Banks were nationalized in the year 1969 to serve needs of the country on priority and to save villagers and poor people from clutches of local money lenders who usually exploit people in crisis. PSU banks were made for serving social schemes and for poor people. But unfortunately succeeding government used it as a tool to gain political mileage. They simultaneously build pressure Public Sector Undertakings banks to earn profit at par with private banks. This created a confusion.
Now PSU banks are neither serving society wholeheartedly nor in a position to earn profit at par with private peers. One after other PSU banks is moving from profit to loss. Manipulation and fabrication of books does not work for long period.Window dressing does not give good result in long run. After each bad result of each bank, CEO of that bank will make promise to contain bad debts and FM will say that there is nothing to worry. I have heard such words of consolation many times.
Some experts suggest privatization of banks or giving charge of PSU banks to top persons of private banks. Prime Minister Mr. Modi cannot do it which Congress Government could not do though they made several efforts in this direction during last two decades.
Rulers of the past looted bank for serving their political and self interest and thus damaged fundamentals of banks and now innocent PM Mr. Modi is trying to improve it without punishing anyone of the past. Of course he will hardly get success due to deep rooted dirty culture in banks as well as in politics and administrative and legal set up of the country.
And similarly handing over PSU banks to private banks will never take place by choice but under compulsion. We have seen how in the past few private and PSU banks merged with stronger bank in that sector .This is the habit of our rulers , they first allow the system to rot and collapse, then they take some corrective step to win the heart of innocent voters.
During my more than three decade long association with banks, I have understood the nature of deep rooted culture of working, of flattery , of bribery and of speaking art which change the wind as per choice and which help in winning the heart of higher bosses.That is why I use to say that no power on earth can reform banks and save them from disaster.
Yes , Ruling government can infuse capital from time to time to hide bad culture and to protect erring officials and guilty politicians as they distribute charity to families of persons who are victim of public anger, riot or misbehavior of politicians or super officials or mafia colleagues or criminals. Ruling parties have huge public fund which they normally use to hide corrupt politicians and erring officials of their choice .
If anyone tries to punish erring officials and corrupt politicians , gang of corrupt persons and officials will come together to puncture exercise meant for real reformation and real transformation of banks.
This is India where even person like Narendra Modi who has been working day and night devotedly for growth of the country has been facing humiliating and false charges from his opponents . Gang of corrupt politicians have gathered together to puncture growth agenda of Mr. Modi.
Our country runs on emotions and it is very easy for bad persons to provoke emotions and malign a good person . Bad persons always have unity among them whereas good persons seldom come together to defeat the bad motives of bad persons. Same is the nature of prevalent situation in banks.
People of India want persons like Mamohan Singh who remain silent all the time and allow all looters a free hand , who allows all undisciplined behaviors to get roots in the offices ,who irrigated and promoted corrupt politicians to remain in power and to please High command, who remains silent against even anti-nationals, who promotes the culture of flattery and bribery silently and who do not give any reaction even if hundreds of rapes, killings or riots take place in India.
It is economist but clever MMS who used to say after every quarter that price rise will be within control from next quarter but price rise could never be contained during his rule .It is he who allowed banks to rot and grow sickness for years and decades . His silence is liked by gang of corrupt politicians, criminals and those who are benefited by corrupt system by using illegal methods.
People do not like vocal persons like Modi who work 12 hours a day and motivates others to work 12 hours for the sake of growth in the country. Similarly in banks also , a good worker is not liked by his bosses but a super flatterer is worshiped like God.In such environment it is foolish to dream of real transformation in PSU banks . 5
Now PSU banks are neither serving society wholeheartedly nor in a position to earn profit at par with private peers. One after other PSU banks is moving from profit to loss. Manipulation and fabrication of books does not work for long period.Window dressing does not give good result in long run. After each bad result of each bank, CEO of that bank will make promise to contain bad debts and FM will say that there is nothing to worry. I have heard such words of consolation many times.
Some experts suggest privatization of banks or giving charge of PSU banks to top persons of private banks. Prime Minister Mr. Modi cannot do it which Congress Government could not do though they made several efforts in this direction during last two decades.
