Sunday, August 30, 2015

Role Of Corrupt System In Rising NPA In Banks

This refers to an article published in Economic Times which reflects how corruption plays a big role in rise in stressed asses in banks.There is no doubt in it that corruption at all levels is root cause of rising stressed assets in banking system and poor recovery of dues from defaulting borrowers. Team of Chartered Accountants, Auditors, Middlemen, Advocates and bank officials all play their role in sanction of loan to unscrupulous loan seekers and then in delayed or non-recovery from a bad borrower or in writing off of loans. First they help in sanction of bad loans and then in helping bad borrowers someway or the other in getting rid of loan or relief in loan.

Politicians have created bad culture in all offices and all departments. Merit is of  little value or of no value in Indian system but flattery and bribery play significant role in all sphere of life. Management of  public sector bank is also victim of this bad culture of flattery and bribery. Honest officers like Ashok Khemka and Durga Nagpal in banks are not only rejected in promotion processes but also posted at far, ineffective, critical  and remote  places. Honesty and good performance result in only disturbance of peace of mind and trouble for family.

Team of Chartered Accountants  who are master in preparation of financial papers needed for sanction of a loan in a bank help borrowers in cheating banks or you say in getting loan in nexus with bank officials , of course with underhand dealings in cash or in kind.  Politicians build pressure on top bankers to favour corporate houses of their choices. Then top officials build pressure on juniors to sanction loans to parties of their choice. Finally a Branch Head sanctions loans to please local musclemen or middlemen to lead a safe and prosperous life. Altogether  , it forms a vicious circle and creates finally a bad culture where good performers think it wise in sitting at back benches and / or keeping them away from all promotion processes or from taking part in credit approval processes or remaining silent spectator of ill-motivated bad decisions of bosses..Quality of credit is often compromised.

Property valuers, architects, chartered engineers , Contractors ,dealers or suppliers in/ of  goods, plants and machineries and various services, all work in nexus with bankers and loan seekers . Bank officials get commission whereas loan seekers get quick disposal and sanction of their loan proposals. Business houses or traders who hesitate in giving money in lieu of loan sanction run from pillar to post and finally get either inadequate loan or get loan after inordinate delay.

When loan accounts turn bad and banks file cases in courts to recover their dues, advocates help bad borrowers in delaying action on cases filed against them by bankers. or else some higher bosses or some political masters recommend writing off of loans or for compromise settlements with bad borrowers thus causing huge loss to banks. When banks face capital shortage , it is Government which provide infusion of capital to sick banks so that real exposure of bank or borrowers or inefficiency of the officers do not take place and all guilty officials are either awarded or exonerated from charges of irregularities  .

Branch Managers who are honest performers will not be provided adequate staff or will be deprived of quality staff. Similarly auditors who write truth about loan accounts and about functioning of branches are either tortured by frequent transfers or their supporting staff are reduced to bare minimum and they are advised to complete audit work in minimum number of days so that they may not go deep into any mal-functioning.

Debt Recovery Tribunals or Certificate offices or Judiciary or CBI or CVC dealing in banks related cases of corruption or court cases related to default are provided with inefficient staff , inadequate number of staff  and inferior infrastructure. Good carpenters have to quarrel with his tools and retire or die. Old proverb 'Bad Carpenters quarrel with tools '  is now changed . In modern era, bad carpenter flourishes by leaps and bounds whereas good carpenters quarrel with his tools.

Lacs of cases are pending in all courts of the country for years and for decades and people are therefore not afraid of court action. Defaulters and criminals are not afraid of law and legal action, rather they use legal procedures to get rid of punishments. Police is not trustworthy like their counterparts in America or elsewhere. Rules and laws and finally, entire legal and administrative set up are moulded, manipulated , managed, misinterpreted , modified to suit defaulters and criminals. This is reality of Great and Lovely India.


Honesty is no more is the best policy. Survival for the fittest is no more a reality. One has to learn the art of cheating with dignity and then only he or she can survive and lead a healthy, wealthy and safe life. One has to learn the art of speaking and delivery of good lectures .One has to learn how to appear to be good and act bad simultaneously. One has to develop expertise in preaching good sermons and then to stab and defraud the system for getting quicker success than ideally good, honest and devoted workers.
I have therefore no doubt that corrupt banking system creates mountain of bad debts and makes the recovery process complicated , delayed and ineffective. It is difficult to single out bankers for such pathetic position of bankers, all related with process of loan sanction and processes for recovery of loan from defaulters are equally and jointly responsible for current mess in banking system. 

Even media men also play their role in adding fuel to fire . They speak the language of  a person or the company who can pay them better for publishing a news. They are least bothered whether published news is correct or incorrect. They can spoil the career of good persons or make a bad person appearing as if He or She is the God. Media men can spoil entire day or week in analysing who murdered and how Indrani was killed. They can publish false news of a company to misguide investors in shares of the company or they can publish a rumour which can tarnish the image of a company or a political party just to get money in lieu of news or to serve the interest of a party whom they like or dislike. They do not understand the implication and complication associated with banking activities or financial discipline of a bank or a company.

The following article published in Economic Times portrays the real picture of bankers and their associates


How corrupt banking system creates a mountain of bad loans & makes recovery process complicated -Economic Times -30th August 2015

In the morning of May 19, 2014, three days after the Lok Sabha poll results were announced, and with a government not quite in place, chaos reigned at the debt recovery tribunal (DRT) in Ballard Estate, the old commercial district of Mumbai. A lawyer, his juniors and his clients were shouting slogans against the presiding officer of what is known as DRT 1, on the 5th floor of Scindia House.

The lawyer wanted to stop presiding officer HV Subba Rao from reading out orders on cases he had already prepared. Subba Rao sat through the din and read out the 10 orders. Then he retired to his chamber and called the police.

In his complaint at the Mata Ramabai Ambedkar Police Station, Subba Rao alleged that a certain lawyer did not want him to pronounce orders in four cases and created a ruckus and made wild allegations to stop him. The police duly arrived, arrested two lawyers and the day ended with little else achieved.

Can’t repay Rs 100 crore to bank? Take 200 crore more, Mr Defaulter -Economic Times 30th August 2015
The fault in our markets, dear reader, is not in China, but in our companies. The government says that India's fiscal and trade deficits are under control; our reserves, over $300 billion, enough to stave off an attack on the rupee.

So, why did Moody's downgrade India's growth projection from 7.3 per cent to 7 per cent last week? Why is lending by banks, a proxy for growth, limping at 8.4 per cent, the lowest in 20 years?

But let that pass. Folks who move billions of dollars ac ..


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