SBI chief... Arundhati Bhattacharya
MUMBAI: Chairman of State Bank of India(SBI) Arundhati Bhattacharya said that private banks are doing well because they are cannibalising the customer base of PSU banks and warned that they will have to be prepared for a stiff competition from their peers.
"Its a dog eat dog world," SBI chief said while urging the government to provide more capital for growth as private banks are taking away the business they funded in to support the economic growth during 2008-09 boom.
"If we had not been supporting business during 2008-09, boom would not have happened, infrastructure you see today would not have happened if the government did not have PSBs then. Why did the private sector not participate? Because they saw the risk and stayed out," she speaking at a seminar organised by Indian Banks' Association and industry body Ficci.
"Today why is the private sector growing at 22%? Because they are cannibalising the completed projects at low cost (because) risks have gone down. They may not be able to cannibalise me because I am big. But they are cannibalising the smaller banks," she added. Government owned SBI has a market share of 20% in terms of deposits and advances.
Comments from Ms Bhattacharya comes at a time when at least a dozen of new private banks are making entry into the banking system. The Reserve Bank of India has recently given in-principle approval to 11 candidates to start Payments Banks and two banks - IDFC and Bandhan to start full fledge banking operations.
Further 6-7 aspirants are likely to receive approval from the banking regulator to start small bank- where they would offer small ticket loans. She said, "I am not sure how much capital new private banks will have to burn."
She indicated that the payments banks have a better advantage over existing banks as they ' do not have legacy issues' while the full fledged private bank are better positioned since 'they are not held hostage by industry agreements'. At present, wages at PSU banks are decided based on negotiation with unions and not performance linked.
She also warned about PSU banks may face further risk if they do not receive capital for growth. "Risks are back and I think we need to get our understanding very clear as to what the PSU banks are doing. I do not agree that the government has given us enough capital. They should look at the Chinese banks for the kind of capital they have got."
A fortnight ago, government announced that it would give Rs 70,000 crore to PSU banks over the next three years of which Rs 25,000 crore would be given this fiscal year.
Stress loans have risen sharply in the recent years, particularly for public sector bank has been a cause of concerns for investors and regulator. data complied by ETIG shows that the the gross non-performing assets for private banks stood at Rs 34,805 crore, which is one tenth of PSU banks which is at Rs 296321.4 crore as on June end 2015. due to higher level of stress loans, for the first time, private banks outperformed PSU banks for the quarter ending June 2015-16.
SBI Chairman Told a Few Weeks Ago 11.08.2015
SBI sees bad loan pressures easing
State Bank of India (SBI) expects pressure from struggling borrowers to ease as the economy recovers after the strain on India's smaller firms pushed its bad debts higher in the three months to June.
A slightly wider bad loan ratio in the quarter, and a 53 percent sequential rise in new bad loans, hit shares in the country's largest bank by assets, sending them down nearly 5 percent on the day.
Indian banks have been hobbled by their heaviest bad loan burden in a decade as a prolonged economic slowdown squeezed companies' ability to service debt. That also choked new investments, lowering demand for bank credit.
http://www.reuters.com/article/2015/08/11/state-bank-india-results-idUSKCN0QG0KW20150811
High bad debts temporary: SBI-15.12.2014-NDTV
Mumbai:
Attributing rising bad debts to economic slowdown, State Bank of India (SBI) today said high Non-Performing Assets (NPAs) are 'temporary'.
"NPAs continue to be a challenge. But I don't want to put a number to it. I can only tell you that large part of the NPAs is really because of the external economy and I would think that they are temporary only," SBI Managing Director Diwakar Gupta told reporters on the sidelines of the Delhi Economics Conclave here.
SBI's NPAs rose to 5.15 per cent in the second quarter ended September, from 4.19 per cent over the year-ago period because of deteriorating asset quality.
He said the bank has made adequate provisioning norms.
"We have been providing in excess of the prudential provisions. Whatever Reserve Bank asked us to provide, we have been providing that, plus a little more." Gupta said.
The Reserve Bank recently increased the provisioning for standard restructured assets for banks to 2.75 per cent from 2 per cent.
