We have seen in the past how reputed company and one of top three IT sector giant companies called as Satyam Computer managed to portray good picture of the company in the balance sheet year after year. Later when fraud perpetuated by Satyam was exposed by none other than promoter , government was caught unaware and the most famous team of Auditors (PWC) also expressed helplessness . It was only shareholders in the company who had to suffer the most.
As regards ICICI bank , RBI has little to say and GOI has no direct stake but people of India has greater stake in form of share participation. So far as SBI is concerned, RBI and GOI has greater role and greater stake whereas people of India has almost considerably big stake. In both the cases , it is people of India including investors and depositors who will suffer the most if they fail or they face crisis even to little extent. It is therefore the biggest and important duty of both RBI and GOI to ensure full safety of at least these two banks . More than half of public sector banks and Regional Rural Banks are already exposed and their crisis is now in public domain and government has merged RRBs to parent banks and trying to merge weaker PSBs with comparatively stronger PSBs
It is good that RBI and GOI have recommended a little higher capital for these two big banks to cover the risk. But if the game of manipulation if going on in these two big and important bank is unearthed like that in Satyam Computers , I hope the loss will go beyond their control . Loss to people of India will be enormous. If big banks like SBI and ICICI fail it will cause cascading effect on all other banks and people at large will suffer great loss and completely lose faith in banks. There will absolute crisis of trust and outcome of such crisis will lead to greater and unimaginable financial crisis in the country.
Before it is too late ,I therefore make an earnest appeal to both RBI and Government of India to make a forensic audit of at least each high value accounts , say loan value more than five crores and confirm to people of India that these two banks are really safe, that figures reflected through yearly balance sheets are true and correct and that interest of depositors and investors is fully protected.
It is important to write here that after retirement of each CMD of SBI, there is usually sudden rise in gross NPA of the bank. As long as a CMD is in service, he or she tries to manipulate figures in his favour to save his or her skin. This happens almost in all public sector banks. Present Chairman of SBI Mrs Bhattacharya has already started speaking on inherent risk in PSBs and said in clear term that GOI will have to provide larger amount of capital to keep them in safe mode. ICICI bank has seen Ms Kochar as Chairman for many years and hence entire responsibility may come on one shoulder, but in case of SBI , each CMD retire after two to three years and there is almost none as answerable and accountable if any crisis erupts .
Restructure of bad loans frequently or selling of bad loans to Asset Reconstruction Company ARC or writing off of bad loans or sacrificing huge amount of principal and interest in arriving at compromise settlement with defaulters may simply postpone the exposure but cannot help banks in maintaining permanent good health. It is indirectly affecting the profit of these banks by way of larger provisions and larger write offs undertaken by banks to keep Balance sheet shining.
Unless and until there is drastic change in mindset of entire manpower working in PSBs and that in political masters, one cannot dream of any improvement in quality of loaning and quality of monitoring in these banks. Team of clever officers and clever auditors can brighten the appearance of Annual Balance Sheet of banks, but cannot ensure good quality of assets.
I therefore reiterate that RBI should issue a certificate to people of India that health of these two big important banks are perfectly fine and in their control. May God bless people of India who have deposited their hard earned money in bank, who have invested in shares of these banks and who are banking with them.
SBI, ICICI Bank are ‘too big to fail’, says RBI-Hindustan Times -31st August 2015
The Reserve Bank of India on Monday listed India’s largest lender State Bank of India and ICICI Bank, the country’s largest private sector bank, as India’s two domestic systemically important banks (D-SIBs).
The selection of banks is based on analysis of their size as a percentage of annual GDP.
“Based on systemic importance scores in ascending order, banks will be plotted into four different buckets and will be required to have additional common equity (tier 1) capital requirement ranging from 0.20% to 0.80% of risk-weighted assets,” according to the framework released by the RBI in 2014.
While SBI will need to set aside an additional tier 1 common equity of 0.6% of its risk-weighted assets, ICICI Bank will have to maintain an extra 0.2%. This will be applicable from April 1, 2016 in a phased manner and will be fully effective from April 1, 2019.
“SBI has a much higher level of tier I at 9.62% as opposed to 7.00% required under current norms. We will adhere to the additional requirements as and when they become applicable,” SBI chief Arundhati Bhattacharya said.
“The bank’s capital adequacy is well in excess of regulatory requirements,” ICICI Bank CEO and MD Chanda Kochhar said.
http://www.hindustantimes.com/business-news/sbi-icici-bank-are-too-big-to-fail-says-rbi/article1-1386216.aspx
http://www.moneycontrol.com/company-facts/statebankindia/shareholding-pattern/SBI
http://www.moneycontrol.com/company-facts/icicibank/shareholding-pattern/ICI02
| Date : Aug 31, 2015 | |||||||||||||||||||
| RBI releases list of Domestic Systemically Important Banks (D-SIBs) | |||||||||||||||||||
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