Rulers of the past looted bank for serving their political and self interest and thus damaged fundamentals of banks and now innocent PM Mr. Modi is trying to improve it without punishing anyone of the past. Of course he will hardly get success due to deep rooted dirty culture in banks as well as in politics and administrative and legal set up of the country.
And similarly handing over PSU banks to private banks will never take place by choice but under compulsion. We have seen how in the past few private and PSU banks merged with stronger bank in that sector .This is the habit of our rulers , they first allow the system to rot and collapse, then they take some corrective step to win the heart of innocent voters.
During my more than three decade long association with banks, I have understood the nature of deep rooted culture of working, of flattery , of bribery and of speaking art which change the wind as per choice and which help in winning the heart of higher bosses.That is why I use to say that no power on earth can reform banks and save them from disaster.
Yes , Ruling government can infuse capital from time to time to hide bad culture and to protect erring officials and guilty politicians as they distribute charity to families of persons who are victim of public anger, riot or misbehavior of politicians or super officials or mafia colleagues or criminals. Ruling parties have huge public fund which they normally use to hide corrupt politicians and erring officials of their choice .
If anyone tries to punish erring officials and corrupt politicians , gang of corrupt persons and officials will come together to puncture exercise meant for real reformation and real transformation of banks.
This is India where even person like Narendra Modi who has been working day and night devotedly for growth of the country has been facing humiliating and false charges from his opponents . Gang of corrupt politicians have gathered together to puncture growth agenda of Mr. Modi.
Our country runs on emotions and it is very easy for bad persons to provoke emotions and malign a good person . Bad persons always have unity among them whereas good persons seldom come together to defeat the bad motives of bad persons. Same is the nature of prevalent situation in banks.
People of India want persons like Mamohan Singh who remain silent all the time and allow all looters a free hand , who allows all undisciplined behaviors to get roots in the offices ,who irrigated and promoted corrupt politicians to remain in power and to please High command, who remains silent against even anti-nationals, who promotes the culture of flattery and bribery silently and who do not give any reaction even if hundreds of rapes, killings or riots take place in India.
It is economist but clever MMS who used to say after every quarter that price rise will be within control from next quarter but price rise could never be contained during his rule .It is he who allowed banks to rot and grow sickness for years and decades . His silence is liked by gang of corrupt politicians, criminals and those who are benefited by corrupt system by using illegal methods.
People do not like vocal persons like Modi who work 12 hours a day and motivates others to work 12 hours for the sake of growth in the country. Similarly in banks also , a good worker is not liked by his bosses but a super flatterer is worshiped like God.In such environment it is foolish to dream of real transformation in PSU banks . 5
No Power Can Stop Rise In Bad Debts In Public Sector Banks?
One after other bank under public sector is booking loss due to higher provisions towards bad debts accumulated in their books and concealed since long. So Called Big banks, So Called Strong Banks and even So Called Top ranked banks like Bank of Baroda, Bank of India, Canara Bank, Indian Overseas Bank, Indian Bank are moving towards loss. Weak Banks like United Bank, U Co Bank, Central Bank, Allahabad Bank, Central Bank, Dena Bank, Indian Bank are growing their weakness quarter after quarter.
The most funny part is that health of bank has been deteriorating quarter after quarter even after concealing huge bad debts by using tools of manipulation and still Government of India and Finance Minister use to say that health of Bank is under control and there is nothing to cause worry. This has been continuing since the year 2010 when the system of technology based identification of bad debts was first introduced in some banks and then all banks were forced to follow the same method.
Still banks have not shown honesty in identification of bad debts and still they are in habit of hiding bad debts to inflate profit and win the heart of RBI and Finance Minister and thus get elevation in career. No change in culture of bank officials is visible. And neither there is any change in attitude of Government even after change of government from UPA to NDA. GOI has advised banks several times during last three decades to refrain from window dressing in balance sheet or in business figures, but the culture of window dressing has not stopped and not even reduced.