SBI sees bad debt stress easing-01.07.2014
State Bank of India has said that the bad debt situation is improving, but there is no magic wand to deal with it. The public sector bank’s bad debts rose to ₹61,605.35 crore or 4.95 per cent of total advances at the end of March, from ₹51,189.39 crore or 4.75 per cent in 2012-13.
http://profit.ndtv.com/news/banking-finance/article-high-bad-debts-temporary-sbi-314787
My Observation submitted a few days ago
RBI has advised bank boards to do detailed scrutiny of their quarterly and annual financial results during board discussions. It appears to be nothing more than ridiculous and a clever step by RBI to put the onus of correctness and genuineness of financial result on bank boards .
It is the duty of RBI to ensure correctness of financial results announced by various banks including private banks to avoid repetition of stories like that of Satyam Computers. It is the duty of RBI to carry out random checking of bank financials and internal working from time to time to create good culture and to stop fraud and manipulation in banks. RBI officials used to audit in seventies and eighties but gradually they stopped this culture because they are also not adequately manned to cope with the work load needed to properly audit thousands of branches .It is therefore not surprising they too shake hands with clever bank officials and indirectly favour culture of manipulation. Even politicians do not like exposure of bad health of banks .They all are birds of same feather.
RBI is therefore bent upon avoiding owning the responsibility of fraudulent games played by CEOs of banks in hiding bad assets. RBI officials understand very well that huge volume of stressed assets in Public sector banks is concealed by bank officials in nexus with team of Chartered Accountants who certify the correctness of financial results, correctness of profit , provision and bad assets.
RBI also knows very well that volume of bad assets will continue to rise every quarter and no power on earth can stop it , can reduce the speed of assets turning bad until there is change of hearts and change in attitude of credit officials of banks, change in mindset of dirty politicians who are least bothered of quality of assets but more concerned about vote bank and lending and until there is change of heart of officials and magistrates sitting in various administrative offices, courts, police department, DRTc etc.
Here it would like to add here that it is the team of Charted Accountants who are supposed to be more intelligent and talented and who are the competent and legal bodies to certify the correctness of financials of all companies and banks, certify bad assets as standard assets in nexus with bank officials and in lieu of some costly gifts and red carpet welcome extended to them by bank officials..
It is CAs who guide banks how to conceal bad advances , how to lend money to bad borrowers, how to manipulate financials to inflate profit and reduce provisions against bad loans. It is team of CAs who guide business men how to evade tax and how to use black money in real estate or in business itself. It is team of CAs who sign on balance sheet of branches of banks blindly or in greed of some valuable gifts. It is team of CAs who sell their signature at every point of business , at every point of compliance and certification. Gift culture at all levels make the case of certification easy .
Bank officials have been in habit of concealing bad asses to please their bosses, A Branch Manager of a branch try to please his Regional Head,, a RH may try to please his Zonal Head and all try to keep the Chief of Bank in good mood and for this purpose they all have to conceal bad assets .If any officer or any team of CAs dare declaring bad assets as bad asset truly, their career is sure to be doomed. O the contrary officers and CAs who are clever in concealing bad debts are promoted and their career is brightened.
Every quarter bank Chiefs promise that the health of bank will improve from next quarter . They book good profit in one quarter and show drastic fall in profit in next quarter. This clever hide and seek game of figures has been continuing for last ten years and specially after from the period when bank became technology friendly .
The bitter truth is that neither RBI , nor bank officials, nor team of CAs and nor politicians want to say spade a spade . They all are so called positive-minded and it is their compulsion to show banks as healthy so that evil works are not exposed. It is their compulsion to conceal bad assets and to book more and more false profits and projects banks as prosperous so that investors and customers of banks do not lose trust on PS banks.
If a NPA of a bank rises, investors will avoid investing in share of such banks, business men will not like to park their fund in such banks and will not like to borrower money from such banks, RBI officials will have to face the awkward position before ministers, and finally politicians will have to face the anger of common men whose hard earned money will be at stake in case of bank going weak and finally sink.
It is therefore wrong to believe that bank board will be able to find out or detect the fraud game played by CAs and clever bank officials . After all , if they say bad assets as bad , it will tantamount to digging own grave. When protectors become looters, none can save us from disaster. When team of CAs can be bought , when bank officials are bought, when legal officials are bought ,when politicians are bought and when every good certificate of good health can be bought by every officer , RBI should not expect correctness of financials of any bank in particular and any company in general .
