FM Jaitley Praises Public Bank

I would like to refer the conclusive statement made by Mr. Arun Jaitley Finance Minister on performance level of public sector banks. He says that despite having so many natural shortcomings in PSBs , public banks have done commendable job and overall performance of PSBs is still better than private banks. I do not know whether he is clever or fool , neither do I have courage to say that FM is having foolish impression about banks, but I may say with without doubt that he lives in fool's paradise. I say so because he says that Public banks normally find it challenging to compete with the private sector institutions as state institutions have more bureaucratic manner of decision-making. "The private institutions have a better play of joints and quicker, and easier, decision-making process," . He has thus maligned the entire process of decision making which is tested and attested for decades. Secondly if the job is commendable why assets are stressed in such large volume in public banks  and why does government need to inject capital again and again.

Instead of pointing out the wrong intention behind all decisions taken by public banks he has held process of decision taking guilty for rise in bad debts or for poor performance of banks .Finance Minister has cleverly avoided the bitter truth that large scale corruption and inefficiency of officials working in banks, administrative offices, high power political positions, Reserve Bank, CBI, CVC, Anti-corruption bureaus and in department of audit and inspections are behind growing weakness of banks and growing volume of bad assets.

Finance Minister is perhaps not ready or do not find it wise to accept the bitter truth behind weakness of banks. Even a layman or common banker watching quality of lending, quality of write off of bad loans, quality of compromise settlement with defaulting borrowers, quality of recruitment in bank, quality of promotions and quality of transfers either from inside or from outside the bank will not hesitate in accepting that it is bad intention of decision takers at all levels including banks, administrative offices, political superior positions, legal set ups to deal with litigations related to bad debts which have contributed more in deteriorating health of public sector banks .

Loan sanctioned by a Branch Manager of a public bank within his delegated power is not at all victim of bureaucratic delay in decision but victim of evil forces building pressure on him from higher offices, from political masters and from local mafias which result in lending to unscrupulous persons and which motivates him to lend money for earning bribe .

It is illegal money earned by bad lending which helps him in keeping his bosses happy, in buying mental peace, in maintaining so called higher standards in society and in getting quicker promotions and in getting postings at desirable places. It is flattery and bribery which helps him in getting admiration and elevation in all meetings and in superseding many junior officers in career path.

It is bribery and flattery which help him in safeguarding himself from all types of actions and for his ill-motivated decisions taken in lending. A Branch Head or any officer in public bank is otherwise fully free to take his wise and honest decisions in sanction of a loan or on any issue if he or she is ready to face frequent transfers, rejections in promotions and humiliation in meetings attended by higher bosses conducted for fixing targets or review of targets.

A Branch Manager can take bold and beautiful decisions on lending and he can say No to bad proposals only if he is sure of getting full protection from police , politicians, local mafias and above all from his superiors for his honest and wise decisions. Fear of disturbances from local people and from internal super duper bosses normally compels a bank officer to indulge in bad quality lending. Similarly a Regional Head or Circle Head or a Zonal Head in public bank has enormous power to sanction high value loans and they are not subjected to any hindrance in taking good decisions but they are subjected to such a situation that they are constrained to take unwise, foolish and suicidal decisions on bad proposals of loans.

On the contrary , management of private banks have very safe and well regulated mechanism to control on sanction of any loan , on monitoring of loan and finally in ensuring regular repayment of loan as per schedule set by them while sanctioning a loan. Most of branches and majority of Branch Heads are not empowered to sanction loan and they have to depend on Loan Processing Branches which are manned by purely skilled and intelligent officers who are well acquainted with rules framed ,they know how to deal with and how to assess a loan proposal emanated from branches and they are fully accountable for recover of each instalment in due time.

Officers working in private bank cannot dream of lending to fake person, fake companies , ineligible persons and persons with weak credentials, doubtful integrity and doubtful creditworthiness. There may be defaults in private banks too, but the probability of it is lower .Officer indulging in bribe or found negligent in taking decisions are warned and finally kicked out. There is none to protect corrupt officer.

Yes it is true that private banks fail when the question of recovery from recalcitrant borrowers comes. They are equal victim of legal inefficiencies and administrative corruption. They try to take all safety and all precautions at the time of sanction so that cases of default becomes minimum and that of compulsion of legal action become negligible. They keep politicians away from all sanctioning processes. They are not afraid of torturous transfers. They get incentives and bonuses based on profit they earn for bank. They get promotions and cream posting based on their earning capacity and not based on recommendation of some VIPs as usually happens in public banks. Only tested persons are made branch head.   