At least when so called strong banks book higher Gross NPA ratio and show erosion in profit or book loss , Government should become alert and take stern measures to stop corruption in banking and other departments who fail to recover money from defaulters. No effective step has been taken to punish real guilty in lending and to officers in judiciary and administrations who play foul game with bankers in nexus with bad borrowers. Government has total failed to stop political interference. Government has failed to stop malpractices prevalent in processing and sanctioning of loan . Government has totally failed to stop flattery and bribery culture playing their prominent role in promotion of officers and recruitment of officers in various scales.
Finance Ministers under all governments during last three decades have simply issued advices, guidelines, instructions and alerts or warnings to management of public sector banks to stop rise in bad debts but failed to ensure compliance of the same. Rather it is they who help banks to hide bad debts by using tools of restructure or rephrase or by giving additional loan or eventually by writing off of the bad loans. It is they or RBI officials who apply pressure on banks to give loans to unscrupulous business men and then be lenient in recovery.
Every year , employees of all bank celebrate 14th September as Hindi Diwas and take oath to work , write and speak in Hindi but they seldom use Hindi in practice. In the month of November , bank staff use to celebrate Vigilance Week and take oath not to indulge in corrupt practices and will do all work with sincerity , honesty and full devotion without any biased attitude. Still most of work take place with role of corrupt practice only, it may be case of lending or recruitment or promotion or purchase of goods and services.
Similarly Every quarter , top management issue circulars for all branches not to inflate business by window dressing , but majority of them including issuing authority resort to window dressing to achieve the set targets. In the same way RBI and GOI issues lessons of ethics and morality for all banks , but none of them are complied in toto and none of them are put in action in true spirit.
Bankers and all concerned offices are habituated to obtain or submit a certificate , which may be true or false ,that all laws are honestly followed and all circulars are put in action. But the reality is mostly remain exactly the opposite to contents of such certificates. This reflects the true picture of work culture and practices prevalent in banking industry .
Certificates and oaths have become customary rituals and they have no connection with ground reality.
It is ministers or RBI officials who teach and force bankers not to apply force in recovery of bad loans but to recover money from defaulters by love and persuasions only. It is they who provide minimum staff and officers in judiciary or inferior officers in DRT or courts so that cases filed by banks for recovery remain pending for disposal for decades. No improvement at any level is visible . Ministers preach sermons to bank CMD, then CMD teaches General Managers and GMs finally preach sermons to juniors in order of level of posts and thus they all get promotions and get safe exit without facing any punishment , rather getting more and more awards.
Every year , employees of all bank celebrate 14th September as Hindi Diwas and take oath to work , write and speak in Hindi but they seldom use Hindi in practice. In the month of November , bank staff use to celebrate Vigilance Week and take oath not to indulge in corrupt practices and will do all work with sincerity , honesty and full devotion without any biased attitude. Still most of work take place with role of corrupt practice only, it may be case of lending or recruitment or promotion or purchase of goods and services.
Similarly Every quarter , top management issue circulars for all branches not to inflate business by window dressing , but majority of them including issuing authority resort to window dressing to achieve the set targets. In the same way RBI and GOI issues lessons of ethics and morality for all banks , but none of them are complied in toto and none of them are put in action in true spirit.
Bankers and all concerned offices are habituated to obtain or submit a certificate , which may be true or false ,that all laws are honestly followed and all circulars are put in action. But the reality is mostly remain exactly the opposite to contents of such certificates. This reflects the true picture of work culture and practices prevalent in banking industry .
Certificates and oaths have become customary rituals and they have no connection with ground reality.
It is ministers or RBI officials who teach and force bankers not to apply force in recovery of bad loans but to recover money from defaulters by love and persuasions only. It is they who provide minimum staff and officers in judiciary or inferior officers in DRT or courts so that cases filed by banks for recovery remain pending for disposal for decades. No improvement at any level is visible . Ministers preach sermons to bank CMD, then CMD teaches General Managers and GMs finally preach sermons to juniors in order of level of posts and thus they all get promotions and get safe exit without facing any punishment , rather getting more and more awards.
There is no doubt to me that health of banks will continue to deteriorate quarter after quarter and year after year. Government will have to provide capital support to these banks and ultimately taxpayers money will be lost and common men will be taxed higher. Not only PSBs , even health of private banks has been deteriorating. And if these private banks sink or collapse, it will be the common men only who will suffer problems and will have to bear the brunt of mismanagement and misrule f GOI .