Similarly art of Tax evasion taught by CAs to business community help in creation of black money in the system in nexus with tax officials, Hence it will be wrong to blame business community or any individual for tax evasion or for buying a landed property at higher rate but registering at lower rate using black money. It is a well established culture in India and to stop the same is nothing but hard nut to crack . Even politicians cannot survive without black money , how others will stop playing with powers of black money. Culture of flattery will end as soon as culture of dishonesty is stopped. None will like it from core of their heart . All want others to be his or her yesman .
If RBI officials , to begin with ,make a through scrutiny of all accounts of all borrowers who have been enjoying credit facility of more than 100 or 50 crore , the bitter truth of bad debts will come to surface, provided however that bank officials are kept miles away from the place where scrutiny is taking place and provided talented team of CAs are not allowed to talk to any borrower and any bank officials during the period of audit and inspection and entire task is conducted before CCTV and financially expert team of media men.
If RBI does not have enough manpower even to make scrutiny of Rs.100 crore borrower, they may start the task with scrutiny of books of best five banks . If it is proved that banks considered as best performers are best only due to best manipulation and fraudulent placing of figures only , it will become crystal clear to all concerned that the crisis in public bank is more deep rooted , bad culture is imbibed in DNA of all concerned and to stop the culture of manipulation in PS banks is nothing but wondering in dreamland.
It is worthwhile to mention here that proposals of loans and advances of Rs.50 crore or Rs.100 crore and above are sanctioned by none other than bank boards . It is bank boards which are supposed to monitor the health of high value loans . How it is then possible for such bank boards to doubt financials certified by CAs ? It is just like asking a thief to investigate the act of stealing and punish the culprit. There is invariably an unity among dishonest and corrupt officials . They all try to save each other in their mutual self interest.
If a Branch Head says that loan sanctioned by his predecessor is bad due to bad lending or bribe led lending, he will have to face the same precarious situation when his successor joins his branch after his transfer. As such each officer thinks it better and safe to hide bad loans by hook or by crook to save his colleague from punitive action and to avoid rejection in promotion processes. This culture is well established at all levels of management.
An Appeal to Government of India on Window Dressing
From time to time RBI and Government of India have asked and advised public sector banks to refrain from window dressing in deposits and advances. Still bank officials indulge in window dressing every quarter and this has been happening for decades. Window dressing is nothing but artificial inflating of business and reduction of stressed assets.
Bank officials inflate deposits in the last week of quarter or year and the same comes down in the first week of next quarter or year . Similarly they inflate figures of advances in the last week and get appreciation and awards from their bosses and from Ministers. This results in undue award to non performers and unjustified punishment to real performers.
Similarly on the front of bad assets and stressed assets, bankers hide bad assets by using the tools of rephrasing, restructuring and through evergreening of loan processes . Due to this timely action is not initiated against defaulters and during this time , defaulters disposes off the assets and then pray for compromise settlement or write off of the dues. In this way Recovery from defaulters is adversely affected.
Ultimately it is the government of India which has to suffer. It is taxpayers money which is infused in bank to protect them from falling due to mismanagement of bank officials or due to exploitation of banks by politicians. I add politicians because it is they who have been misusing banks for political advantages during each government in some way or the other. It is politicians who have damaged the banking culture.by their ill motivated advices and by suggesting writing off of loan for political gain.
Will you act against who have indulged in window dressing in the quarter ended June 15 despite your instruction not to do so in the same month?
It is important to say here that GOI can make real plan based on real figures only and similarly bank can recover bad money only if they take timely action.
Lastly I may add here that banking is a service industry and one cannot judge the performance of any individual based on figures. There are several Branch Heads or Bank heads who achieve the targeted figure somehow or the other but the customers of the branch and bank are not happy with the service extended .It may be these achievers who have added major portion of bad assets in their bank.
Here I would like to give an illustration TO substantiate my views. Suppose I am Branch Manager of a branch or Chief of a bank. I indulge in bribe based lending and achieve the advance well in advance. Then I use a little part of the ill earned money to buy deposits from government departments and public sector undertakings who have surplus funds and who can keep bulk deposits in my branch or in may bank, I can achieve and surpass even the target set for deposits. In this way I will be considered as good performer by my bosses, I will earn cash incentive and get quicker promotions. On the contrary those who have lagged behind the target or who have contributed lesser business by good means and by extending best services to customers may be rejected in cash incentives and in career.
