Friday, October 16, 2015

RBI Threatens Action Against Erring Officials



RBI Governor as usual has once again threatened that bank officials or borrowers or customers whoever have caused loss to bank or who have neglected in discharging their duties or who have violated laws and rules will have to pay the price . Expressing concern over illegal Rs 6,000 crore transfer of funds through a Bank of Baroda (BoB) branch, RBI Governor Raghuram Rajan said it will be pursued both by the central bank and investigative agencies to the "ultimate conclusion" to ensure that the guilty are made to "pay the price" for it. He also said that if not pursued quickly, such frauds create an atmosphere of impurity which then breeds more such practices.



RBI Governor has proposed a nice idea indeed. Since long it has been suggested that the person whosoever he or she may be , must be brought  to task if it is proved that loss caused to bank or possibility of loss to bank in future has occurred or likely to occur due to an act of the person which was ill-motivated or due to absolute negligence of duties .But RBI in the past too have issued paper bullet threatening several times and unfortunately no substantial change or improvement has taken place in public sector banks.

In the year 1991 Government of India accepted to pursue the policies of reformation and changed various rules and guidelines to reform banks. But unfortunately during last twenty five years of so called reformation, health of assets of  banks in public sector has deteriorated year after year. So many banks have faced crisis of mounting bad debts, capital erosion, fall in return on assets, fall in profitability and increase in quality of staff attachment to bank service. To add fuel to fire, loss caused by fraud in PS banks is increasing year after year and runs in thousands of crore of rupees.

Number of weak banks have increased slowly and gradually and each time a bank is exposed , RBI either changes CMD or merge the bank with some stronger bank. As of now as many as ten banks are identified as weak bank due to continuously rising Gross Non performing Asset Ratio. Even so called strong banks like SBI, PNB, BOB, BOA , Canara bank , IOB have turned weak. Government has infused capital many times in the past and still proposing to infuse more capital to save banks from facing disaster.

Window dressing has always been used to hide weakness of bank since long. No substantial improvement is visible. RBI usually take steps like merger to hide evil works of one bank or the other or allow banks to restructure bad loan to reduce volume of stressed assets.

All this has happened only because RBI or GOI never took drastic action against erring officials. Finance Ministers of last three decades have several times threaten to punish guilty officials but in fact it is only they who have caused much pain to bank to serve their self interest and  political interest.

Legal machinery almost proved total failure in recover of money from defaulters of banks. Politicians instead of recover of money from defaulters promoted the culture of loan melas, write off of loans, and sacrificing of interest in compromise settlement.

Outcome of dirty politics is now visible in form of erosion in net profit margin, fall in Return on Assets and decline in profitability of public sector banks. Bank staff in general are demotivated and a few flatterer and yes-men occupy top post and it is they who propagate dirty culture down the line. Borrowers have applied several tools of gifting officers to take credit facilities and then to get it written off. How long such dirty culture will continue?

But it is certain that as long as culture is not changed in bank, all threatening issued by RBI or Finance Minister will prove useless and ineffective. Unless clear and loud message is conveyed by stern action to all bankers, politicians and administrative and legal officials , we cannot dream of effective action and substantial improvement in health of bank.

Bank of Baroda fraud: RBI's Rajan says guilty will have to pay the price-First Post- 16.10.2015
Aizawl: Expressing concern over illegal Rs 6,000 crore transfer of funds through a Bank of Baroda (BoB) branch, RBI Governor Raghuram Rajan said it will be pursued both by the central bank and investigative agencies to the "ultimate conclusion" to ensure that the guilty are made to "pay the price" for it.

He also said that if not pursued quickly, such frauds create an atmosphere of impurity which then breeds more such practices.


"We have created a whole new system for fraud alerts, fraud awareness amongst the banks.
My hope is, going forward, we will pursue these frauds to the ultimate conclusion so that those who commit frauds do in fact pay the price for committing them.
"Otherwise if they are not pursued quickly and pursued to their logical conclusion, it creates an atmosphere of impurity, which then breeds more such practices," Rajan told reporters after an RBI board meeting here.

Replying to questions on the alleged scam, Rajan said sharp practices were at work. "It does raise questions about fraud in the system, at this time we don't know enough to allege one. What I am saying is generally," he said.
Rajan said that it was very important that a message is sent that if there is deliberate laxity, deliberate violation of rules in order to give private gains to certain parties, they should be pursued both by the regulator and the law enforcement agencies. "We have put up certain structures which will help them go forward," he added
firstpost.com/business/bank-of-baroda-fraud-rbis-rajan-says-guilty-will-have-to-pay-the-price-2470846.html

RBI to take close look at banks' asset quality: Raghuram Rajan -Economic Times-16.10.2015

Reserve Bank of India Governor Raghuram Rajan said on Thursday the central bank would take a close look at the asset quality of lenders, while calling on them to recognise all bad loans and put assets back to work after talking with company promoters.

The comments are the latest by Rajan pushing lenders to deal with their pile of non-performing assets as the government pushes for increased corporate investments.

Rajan said the central bank was also working with the government....



My blog of the year 2011

No comments:

Post a Comment