Government will perhaps come to senses only when a banks fully collapses and then they will suggest for merger or privatisation or change of ownership. No full proof solution will ever come unless and until there is change in culture and attitude of rulers, auditors, inspectors and vigilance officers or that in judges and advocates. Ministers or officers , all want to pass the time somehow or the other, none of them want to buy headache in forcing discipline or in taking action against erring officials. Even Trade Union leaders who were and who are supposed to be protectors of employees and of organisation have also become partner of bank management and they too appear to be second side of same fake coin which represents character of bank management.
Government will perhaps come to senses only when a banks fully collapses and then they will suggest for merger or privatisation or change of ownership. No full proof solution will ever come unless and until there is change in culture and attitude of rulers, auditors, inspectors and vigilance officers or that in judges and advocates. Ministers or officers , all want to pass the time somehow or the other, none of them want to buy headache in forcing discipline or in taking action against erring officials. Even Trade Union leaders who were and who are supposed to be protectors of employees and of organisation have also become partner of bank management and they too appear to be second side of same fake coin which represents character of bank management.
I would like to refer 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.
Politicians have created bad culture in all offices and all departments. Merit is of 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 places. Honesty and good performance result is 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..
Property valuers, architects, chartered engineers , Contractors ,dealers or suppliers in/ of goods, plants and machineries and various services 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 goes 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 does 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 compete audit 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 in efficient 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 not changed . In modern era, 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 health, wealth 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 . One has to develop expertise in preach 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.
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 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 apolitical 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
http://economictimes.indiatimes.com/industry/banking/finance/finance/how-corrupt-banking-system-creates-a-mountain-of-bad-loans-makes-recovery-process-complicated/articleshow/48724651.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
It is reported that Central Bureau of Investigation had registered a case against a Kolkata based company and after a few days only it came to know that RBI had already cautioned banks seven months ago and redflagged loans given to the firm . It means RBI had virtually indicated banks for not acting in one of largest banking fraud.
It is also reported that in July 2014 too RBI has asked lending banks to investigate operations associated with REI Agro Limited and report back to RBI about an fraudulent activities . When these banks did not respond , RBI asked U Co Bank ,leader of Consortium to hold an emergency meeting of the lending banks and to report the fraud and start recovery proceedings immediately. But the banks did not take appropriate action for a long time and trying to show the account as Standard by using tools of Restructuring.
CBI has however lodged a case of criminal conspiracy, cheating and forgery against the firm on 26th of this month. Above case appears to be astonishing only when it comes in newspapers. Otherwise such types of manipulation and habit of hiding bad debts and fraud cases is not new in banking industry, specially in public banks. Hundreds and thousands of bad accounts involving crores of rupees in every bank are restructured every quarter to show them as Standard Advance.
In this way there is well established culture of inflating profits by reducing provisions towards bad loans fraudulently. And this has been going on for decades and RBI is well aware of It. Ministry of Finance also used to provide patronage to top bankers who used to conceal bad loans and help bad borrowers by lending at the behest of ministers and politicians.
Internal auditors, RBI Auditors, Concurrent auditors, Statutory auditors and all types of inspecting officials who use to inspect and audit big loans in banks are well trained in methods to conceal bad loans and earn some gifts in lieu of it wherever possible. Bank officials, borrowers and team of CAs work in collusion with each other to cheat banks and in this way each of them serve their self interest .
Borrowers get extra loan despite having bad health, CAs get extra fees and additional work as award for being cooperative and bankers achieve targets or credit growth, target of reduction in NPA and elevation in post and pay scale. Besides role of illegal money cannot be denied. CBI can unearth the entire game plan only if officials of CBI also do not become victim of bribe and illegal money. There is an post of CVO and there is one CVC above all CVOs , still the culture of cheating continues. Exposure after exposure takes place , but corrupt officials manage patronage and elevation instead of getting penalised. This is the beauty of Indian politics.