But in the long run, advance made by me may become bad assets and cause huge loss to bank and force bank to arrange for larger capital. Customers may be dissatisfied with services extended from my branch because I focused on only few high value customers and neglected common men .Growth achieved may not be long lasting and stable. On the contrary , a person who did quality lending and who focused on retail business did the best for the health of the bank .His advances may remain standard healthy for years and decades. Bank may earn consistent income from such quality lending .
Future of bank depends not on figures but on quality of service it extends. Good culture is more important than good figures a bank achieves. Respect and recognition of real good performers can only help in giving permanent growth and consistent profit to a bank or a branch. Similarly wrong lending to achieve the target may give some temporary relief to political masters for temporary period but in the long run even persons like Devi Lal , V P Singh, Janardhan Pujari or Chidambram who promoted Loan Mela or Loan waivers used for for vote gain were rejected in election by voters. IN the same way bank officials who resort to evil means to achieve the target are trapped in corrupt dealing sooner or later or punished by almighty GOD in later part of life.
A Student who passed the examinations of his life by using unfair means may not necessarily get success in real life. A person may get job by using unfair means may be rejected by employer in short period. A bank may book inflated profit and book higher growth in business by using window dressing and by concealing stressed assets but sooner or the later the bank is exposed and subjected to hard medicine and surgical operation to survive or merged with some other bank . Unfair means in any sphere of life has bad outcome . There is no substitute to truth and real growth .
Click Here to Read My Blog on Window Dressing
"Its a dog eat dog world," SBI chief said while urging the government to provide more capital for growth as private banks are taking away the business they funded in to support the economic growth during 2008-09 boom.
"If we had not been supporting business during 2008-09, boom would not have happened, infrastructure you see today would not have happened if the government did not have PSBs then. Why did the private sector not participate? Because they saw the risk and stayed out," she speaking at a seminar organised by Indian Banks' Association and industry body Ficci.
"Today why is the private sector growing at 22%? Because they are cannibalising the completed projects at low cost (because) risks have gone down. They may not be able to cannibalise me because I am big. But they are cannibalising the smaller banks," she added. Government owned SBI has a market share of 20% in terms of deposits and advances.
Comments from Ms Bhattacharya comes at a time when at least a dozen of new private banks are making entry into the banking system. The Reserve Bank of India has recently given in-principle approval to 11 candidates to start Payments Banks and two banks - IDFC and Bandhan to start full fledge banking operations.
Further 6-7 aspirants are likely to receive approval from the banking regulator to start small bank- where they would offer small ticket loans. She said, "I am not sure how much capital new private banks will have to burn."
She indicated that the payments banks have a better advantage over existing banks as they ' do not have legacy issues' while the full fledged private bank are better positioned since 'they are not held hostage by industry agreements'. At present, wages at PSU banks are decided based on negotiation with unions and not performance linked.
She also warned about PSU banks may face further risk if they do not receive capital for growth. "Risks are back and I think we need to get our understanding very clear as to what the PSU banks are doing. I do not agree that the government has given us enough capital. They should look at the Chinese banks for the kind of capital they have got."
A fortnight ago, government announced that it would give Rs 70,000 crore to PSU banks over the next three years of which Rs 25,000 crore would be given this fiscal year.
Stress loans have risen sharply in the recent years, particularly for public sector bank has been a cause of concerns for investors and regulator. data complied by ETIG shows that the the gross non-performing assets for private banks stood at Rs 34,805 crore, which is one tenth of PSU banks which is at Rs 296321.4 crore as on June end 2015. due to higher level of stress loans, for the first time, private banks outperformed PSU banks for the quarter ending June 2015-16.
SBI Chairman Told a Few Weeks Ago 11.08.2015
SBI sees bad loan pressures easing
State Bank of India (SBI) expects pressure from struggling borrowers to ease as the economy recovers after the strain on India's smaller firms pushed its bad debts higher in the three months to June.
A slightly wider bad loan ratio in the quarter, and a 53 percent sequential rise in new bad loans, hit shares in the country's largest bank by assets, sending them down nearly 5 percent on the day.
Indian banks have been hobbled by their heaviest bad loan burden in a decade as a prolonged economic slowdown squeezed companies' ability to service debt. That also choked new investments, lowering demand for bank credit.
http://www.reuters.com/article/2015/08/11/state-bank-india-results-idUSKCN0QG0KW20150811
High bad debts temporary: SBI-15.12.2014-NDTV
Mumbai:
Attributing rising bad debts to economic slowdown, State Bank of India (SBI) today said high Non-Performing Assets (NPAs) are 'temporary'.
