery of TDS dues of nearly R20-60 crore and the cumulative amount could run into R1,500-1,600 crore.
NAFCUB says banks are ready to start deducting TDS from the current financial year, but retrospective payment could land them in deep financial trouble. Moreover, as several customers might have claimed this amount in their I-T returns, providing details would be cumbersome for banks, said Vikrant Ponkshe, MD, Cosmos Cooperative Bank.
While NAFCUB has made representations to the Prime Minister, Union finance minister and department of finance on the issue, Abhyankar said five UCBs were planning to file a petition in the Supreme Court.
Hit by sluggish growth, public sector banks’ bad debts soar to 10-year high -Hindu Business Line
March 11:
The bad debts — non-performing assets (NPAs) — of public sector banks have surged to a 10-year high. Bad debts for all public sector banks reached 5.64 per cent of their total advances as of December 2014, the highest level since 2004-05, when they stood at 5.73 per cent.
These numbers were disclosed in an agenda note for a meeting Finance Minister Arun Jaitley had with the heads of public sector banks and financial institutions here on Wednesday.
During the last few quarters, there has been a continuous rise in bad debts, making the situation alarming. NPAs were 4.72 per cent of total advances at the end of March 2014, and rose to 5.29 per cent by September-end before surging in the December quarter.
Reasons for the increase in bad debts include sluggish domestic growth and continued uncertainty in global markets, leading to a drop in export of various products, including textiles, engineering goods, leather and gems. According to the agenda note, “PSBs continue to be under stress on account of their past lending.”
Among the 19 major industry groups, the coal and fuel sectors (petroleum, coal products and nuclear) were the only ones to register a decline in bad debts during the first nine months of the current fiscal year.
Finance Ministry officials said both PSBs and the Centre can be expected to continue with measures to improve asset quality. Banks are also expected to move to improve risk management and asset quality.
At the same time, the Centre is in the process of establishing six new Debt Recovery Tribunals to clear the banking sector’s NPAs.
The Centre feels that clearing stalled projects will help in improving the loan situation of public sector banks.
My Comments are as follows
Reserve Bank of India ,Finance Minister and Ministry of Finance have been making various experiments with public sector banks to improve the health of public sector banks . FM has been suggesting various ways and changing policies frequently on constitution of bank boards or appointments of Chiefs of the bank.
But in my opinion, Ministry of Finance as well as Reserve Bank of India are far away and totally ignorant of how to improve the real health of PS banks. Either they do not know the art of curing banks or they do not want to do so as a strategy to use banks to serve political interests. They are rather adding fuel to fire and causing more damage to already sick bank. They are suggesting all such steps to improve the health of banks which have played key role in making banks sick .They used to say that the will not interfere in functioning of banks but they continue to interfere.
In my view , GOI or RBI cannot ignore control on banks , not because they are key owner of banks but because of the fact that banks were nationalised to save common men from exploiter money lenders. GOI will have to interfere in functioning of banks when bank officials misuse powers delegated to them.
Government have to use banks for poverty alleviation programme, for creation of employment opportunities, for giving various financial help to poor people, for extending credit to priority and neglected sector ,for helping weaker sections of the society , for extending credit for growth of infrastructure , power sector and so on. As such it is the duty of Ministry of finance that banks wholeheartedly execute the policies of lending and policy on interest rate in true spirit, uniformly without any discrimination. GOI will have to learn to punish officials who are corrupt, who exhibit negligence and who are ill motivated in taking decisions.
Unfortunately GOI has completely failed to keep watch on individuals working in banks as bank's Chief . Until GOI punish erring officials , they cannot inculcate good practices in banks. And for this , politicians will also have to be honest, sincere and transparent in their actions.
It is sad that they failed to stop rising corruption in recruitment, promotion and posting. They failed to punish top officials of banks who misused merit oriented promotion policies for self interest .