Let us hope for the best. But it is also true that several cases of frauds involving hundreds and thousands of crore of rupees have been exposed during last one to forty years and none of top officials have been booked to task. Only inquiry and investigations are initiated, advices are sent by RBI to banks, guidelines are issued by head offices of banks for branches for taking proper care before lending and so on. But actual action is never taken. This is why volume of losses to banks due to frauds and bad debts in increasing unabated every quarter. Bank management however in each such exposed cases make some juniors as scapegoat and safely close the file for ever.
If CBI is asked to investigate and peep into each bad loan accounts involving Rs. five or ten crore and above, I think the story of fraudulent manipulation and undue favour to borrowers will come to light in more than fifty percent of cases. And it will become crystal clear that majority of top officials have become top officials in that bank only by resorting to illegal methods, window dressing, manipulation and by using bribe for buying bosses and selling their skill to loan seekers.
I have been writing for several years that internal position of bank's assets is not at all good and real volume of bad debts is on an average more than 25 percent of total advances and goes even beyond 50 percent. But quarter after quarter CEO of each bank will speak to media and say that they will reduce Gross NPA ratio in forthcoming or next quarter. RBI and Finance Minister also believe on such clever and shrewd bank officials and give them promptest promotion and even give them job after retirement.
But now when a secret survey has been carried out by Earnst & Youung , Majority of top officials interviewed or who responded on questions submitted by EY India to them have admitted the bitter truth of bank's asset quality and future of bad debts keeping a condition that their names will not be disclosed. In brief, bankers without disclosing their names have accepted following bitter truth in a survey conducted by E & Y
1. that problem of bad debts is likely to go up in coming two-three years.
2. that steps taken by RBI are not going to help bankers in stopping slippages to NPA category .
3. that Diversion of fund is very common with companies. They do not use the fund for which they avail from banks and diversion to stocks, real estate is very common.
4. that Borrowers borrow money beyond their repayment capacity
5. that they do not accept the stress on face value but want forensic audit of companies to ascertain intent of the borrower.
6.that bankers resort to outsourcing of vital functions knowing very well that outsourcing of due-diligence activities by banks to various entities, such as surveyors, financial analysts and other verification agencies is risky .
7. Lenders rely significantly on the inputs issued by such third parties. Reports are made as a routine with little scrutiny. In some situations the report may be drafted under the influence of unscrupulous borrowers.
8.It is therefore important that the selection of such third parties is independent, done in a transparent manner and is based on their capability and credentials,"
9.that banks often send their sales force instead of credit officers to do credit appraisal activities, such as in-person verification, background checks, and factory visits, which is inherently conflicting to their role of loan origination
10.that in most large proposals, the due diligence or credit appraisal done by the consortium leader is accepted by the member banks. This is applicable in multiple bank lending relationships, where the lenders with low exposure rely on checks done by the lenders with higher exposure, it added.
11. Even after noticing warning signals, bank officials in general try to hide it and suggest ways how to keep the account in Standard category by using wrong and improper tools to save their colleagues . Borrowers take advantage of banker's constraints and compulsion of sticking to NPA target fixed by higher authorities. They seek more and more fund to divert the same to other field like stock, real estate or other business activities or even misuse the excess fund for consumption and for leading a life of highest standard for which he is not capacitated.
AIBEA had given a call for all bank employees to observe strike on September 2 , 2015 to protest against proposed modification / amendments in labour laws to the detriment of bank employees and to favour employers.
AIBEA had further requested Government to declare Loan to Kingfisher as wilful default so that bankers can recover the money from defaulter like Vijya Mallya. This makes it clear that despite several efforts made by many banks, bank officials failed to convince the borrower and the court that the default is wilful. Not only Vijya Malya, there are hundreds of such big defaulters , who are not repaying the dues to banks despite the fact that they have capacity to repay in time, but bankers are unable to consider the default as wilful default.
It is just enough to prove that not only bankers have acted with negligence in lending to high profile borrowers in greed of some favour and some material gain but also Indian laws and Rules framed by RBI are proved to be ridiculous and ineffective. It is painful that banks are needed to prove the default as wilful to recover the loan given to a borrower. After all, default is default. Courts and tribunals are unable to decide bank cases filed against defaulters in years and decades. It is Himalayan task for bankers to prove in court that they have given loan to defaulter, that documents are genuinely executed by defaulters only and that amount of default is correctly calculated.