"NPAs continue to be a challenge. But I don't want to put a number to it. I can only tell you that large part of the NPAs is really because of the external economy and I would think that they are temporary only," SBI Managing Director Diwakar Gupta told reporters on the sidelines of the Delhi Economics Conclave here.
SBI's NPAs rose to 5.15 per cent in the second quarter ended September, from 4.19 per cent over the year-ago period because of deteriorating asset quality.
He said the bank has made adequate provisioning norms.
"We have been providing in excess of the prudential provisions. Whatever Reserve Bank asked us to provide, we have been providing that, plus a little more." Gupta said.
The Reserve Bank recently increased the provisioning for standard restructured assets for banks to 2.75 per cent from 2 per cent.
SBI sees bad debt stress easing-01.07.2014
State Bank of India has said that the bad debt situation is improving, but there is no magic wand to deal with it. The public sector bank’s bad debts rose to ₹61,605.35 crore or 4.95 per cent of total advances at the end of March, from ₹51,189.39 crore or 4.75 per cent in 2012-13.
When asked about the current situation, the Chairperson of the bank, Arundhati Bhattacharya, said, “We are seeing some lessening of stress but...there is no magic wand, we have to work our way through. As the GDP goes up, and demand goes up, the capital market will begin to respond. Once people are able to raise equity, we will see things becoming better.” She was addressing the media after inaugurating SBI’s digital branches.
Elaborating on this, Pradeep Kumar, MD and Group Executive (Corporate Banking), SBI, said one of the customers, a power company, came out with a qualified institutional placement (QIP) and it was subscribed twice, while another power company is coming out with a QIP.
“A couple of EPC companies are also planning rights offerings and I have talked to some private equity investors in these companieswho are also willing to participate in these offerings. I think the market is slowly beginning to respond to growth. I think this is a big plus for the banking industry,” he said.
Bhattacharya said the bank has to work on multiple kinds of solutions. “We will do all we can take. The fact is that we are very much in control; we know what is going wrong and where. We know what is to be done. We are trying to address those issues,” she said.
Interest rates
On interest rates, Bhattacharya said it was stable at this point. Asked about fund-raising plans, she said, “I don’t need it. I will have to check credit growth and then decide (in) another four months. We would need it should there be lot of demand for credit.” Once credit demand picks up, she said, “We have lot of options, including rights, QIP and FPO, so everything is on the table. At this point in time, we have not finalised anything.”
On interest rates, Bhattacharya said it was stable at this point. Asked about fund-raising plans, she said, “I don’t need it. I will have to check credit growth and then decide (in) another four months. We would need it should there be lot of demand for credit.” Once credit demand picks up, she said, “We have lot of options, including rights, QIP and FPO, so everything is on the table. At this point in time, we have not finalised anything.”
SBI raised ₹8,032 crore in January by selling 5.13 crore shares through a QIP.
http://profit.ndtv.com/news/banking-finance/article-high-bad-debts-temporary-sbi-314787
My Observation submitted a few days ago
RBI has advised bank boards to do detailed scrutiny of their quarterly and annual financial results during board discussions. It appears to be nothing more than ridiculous and a clever step by RBI to put the onus of correctness and genuineness of financial result on bank boards .
It is the duty of RBI to ensure correctness of financial results announced by various banks including private banks to avoid repetition of stories like that of Satyam Computers. It is the duty of RBI to carry out random checking of bank financials and internal working from time to time to create good culture and to stop fraud and manipulation in banks. RBI officials used to audit in seventies and eighties but gradually they stopped this culture because they are also not adequately manned to cope with the work load needed to properly audit thousands of branches .It is therefore not surprising they too shake hands with clever bank officials and indirectly favour culture of manipulation. Even politicians do not like exposure of bad health of banks .They all are birds of same feather.
RBI is therefore bent upon avoiding owning the responsibility of fraudulent games played by CEOs of banks in hiding bad assets. RBI officials understand very well that huge volume of stressed assets in Public sector banks is concealed by bank officials in nexus with team of Chartered Accountants who certify the correctness of financial results, correctness of profit , provision and bad assets.
