Friday, July 10, 2015 Danendra Jain expresses his views as under ( Read news given below which reports that top officials now accepts the real truth without disclosing their name that restructure is used as a tool to hide NOA only )
Which Bank Is First In NPA ?
It is reported in newspaper Today that United Bank of India has been placed at Top in the list of banks having more stressed assets compared to their total advances and in comparison to private banks
If a person read news about banks regularly , he is aware that banks like State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, Union Bank, Oriental bank are considered as stronger banks whereas banks like United Bank of India, Central Bank of India , Uco bank, Indian Bank, Dena Bank, Vijya Bank are considered as weaker bank. Even two to three decades ago, banks like United Bank of India, UCo Bank, Indian banks were considered as weak bank and were on the verge of merger with so called stronger banks.
Government of India has been making promising year after year and quarter after quarter that health of public sector banks is good and regulating agencies like RBI and Ministry of Finance is closely watching the performance of these banks. As a matter of fact , actual health of these banks never improved by virtue of any change in policy or change in controlling offices. It is the art of manipulation which helps some banks to show good performance in some quarters and bad performance in some other quarters. Some of Chiefs are purely looters and some are less looters. Some banks have been exploited by politicians to greater extent and some are to lesser extent due to some reason or the other. Some of Chief are blind flatterer of Ministers and some are less Yesman. In fact there is no improvement in work culture and no change in attitude of politicians in using bank for vote purpose.
Unfortunately , Government of India has never taken any step to improve the health of PSU banks. On the contrary , ruling party has always tried to exploit these banks for political advantage. Sometimes they prescribe Loan Mela for growth of bank and sometimes they build pressure for write off of bad loans. Sometimes they build pressure on banks for priority sector lending and sometimes for lending for growth in infrastructure in the country. Sometimes the prescribe brainless expansion of branch network or ATM network and sometimes they ask for opening of accounts or doing insurance business.
It is they who have damaged the banking culture from grass root level and injected corruption and malpractices in PSU banks. It is they who use banks to garner votes and then it is they only who accuse banks for lesser profit compared to banks. When Financials of PSU banks reflect signs of weakness compared to peer private banks, they prescribe certain change in policy or change in Chief of banks, but dirty culture of exploitation of bank never stops.
Due to continuous exploitation of PSU banks by politicians , health of these banks have consistently moved from good to bad and bad to worse. GOI has to provide capital support from time to time. Even then the health of banks do not appear to be improving, rather it is deteriorating quarter after quarter. Volume of stressed assets in weakest bank United Bank is reported to be 21.5% and that in strongest bank SBI is more than 15%. This is the statistics which is published by these banks and which is accepted by RBI too.
If correct assessment of quality of assets of all PSU banks is done by an unbiased agency without any fear of repercussion or punitive action, I am very much sure that volume of stressed assets will be around 50 percent of total advances or approaching it.
And the matter of concern is that no concrete step has been taken by any agency to stop this uptrend in stressed assets. Quality of lending has not improved. Quality of workforce promoted to higher level is not based on ability to perform or based on seniority and experience but purely based on flattery and bribery. Similarly quality of recruitment in PSU banks has faced erosion year after year during the regime of reformation launched since 1991. So called merit oriented promotion policy or recruitment set up has failed to ensure merit at any level, rather it has promoted demerit.
Obviously , on the one hand banks are appearing to recover bad loan , on the other they are adding many more times of it as new bad loan. They are unable to control loss caused by frauds and stressed assets. It is all because neither management of banks are honestly doing corrective and reformative work, nor are government officials or ministers taking any concrete step to stop further deterioration in quality of assets and quality of work force.
Unless and until there is change in culture and mindset of people who work in bank and who monitor and regulate them ,there is no hope for improvement in health of ailing PSU banks. GOI will have to decide whether banks are to be used as tool to fulfil social objective or to be left free to earn profit and profit only. Similarly , bank officials have to decide whether they are meant to serve their organisation or they are to served their bosses and bosses only.
Due to continuous exploitation of PSU banks by politicians , health of these banks have consistently moved from good to bad and bad to worse. GOI has to provide capital support from time to time. Even then the health of banks do not appear to be improving, rather it is deteriorating quarter after quarter. Volume of stressed assets in weakest bank United Bank is reported to be 21.5% and that in strongest bank SBI is more than 15%. This is the statistics which is published by these banks and which is accepted by RBI too.
And the matter of concern is that no concrete step has been taken by any agency to stop this uptrend in stressed assets. Quality of lending has not improved. Quality of workforce promoted to higher level is not based on ability to perform or based on seniority and experience but purely based on flattery and bribery. Similarly quality of recruitment in PSU banks has faced erosion year after year during the regime of reformation launched since 1991. So called merit oriented promotion policy or recruitment set up has failed to ensure merit at any level, rather it has promoted demerit.
Sunday, August 30, 2015 Danendra Jain writes as under
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.
Fundamentals strong, global events won't impact India: Jaitley--Hindustan Times 8th September 2015
Finance minister Arun Jaitley said on Tuesday India will be among the lesser impacted countries by the global economic turmoil but the government needs to take steps to strengthen the economy.