Government of India do not hesitate in building pressure on banks to lend money to big infrastructure project, big corporate, high value business houses, Power generating companies or power distributing companies or even to farmers, small traders and small industrialists.
But when it is the issue of recovery of overdues from defaulters, Government of India do not extend any support to bank officials , rather bank officers are advised to be tactful and effective. When default occurs, blame is pointed towards nature, or global situation or domestic economic slowdown.
GOI fail to make laws or is unwilling to make laws effective so that money is recovered from all types of defaulters without the need of proving various points, like whether the default is wilful or not, like advance made was adequate or inadequate, documents executed by defaulters are time-barred or within limitation, whether proper notice has been served to defaulters or not, whether proper formalities for creation of mortgage of properties was created or not, whether any property not under mortgage can be seized or not, interest rate was low or high and so on.
Government of India is not willing to build pressure on courts and various tribunals like Debt Recovery Tribunals to decide the bank cases pertaining to recovery from defaulting borrowers in timeframe and fix accountability on judges and magistrates who in collusion with borrowers and in nexus with advocates go on delaying decisions on bank cases on flimsy grounds for years and decades.
It is very much painful and ridiculous too that Banks are forced to give loan to a person or a company in a timeframe of few days or few months but borrowers , loan takers are not forced to repay the loan on demand or face stern punishment and judiciary is not forced to decided the case in a fixed timeframe of few months or a year or two and courts are not forced to decide the case in fixed timeframe. I am unable to understand why does it takes years and decades to prove that loan has been given , that default has occurred and that defaulters have to repay the dues.
Banks are required to give loan to farmers, students, business men, professionals or industrialists without any trouble to loan seekers , but when loan takers fail to repay the loan in time willingly or unwillingly, then bank need to prove it from various angle that bank has truely given loan or default is wilful . It means needle of doubt is always pointed out towards bankers and not against borrowers who have wilfully defaulted in repayment of loan in time with a malicious intention to get it written off or to settle the loan under compromise with huge discount.
The root cause of accumulation of stressed assets in public sector bank is neither global recession or economic recession as claimed by clever bankers and clever politicians. Reasons for rise in stressed assets starts from the first day of loan sanction to days of monitoring, day of default and finally days when recovery processes are initiated till it is parked in courts for final ordeal. Quality of sanctioning of loan, quality of monitoring, quality of legal system , quality of politics, quality of governance, quality of workforce who handle such cases all need to be questioned and made effective .
The key reason is that bank officials in public sector banks are to sanction loans under pressure from some corner or the other or under pressure of achieving the target. If loan growth is not achieved , the career and personal life of bank officers may be affected badly. There is no protection to bank officers who are shouldering the task of loan sanctioning and loan processing. Loan processing officers and loan sanctioning officers may face threat to their life and their family or may face critical and frequent transfers or rejection in promotion. In such position , some officers become extraordinary clever and they start earning money from unfair means by giving loan to those who bribe them better. In this way they kill not only two birds but many birds with one stone. They achieve the target given by management and earn money from evil ways, they get appreciation in all meetings, they get quicker promotion, cash incentives not only from borrowers but also from bank management for achieving the target and finally get cream posting.
Bankers are meant to do banking activities , but they are forced to indulge in non-banking activities which adversely affects the quality of lending , quality of monitoring and quality of ownership for assets created by bank. Bank officers act as machine which work as directed by machine owner. They do not have love for banks but love for higher bosses who can make or mar their life and career. The culture in government banks is to pass the time somehow or the other and leave the evil work behind for followers. There is complete lack of ownership and loyalty. Quality is not significant , quantity is important.
Second reason is political exploitation of banks by politicians and local muscle men. Safety of bank officers depends on the mercy of God. In naxal areas , bank officers do not have courage to say 'no' to any loan seeker or even reduce the amount of loan sanction compared to what is demanded by local goondas and muscle men directly or indirectly for others.