RBI also knows very well that volume of bad assets will continue to rise every quarter and no power on earth can stop it , can reduce the speed of assets turning bad until there is change of hearts and change in attitude of credit officials of banks, change in mindset of dirty politicians who are least bothered of quality of assets but more concerned about vote bank and lending and until there is change of heart of officials and magistrates sitting in various administrative offices, courts, police department, DRTc etc.
Here it would like to add here that it is the team of Charted Accountants who are supposed to be more intelligent and talented and who are the competent and legal bodies to certify the correctness of financials of all companies and banks, certify bad assets as standard assets in nexus with bank officials and in lieu of some costly gifts and red carpet welcome extended to them by bank officials..
It is CAs who guide banks how to conceal bad advances , how to lend money to bad borrowers, how to manipulate financials to inflate profit and reduce provisions against bad loans. It is team of CAs who guide business men how to evade tax and how to use black money in real estate or in business itself. It is team of CAs who sign on balance sheet of branches of banks blindly or in greed of some valuable gifts. It is team of CAs who sell their signature at every point of business , at every point of compliance and certification. Gift culture at all levels make the case of certification easy .
Bank officials have been in habit of concealing bad asses to please their bosses, A Branch Manager of a branch try to please his Regional Head,, a RH may try to please his Zonal Head and all try to keep the Chief of Bank in good mood and for this purpose they all have to conceal bad assets .If any officer or any team of CAs dare declaring bad assets as bad asset truly, their career is sure to be doomed. O the contrary officers and CAs who are clever in concealing bad debts are promoted and their career is brightened.
Every quarter bank Chiefs promise that the health of bank will improve from next quarter . They book good profit in one quarter and show drastic fall in profit in next quarter. This clever hide and seek game of figures has been continuing for last ten years and specially after from the period when bank became technology friendly .
The bitter truth is that neither RBI , nor bank officials, nor team of CAs and nor politicians want to say spade a spade . They all are so called positive-minded and it is their compulsion to show banks as healthy so that evil works are not exposed. It is their compulsion to conceal bad assets and to book more and more false profits and projects banks as prosperous so that investors and customers of banks do not lose trust on PS banks.
If a NPA of a bank rises, investors will avoid investing in share of such banks, business men will not like to park their fund in such banks and will not like to borrower money from such banks, RBI officials will have to face the awkward position before ministers, and finally politicians will have to face the anger of common men whose hard earned money will be at stake in case of bank going weak and finally sink.
It is therefore wrong to believe that bank board will be able to find out or detect the fraud game played by CAs and clever bank officials . After all , if they say bad assets as bad , it will tantamount to digging own grave. When protectors become looters, none can save us from disaster. When team of CAs can be bought , when bank officials are bought, when legal officials are bought ,when politicians are bought and when every good certificate of good health can be bought by every officer , RBI should not expect correctness of financials of any bank in particular and any company in general .
Similarly art of Tax evasion taught by CAs to business community help in creation of black money in the system in nexus with tax officials, Hence it will be wrong to blame business community or any individual for tax evasion or for buying a landed property at higher rate but registering at lower rate using black money. It is a well established culture in India and to stop the same is nothing but hard nut to crack . Even politicians cannot survive without black money , how others will stop playing with powers of black money. Culture of flattery will end as soon as culture of dishonesty is stopped. None will like it from core of their heart . All want others to be his or her yesman .
If RBI officials , to begin with ,make a through scrutiny of all accounts of all borrowers who have been enjoying credit facility of more than 100 or 50 crore , the bitter truth of bad debts will come to surface, provided however that bank officials are kept miles away from the place where scrutiny is taking place and provided talented team of CAs are not allowed to talk to any borrower and any bank officials during the period of audit and inspection and entire task is conducted before CCTV and financially expert team of media men.
If RBI does not have enough manpower even to make scrutiny of Rs.100 crore borrower, they may start the task with scrutiny of books of best five banks . If it is proved that banks considered as best performers are best only due to best manipulation and fraudulent placing of figures only , it will become crystal clear to all concerned that the crisis in public bank is more deep rooted , bad culture is imbibed in DNA of all concerned and to stop the culture of manipulation in PS banks is nothing but wondering in dreamland.
It is worthwhile to mention here that proposals of loans and advances of Rs.50 crore or Rs.100 crore and above are sanctioned by none other than bank boards . It is bank boards which are supposed to monitor the health of high value loans . How it is then possible for such bank boards to doubt financials certified by CAs ? It is just like asking a thief to investigate the act of stealing and punish the culprit. There is invariably an unity among dishonest and corrupt officials . They all try to save each other in their mutual self interest.