Jaitley was briefing the media after the high-level meeting on global economic scenario chaired by Prime Minister Narendra Modi where bankers and billionaires talked about how India can manage global economic turbulence, including opportunities for Asia's third-largest economy in China's market and growth woes.
"Most participants felt that we are going through a phase of volatility which might turn to some turmoil on the market. Volatility is the norm of the moment and will result in turmoil in the markets and rupee," said Jaitley.
"By and large, a major crux of the entire discussion was that in terms of its economy India is relatively untouched. It was suggested that we should take steps to strengthen India's economy," he said.
Jaitley said the impact of the global turmoil will be far lesser on the Indian economy as its fundamentals are reasonably strong.
The meeting in New Delhi was attended by tycoons including the country's richest man, Mukesh Ambani, Jaitley, Reserve Bank of India governor Raghuram Rajan, economists and state and private bank chiefs.
The minister said issues of ease of doing business, cost of labour and capital and stalled projects were also raised by participants at the meeting. Participants specifically emphasised on two steps - bankruptcy code and anti-corruption - and many of them wanted monetary policy easing by RBI, the minister said
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.
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.
Fundamentals strong, global events won't impact India: Jaitley--Hindustan Times 8th September 2015
Finance minister Arun Jaitley said on Tuesday India will be among the lesser impacted countries by the global economic turmoil but the government needs to take steps to strengthen the economy.
"Most participants felt that we are going through a phase of volatility which might turn to some turmoil on the market. Volatility is the norm of the moment and will result in turmoil in the markets and rupee," said Jaitley.
"By and large, a major crux of the entire discussion was that in terms of its economy India is relatively untouched. It was suggested that we should take steps to strengthen India's economy," he said.
Jaitley said the impact of the global turmoil will be far lesser on the Indian economy as its fundamentals are reasonably strong.
The meeting in New Delhi was attended by tycoons including the country's richest man, Mukesh Ambani, Jaitley, Reserve Bank of India governor Raghuram Rajan, economists and state and private bank chiefs.
The minister said issues of ease of doing business, cost of labour and capital and stalled projects were also raised by participants at the meeting. Participants specifically emphasised on two steps - bankruptcy code and anti-corruption - and many of them wanted monetary policy easing by RBI, the minister said
Bankers expect NPA crisis to worsen in next few years: EY survey-LiveMint-8th Sember 2015
EY stated that 72% of the respondents felt that in the current scenario, the RBI’s debt restructuring norms are being misused by borrowers
The EY survey asked respondents about various issues relating to rising bad loans, including the reason and ways to contain the problem.
In its report titled ‘Unmasking India’s NPA Issue’ released on Tuesday, EY stated that 72% of the respondents, a majority of whom were bankers, felt that in the current scenario, the Reserve Bank of India’s (RBI) debt restructuring norms are being misused by borrowers.
According to the report, the overall level of stressed loans—or the sum of gross NPAs and gross restructured assets—went to over 11% in March 2015, from 9.2% in March 2013. Similarly, gross NPAs rose to 4.6% from 3.4% in the same period.
At 39 listed banks, gross NPAs rose 27.69% to Rs.3.21 trillion on 30 June 2015 from Rs.2.51 trillion in the year-ago period.
The report noted that about 40% of the loan accounts restructured between 2011 and 2014 had turned bad.
“The pace and quantum with which restructuring of loans were being undertaken, implied that restructuring of accounts was being resorted to avoid classification of accounts as NPA and thereby enable lower provisioning in the bank books,” EY said in the report.
As many as 87% of the respondents stated that diversion of bank funds to unrelated businesses or fraud by borrowers directly resulted in the steep rise in the level of bad loans. Also, 64% of the respondents believed that lapses in the initial due diligence was a big reason for increased NPAs, said the report.
Only 15% of the respondents were optimistic that recent regulatory changes by the RBI and increased supervision would be productive in controlling the rising NPAs.
Most of the respondents said that forensic audit of accounts instead of the present practice of doing a general audit of accounts of the borrowers before taking a call on the debt restructuring will help. About 91% of the bankers who responded to EY’s queries agreed that forensic audit prior to approval of restructuring plans was essential to control incidences of default. Further, 54% of the respondents believed that a forensic audit would help in weeding out wilful defaulters from genuine borrowers.
The survey noted that 68% of the respondents felt that enhancing their internal skill sets on credit assessment and evaluation was essential in fighting the NPA issue, while 56% said that independent borrower checks was essential in ensuring that the situation does not worsen.
EY said that the survey recorded responses from 110 participants, largely from public sector, private sector, foreign and co-operative banks. Most bankers surveyed belonged to credit operations in their respective banks. Other bankers were from the legal and compliance, loan recovery, auditing and vigilance departments.
http://www.livemint.com/Industry/xPuLSOoxWckzmLk8RhnrGJ/Bankers-expect-NPA-crisis-to-worsen-in-next-few-years-EY-su.html
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