Third reason is position of bank officers become pathetic when loan turns bad . When loanee do not repay the loan, bank officers can do nothing other than worshiping defaulters as if defaulters is God. It takes years and decades for bankers to prove in courts that they have really given loan to defaulting borrowers and they have calculated interest correctly or the documents executed by defaulters are genuine and with Limitation act provisions.
Government , either state or central , is unable to pressurise their officials in various departments to clear the project in timeframe and penalise who wilfully delay the process of statutory clearances. GOI is unable to provide land, coal ,power and other inputs for timely completion of projects promoted by various business houses. It is known to all that project valued Rs.400000 crore in steel sector are pending and languishing in various offices for decision for years and finally when cost escalates , promoters surrenders which finally resulting in converting standard asset to Non Performing assets.
Similarly power generating companies and distributing companies have been financed thousands of crores of rupees by various public sector banks and most of them are defaulters because they are unable to recover even the cost from consumers of power to political reasons. Politicians do not want to increase rate to give comfort to voters but when these power companies book loss and default in repayment of bank loan, Government blame banks for failing to recover the dues .
Finally , even if it is proved and it is known to all that loan sanctioned to such defaulters was with ill-motivation and with negligence. As such there is no fear of action in the minds of any bank officer even if the loan given by them become Non Performing Asset. Officers in bank or elsewhere pass time somehow or the other and get retired leaving behind stressed assets in amounting to crores of rupees. Officers and ED and CMDs of bank sanction loan lavishly and after two to three years transferred to other branches or other banks and none is held responsible for lapses because all of them are birds of same feather. This is why ownership for assets crated by bank loan is not developed in bank officials of government bank as it is inculcated , promoted and crated for each asset in private banks.
AIBEA had given a call for all bank employees to observe strike on September 2 , 2015 to protest against proposed modification / amendments in labour laws to the detriment of bank employees and to favour employers.
AIBEA had further requested Government to declare Loan to Kingfisher as wilful default so that bankers can recover the money from defaulter like Vijya Mallya. This makes it clear that despite several efforts made by many banks, bank officials failed to convince the borrower and the court that the default is wilful. Not only Vijya Malya, there are hundreds of such big defaulters , who are not repaying the dues to banks despite the fact that they have capacity to repay in time, but bankers are unable to consider the default as wilful default.
It is just enough to prove that not only bankers have acted with negligence in lending to high profile borrowers in greed of some favour and some material gain but also Indian laws and Rules framed by RBI are proved to be ridiculous and ineffective. It is painful that banks are needed to prove the default as wilful to recover the loan given to a borrower. After all, default is default. Courts and tribunals are unable to decide bank cases filed against defaulters in years and decades. It is Himalayan task for bankers to prove in court that they have given loan to defaulter, that documents are genuinely executed by defaulters only and that amount of default is correctly calculated.
Government of India do not hesitate in building pressure on banks to lend money to big infrastructure project, big corporate, high value business houses, Power generating companies or power distributing companies or even to farmers, small traders and small industrialists.
But when it is the issue of recovery of overdues from defaulters, Government of India do not extend any support to bank officials , rather bank officers are advised to be tactful and effective. When default occurs, blame is pointed towards nature, or global situation or domestic economic slowdown.
GOI fail to make laws or is unwilling to make laws effective so that money is recovered from all types of defaulters without the need of proving various points, like whether the default is wilful or not, like advance made was adequate or inadequate, documents executed by defaulters are time-barred or within limitation, whether proper notice has been served to defaulters or not, whether proper formalities for creation of mortgage of properties was created or not, whether any property not under mortgage can be seized or not, interest rate was low or high and so on.
Government of India is not willing to build pressure on courts and various tribunals like Debt Recovery Tribunals to decide the bank cases pertaining to recovery from defaulting borrowers in timeframe and fix accountability on judges and magistrates who in collusion with borrowers and in nexus with advocates go on delaying decisions on bank cases on flimsy grounds for years and decades.
It is very much painful and ridiculous too that Banks are forced to give loan to a person or a company in a timeframe of few days or few months but borrowers , loan takers are not forced to repay the loan on demand or face stern punishment and judiciary is not forced to decided the case in a fixed timeframe of few months or a year or two and courts are not forced to decide the case in fixed timeframe. I am unable to understand why does it takes years and decades to prove that loan has been given , that default has occurred and that defaulters have to repay the dues.