They failed to stop and punish top bankers who used power of posting to create a culture of bribery and flattery in banks .
They failed to stop top officers of banks recruiting from campus their own kith and kin in the name of talent.
They failed to stop bribe led lending done by bank officials.
They failed to stop exploitation of banks by corrupt politicians.
They failed to punish bank officials and administrative officials who have been found to be indulged in corrupt practices for self interest and who have failed to take appropriate step in protecting of bank assets and taking suitable steps against erring borrowers and erring officials.
They failed to punish officers, judges, advocates, legal experts, district magistrates, superintendent of police, BDOs, associated with courts and administrative offices who for serving their self interest and for earning bribe and commission continue to postpone actions for years and decades on cases pertaining to recovery of loans from defaulters.
It is they who damaged the repayment culture in banks by suggesting loan waiver culture.
It is they who forced banks to distribute loans like charity by organising Loan Melas and Credit Camps.
It is they who suggest bankers to restructure loans if borrowers face genuine difficulties in repayment of loans . But they fail to stop misuse of such relaxation by corrupt bankers to hide bad loans sanctioned by them or their friends in higher posts to earn illegal money either in cash or in kind.
In brief one can say without any hesitation that it is RBI and GOI in particular and politicians in general who have caused all sickness in government banks and it is they who have extended all helps to private bank.
Politicians are more concerned with their vote banks and their fate in elections. They can sell the banks as pervious FMs sold to enrich their vote banks. They appoint Directors or ED or CMD in banks as per their whims and fancies and thus oblige their fellow leaders in the political party which rule the country or a state.
When post of ED or CMD is sold , these ED and CMDs use the same culture for promoting an officer from one scale to other. When they give bribe directly or indirectly for getting cream post , they apply the same tool to earn wealth not only in recruitment and promotions but also in lending and in awarding any contract for supply of goods and services. They use the power to earn money in writing off of loans and in sacrificing good money to please bad borrowers.
And to add fuel to fire, auditors, inspectors, vigilance officials ,inquiry officials etc who are supposed to take action against erring officials are also chosen from gang of corrupt officials and thus they help corrupt officers more and earn money in saving corrupt officers from punishment.
There is no remedy when protectors become destructors. The great writer Munsi Prem Chand told long ago that "Jab rakshak hi bhakshak ban jaye to vinash nishchit hai" . It means to say that when protectors and regulators of banks become damagers , no power on earth can save banks from disasters.
None of the policies are bad in banks . It is never a question of rules or policies which has hurt bank. It is always the people who have hurt the bank more because it is people who are supposed to execute them in true spirit more often than not, use the rule and policies or twist the rule to earn illegal money , to earn name and fame and to get out of turn promotion .
Fixation of target for credit growth is not bad but it becomes bad when people do so under pressure or with ulterior motive to get undue benefits .
Campus recruitment is not bad if really talented people are recruited. Problem arises and get aggravated only when in the name of talent , weak candidates are given chance to earn illegal money or to give favour to kith and kin f friends and relatives.
My Comments are as follows
Reserve Bank of India ,Finance Minister and Ministry of Finance have been making various experiments with public sector banks to improve the health of public sector banks . FM has been suggesting various ways and changing policies frequently on constitution of bank boards or appointments of Chiefs of the bank.
But in my opinion, Ministry of Finance as well as Reserve Bank of India are far away and totally ignorant of how to improve the real health of PS banks. Either they do not know the art of curing banks or they do not want to do so as a strategy to use banks to serve political interests. They are rather adding fuel to fire and causing more damage to already sick bank. They are suggesting all such steps to improve the health of banks which have played key role in making banks sick .They used to say that the will not interfere in functioning of banks but they continue to interfere.
In my view , GOI or RBI cannot ignore control on banks , not because they are key owner of banks but because of the fact that banks were nationalised to save common men from exploiter money lenders. GOI will have to interfere in functioning of banks when bank officials misuse powers delegated to them.