Private banks do not pay higher pay to all its staff. It is a myth that public bank do not perform because they are less paid compared to private banks. Average pay of staff in public bank is more or almost equal to that in public bank. Staff working in front counters in branches of private banks are paid even less than what a peon is paid in public bank. Marketing officers in private banks get pay and incentive largely based on business they mobilise unlike public banks where payment of salary do not depend on business but on scale such marketing officers recruited .

There are many marketing officers in public banks who are getting so much pay which seniors in private or public bank do not get . Business is not much important in public bank. Officer in all scales in public bank and all so called specialists or marketing officers have to learn the art of keeping higher bosses happy by hook or by crook . They need not bother for quality of work or quality of lending or for losses caused to bank due to their improper actions and ingenuine decisions. In private banks , all staff are bound to think for income for the bank, for growth of bank and not at all for pleasure of higher bosses to an extent which his counterpart in public banks is constrained to do.

Another false reason attributed by Mr. Jaitley for poor performance of public bank is that management of public bank cannot recruit talented staff directly from campus. I would like to mention here that more than ninety five percent of staff in private banks are picked up from local towns or on the basis of simple tests carried out in places where branches are situated. It is hardly a few staff who are picked up from campus. On the contrary public banks have been recruiting staff even in higher scales from campuses or from other public banks for decades.

In the name of merit , management of bank use to recruit officers from outside taking interviews by so called talented  officials . An officer working for a bank for decades in scale I may not be promoted to scale II in promotion process , but an useless , weaker and inferior officer from another public bank with one or two year experience is directly recruited in scale II or scale III or scale IV in the name of merit. In this way , management of public bank become ready to pay two to three times higher pay to newly recruited weak officer compared to officers working in the same bank for years and decades .All this happens in public banks in the name of merit and merit only and this has been happening for last two to three decades.

It is only for last about two years that these banks could not recruit from campus due to Supreme Court Order. Clever FM should ask management of these public banks what benefits bank could earn by recruiting officers paying higher salary from outside in higher scales at the cost of existing experienced officers . I do not want to conclude at my own that FM has reached a wrong conclusion due to wrong inputs given to him by corrupt top bankers, but I can say that he should do more homework before saying that banks in public sector are weak in performance because they are facing constraints in recruitment from campuses.
　
I however agree with the views FM Mr Jaitley that in most of the socio-economic initiative the government has taken, whether Jan Dhan programme or social sector insurance schemes, it was the public sector banks that did a commendable job . It is true that these schemes affected the work quality of public banks to some extent. But it is not acceptable that these schemes resulted in bad quality of lending and rise in stressed assets in banks. These schemes are unavoidable task because public banks are to take care of social objectives also by dint of their nature of existence. These schemes may consume precious time of bank officers but cannot be held responsible for wrong and ill-motivated decisions taken by bad bankers and bad politicians. These schemes have undoubtedly forced banker to spend a great chunk of their valuable time in execution of various government schemes of the past and present government.

Due to such schemes, quantity of lending may be lesser but quality of lending should not get affected at any cost. After all pubic banks are meant to take care of national priorities . Banks were nationalised with a sole objective to serve priority sector and to develop core sector of the country . Profit was not the motive at the time of nationalisation of banks.

But it does not mean that bank officers or politicians will be allowed to loot public money and will not be punished even if ill-motivated decisions are taken in lending and banks have to incur losses or erosion in profits to the tune of crores and crore of rupees. Government will have to find out what portion of stressed asset is due to wrong persons and what due to wrong policies . Generalised conclusion taken by FM on performance done by public bank is totally untrue and unacceptable .

FM or government cannot prescribe proper medicines until they find out the real nature and correct reason behind sickness. I fail to understand why FM has taken Indradhanush i.e. seven steps to reform and transform public banks when they have been doing commendable job. I have no doubt in my mind that all steps taken by FM during Modi led government till date are not enough and not appropriate to cure sick public bank. They all will prove to be Failed and ineffective and also add fuel to fire. 

However I may add here that employees working in public banks have huge potential to perform provided they are properly handled and properly awarded .All private banks of 21st century which are performing well have been able to perform by employees picked up from public bans only. They too recruit staff from unemployed youth born and educated in India only . Staff working in private banks are not from Mars planet or loan takers in private banks are not from Moon.

Why public banks employees fail in public bank and get success when they join private banks is a question which Mr. Jaitley should answer. Staff of public bank can perform well only if the atmosphere is conducive for performance and entire team is well devoted, honest and loyal to banks as their counterpart in private banks are. Fault lies in top management , in politicians running the government and not in policies or rules .