Banks are required to give loan to farmers, students, business men, professionals or industrialists without any trouble to loan seekers , but when loan takers fail to repay the loan in time willingly or unwillingly, then bank need to prove it from various angle that bank has truely given loan or default is wilful . It means needle of doubt is always pointed out towards bankers and not against borrowers who have wilfully defaulted in repayment of loan in time with a malicious intention to get it written off or to settle the loan under compromise with huge discount.
The root cause of accumulation of stressed assets in public sector bank is neither global recession or economic recession as claimed by clever bankers and clever politicians. Reasons for rise in stressed assets starts from the first day of loan sanction to days of monitoring, day of default and finally days when recovery processes are initiated till it is parked in courts for final ordeal. Quality of sanctioning of loan, quality of monitoring, quality of legal system , quality of politics, quality of governance, quality of workforce who handle such cases all need to be questioned and made effective .
The key reason is that bank officials in public sector banks are to sanction loans under pressure from some corner or the other or under pressure of achieving the target. If loan growth is not achieved , the career and personal life of bank officers may be affected badly. There is no protection to bank officers who are shouldering the task of loan sanctioning and loan processing. Loan processing officers and loan sanctioning officers may face threat to their life and their family or may face critical and frequent transfers or rejection in promotion. In such position , some officers become extraordinary clever and they start earning money from unfair means by giving loan to those who bribe them better. In this way they kill not only two birds but many birds with one stone. They achieve the target given by management and earn money from evil ways, they get appreciation in all meetings, they get quicker promotion, cash incentives not only from borrowers but also from bank management for achieving the target and finally get cream posting.
Bankers are meant to do banking activities , but they are forced to indulge in non-banking activities which adversely affects the quality of lending , quality of monitoring and quality of ownership for assets created by bank. Bank officers act as machine which work as directed by machine owner. They do not have love for banks but love for higher bosses who can make or mar their life and career. The culture in government banks is to pass the time somehow or the other and leave the evil work behind for followers. There is complete lack of ownership and loyalty. Quality is not significant , quantity is important.
Second reason is political exploitation of banks by politicians and local muscle men. Safety of bank officers depends on the mercy of God. In naxal areas , bank officers do not have courage to say 'no' to any loan seeker or even reduce the amount of loan sanction compared to what is demanded by local goondas and muscle men directly or indirectly for others.
Third reason is position of bank officers become pathetic when loan turns bad . When loanee do not repay the loan, bank officers can do nothing other than worshiping defaulters as if defaulters is God. It takes years and decades for bankers to prove in courts that they have really given loan to defaulting borrowers and they have calculated interest correctly or the documents executed by defaulters are genuine and with Limitation act provisions.
Government , either state or central , is unable to pressurise their officials in various departments to clear the project in timeframe and penalise who wilfully delay the process of statutory clearances. GOI is unable to provide land, coal ,power and other inputs for timely completion of projects promoted by various business houses. It is known to all that project valued Rs.400000 crore in steel sector are pending and languishing in various offices for decision for years and finally when cost escalates , promoters surrenders which finally resulting in converting standard asset to Non Performing assets.
Similarly power generating companies and distributing companies have been financed thousands of crores of rupees by various public sector banks and most of them are defaulters because they are unable to recover even the cost from consumers of power to political reasons. Politicians do not want to increase rate to give comfort to voters but when these power companies book loss and default in repayment of bank loan, Government blame banks for failing to recover the dues .
Finally , even if it is proved and it is known to all that loan sanctioned to such defaulters was with ill-motivation and with negligence. As such there is no fear of action in the minds of any bank officer even if the loan given by them become Non Performing Asset. Officers in bank or elsewhere pass time somehow or the other and get retired leaving behind stressed assets in amounting to crores of rupees. Officers and ED and CMDs of bank sanction loan lavishly and after two to three years transferred to other branches or other banks and none is held responsible for lapses because all of them are birds of same feather. This is why ownership for assets crated by bank loan is not developed in bank officials of government bank as it is inculcated , promoted and crated for each asset in private banks.
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