If a Branch Head says that loan sanctioned by his predecessor is bad due to bad lending or bribe led lending, he will have to face the same precarious situation when his successor joins his branch after his transfer. As such each officer thinks it better and safe to hide bad loans by hook or by crook to save his colleague from punitive action and to avoid rejection in promotion processes. This culture is well established at all levels of management.
An Appeal to Government of India on Window Dressing
From time to time RBI and Government of India have asked and advised public sector banks to refrain from window dressing in deposits and advances. Still bank officials indulge in window dressing every quarter and this has been happening for decades. Window dressing is nothing but artificial inflating of business and reduction of stressed assets.
Bank officials inflate deposits in the last week of quarter or year and the same comes down in the first week of next quarter or year . Similarly they inflate figures of advances in the last week and get appreciation and awards from their bosses and from Ministers. This results in undue award to non performers and unjustified punishment to real performers.
Similarly on the front of bad assets and stressed assets, bankers hide bad assets by using the tools of rephrasing, restructuring and through evergreening of loan processes . Due to this timely action is not initiated against defaulters and during this time , defaulters disposes off the assets and then pray for compromise settlement or write off of the dues. In this way Recovery from defaulters is adversely affected.
Ultimately it is the government of India which has to suffer. It is taxpayers money which is infused in bank to protect them from falling due to mismanagement of bank officials or due to exploitation of banks by politicians. I add politicians because it is they who have been misusing banks for political advantages during each government in some way or the other. It is politicians who have damaged the banking culture.by their ill motivated advices and by suggesting writing off of loan for political gain.
Will you act against who have indulged in window dressing in the quarter ended June 15 despite your instruction not to do so in the same month?
It is important to say here that GOI can make real plan based on real figures only and similarly bank can recover bad money only if they take timely action.
Lastly I may add here that banking is a service industry and one cannot judge the performance of any individual based on figures. There are several Branch Heads or Bank heads who achieve the targeted figure somehow or the other but the customers of the branch and bank are not happy with the service extended .It may be these achievers who have added major portion of bad assets in their bank.
Here I would like to give an illustration TO substantiate my views. Suppose I am Branch Manager of a branch or Chief of a bank. I indulge in bribe based lending and achieve the advance well in advance. Then I use a little part of the ill earned money to buy deposits from government departments and public sector undertakings who have surplus funds and who can keep bulk deposits in my branch or in may bank, I can achieve and surpass even the target set for deposits. In this way I will be considered as good performer by my bosses, I will earn cash incentive and get quicker promotions. On the contrary those who have lagged behind the target or who have contributed lesser business by good means and by extending best services to customers may be rejected in cash incentives and in career.
But in the long run, advance made by me may become bad assets and cause huge loss to bank and force bank to arrange for larger capital. Customers may be dissatisfied with services extended from my branch because I focused on only few high value customers and neglected common men .Growth achieved may not be long lasting and stable. On the contrary , a person who did quality lending and who focused on retail business did the best for the health of the bank .His advances may remain standard healthy for years and decades. Bank may earn consistent income from such quality lending .
Future of bank depends not on figures but on quality of service it extends. Good culture is more important than good figures a bank achieves. Respect and recognition of real good performers can only help in giving permanent growth and consistent profit to a bank or a branch. Similarly wrong lending to achieve the target may give some temporary relief to political masters for temporary period but in the long run even persons like Devi Lal , V P Singh, Janardhan Pujari or Chidambram who promoted Loan Mela or Loan waivers used for for vote gain were rejected in election by voters. IN the same way bank officials who resort to evil means to achieve the target are trapped in corrupt dealing sooner or later or punished by almighty GOD in later part of life.
A Student who passed the examinations of his life by using unfair means may not necessarily get success in real life. A person may get job by using unfair means may be rejected by employer in short period. A bank may book inflated profit and book higher growth in business by using window dressing and by concealing stressed assets but sooner or the later the bank is exposed and subjected to hard medicine and surgical operation to survive or merged with some other bank . Unfair means in any sphere of life has bad outcome . There is no substitute to truth and real growth .
Click Here to Read My Blog on Window Dressing
My Blog of 2013 on rising NPA in SBI
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