Government have to use banks for poverty alleviation programme, for creation of employment opportunities, for giving various financial help to poor people, for extending credit to priority and neglected sector ,for helping weaker sections of the society , for extending credit for growth of infrastructure , power sector and so on. As such it is the duty of Ministry of finance that banks wholeheartedly execute the policies of lending and policy on interest rate in true spirit, uniformly without any discrimination. GOI will have to learn to punish officials who are corrupt, who exhibit negligence and who are ill motivated in taking decisions.
Unfortunately GOI has completely failed to keep watch on individuals working in banks as bank's Chief . Until GOI punish erring officials , they cannot inculcate good practices in banks. And for this , politicians will also have to be honest, sincere and transparent in their actions.
It is sad that they failed to stop rising corruption in recruitment, promotion and posting. They failed to punish top officials of banks who misused merit oriented promotion policies for self interest .
They failed to stop and punish top bankers who used power of posting to create a culture of bribery and flattery in banks .
They failed to stop top officers of banks recruiting from campus their own kith and kin in the name of talent.
They failed to stop bribe led lending done by bank officials.
They failed to stop exploitation of banks by corrupt politicians.
They failed to punish bank officials and administrative officials who have been found to be indulged in corrupt practices for self interest and who have failed to take appropriate step in protecting of bank assets and taking suitable steps against erring borrowers and erring officials.
They failed to punish officers, judges, advocates, legal experts, district magistrates, superintendent of police, BDOs, associated with courts and administrative offices who for serving their self interest and for earning bribe and commission continue to postpone actions for years and decades on cases pertaining to recovery of loans from defaulters.
It is they who damaged the repayment culture in banks by suggesting loan waiver culture.
It is they who forced banks to distribute loans like charity by organising Loan Melas and Credit Camps.
It is they who suggest bankers to restructure loans if borrowers face genuine difficulties in repayment of loans . But they fail to stop misuse of such relaxation by corrupt bankers to hide bad loans sanctioned by them or their friends in higher posts to earn illegal money either in cash or in kind.
In brief one can say without any hesitation that it is RBI and GOI in particular and politicians in general who have caused all sickness in government banks and it is they who have extended all helps to private bank.
Politicians are more concerned with their vote banks and their fate in elections. They can sell the banks as pervious FMs sold to enrich their vote banks. They appoint Directors or ED or CMD in banks as per their whims and fancies and thus oblige their fellow leaders in the political party which rule the country or a state.
When post of ED or CMD is sold , these ED and CMDs use the same culture for promoting an officer from one scale to other. When they give bribe directly or indirectly for getting cream post , they apply the same tool to earn wealth not only in recruitment and promotions but also in lending and in awarding any contract for supply of goods and services. They use the power to earn money in writing off of loans and in sacrificing good money to please bad borrowers.
And to add fuel to fire, auditors, inspectors, vigilance officials ,inquiry officials etc who are supposed to take action against erring officials are also chosen from gang of corrupt officials and thus they help corrupt officers more and earn money in saving corrupt officers from punishment.
There is no remedy when protectors become destructors. The great writer Munsi Prem Chand told long ago that "Jab rakshak hi bhakshak ban jaye to vinash nishchit hai" . It means to say that when protectors and regulators of banks become damagers , no power on earth can save banks from disasters.
None of the policies are bad in banks . It is never a question of rules or policies which has hurt bank. It is always the people who have hurt the bank more because it is people who are supposed to execute them in true spirit more often than not, use the rule and policies or twist the rule to earn illegal money , to earn name and fame and to get out of turn promotion .
Fixation of target for credit growth is not bad but it becomes bad when people do so under pressure or with ulterior motive to get undue benefits .
Campus recruitment is not bad if really talented people are recruited. Problem arises and get aggravated only when in the name of talent , weak candidates are given chance to earn illegal money or to give favour to kith and kin f friends and relatives.
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