On the other hand I have been writing for last five years and more that health of public banks cannot improve unless and until there is strong will on the part of the government to do so. I am submitting below a few statements made by RBI officials and FM of the then government to highlight how thy use to mislead nation on vital issues related to financial irregularities. Banks are heart of a government but are mostly and highly neglected and exploited. This is why inner real health of banks I'm moving from bad to worse every quarter.
4th December 2015
RBI Governor Mr. Raghuram Rajan says that The Reserve Bank of India Bank has decided to intensify its scrutiny of banks’ financial accounts during the annual financial inspection process as because RBI and Government of India want to achieve the goal of cleaning up bank balance sheets by March 2017.The RBI’s steps to tighten the screws on provisioning for bad loans could adversely affect industrywide profitability. Public sector banks will suffer the most because it they come under scanner , their more and more stressed assets will be unearthed and they will be constrained to increase provisions cutting down their net profits.
27th November 2015
RBI Deputy Governor Mr. SS Mundra said on 27th November 2015 that the creation of non-performing assets (NPAs) is not a sin, and when an account becomes non-performing, bankers and agencies concerned should do some hand-holding.
“An account becoming an NPA at the discretion of the borrower is a very small percentage. The NPA status only reveals that there are difficulties in the account; so it will not generate the same kind of cash flow which was originally envisaged. What is important is when an account becomes an NPA, the bankers and all agencies concerned should do the hand-holding,”
Obviously when regulator feel that NPA creation is not a sin, they will not and they cannot punish the real creator of NPA. It is important to mention here that all NPA are not due to unavoidable hurdles and all are not due to malicious intention of lending authorities.
5th August 2015
The Reserve Bank of India (RBI) said it will now begin to take action against banks that misreport the non-performing assets (NPAs) on their books. It had been observed that in certain cases, loans that had already become NPAs were still treated as standard assets.
“We inspect the banks and we ferret out situations where something that is standard is not NPA and these are called divergences. And some banks there are more divergences that the other. "
Four months have passed , but RBI appears to have taken no action against erring bank officials . Culture of hiding bad accounts by manipulating accounts and by playing with technology continues unabated. Still there are many high value bad accounts which are actually NPA but shown as Standard Assets. There are many accounts which are bad for last five to ten years but bank consider them as standard .
21.st August 2015
Our Finance Minister Mr. Arun Jaitley says that NPA level of Public banks has gone beyond acceptable level. But sign of improvement not visible.
4th July 2013
RBI Governor D Subbarao said in July 2013 that the growing non-performing assets in the banking sector is a matter of concern and steps are being taken to bring it down as soon as possible.
"Together NPAs and restructured assets are increasing and are quite sizable. It is a matter of growing concern. The Reserve Bank and government have taken all action necessary to ensure that NPAs come down as soon as possible,"
November 2012
RBI Governor Mr. D. Subbarao told that NPA situation a concern but not alarming.
July 2012
Reserve Bank of India Governor, Dr D. Subbarao said that the Government’s bid to push more credit to the farm sector appears to have had unintended consequences — bad loans of banks have increased.
October 2012
RBI said that the banking system’s non-performing assets (NPAs) in 2011-12 were the highest in the last five years, according to Reserve Bank of India (RBI) data. Net NPA ratio in 2011-12 stood at 1.28 per cent, with the net NPA ratio of nationalised banks (excluding State Bank of India, or SBI, and its associates) crossing the one per cent mark for the first time in the last five years, at 1.43 per cent. At 0.68 per cent, the ratio was the lowest in 2008-09.
Net NPA ratio for all public sector banks, including SBI and its associates, stood at 1.53 per cent in 2011-12.
During 2004-12, the gross non-performing assets (NPAs) or bad loans ratio in the agriculture sector was higher than the corresponding ratio in the non-agricultural sector, except during 2009 and 2010.
22nd November 2011
RBI says that bad loans are turning nightmarish for Indian banks. A steep rise in interest rates over the past 18 months has led to a sharp increase in non-performing assets.
Non-performing assets, or NPAs, are assets which are categorised by a bank or a financial institution as sub-standard, doubtful or loss assets as they do not yield any returns to them.
The Reserve Bank of India has increased its lending (repo) rate 13 times since March, 2010 to tame inflation.
22nd November 2011
RBI says that bad loans are turning nightmarish for Indian banks. A steep rise in interest rates over the past 18 months has led to a sharp increase in non-performing assets.
Non-performing assets, or NPAs, are assets which are categorised by a bank or a financial institution as sub-standard, doubtful or loss assets as they do not yield any returns to them.
The Reserve Bank of India has increased its lending (repo) rate 13 times since March, 2010 to tame inflation.
2nd June 2010
Rating agencies say that there is possibility of bank NPA levels rising in FY11
Rating agencies expect FY11 to see a rise in bank non-performing assets (NPA) loans where the borrower does not pay interest for over three months. Two reports in the past one week, one by Care Ratings and another by Fitch Ratings, highlight this possibility.
A report by Care Ratings released this week attributes this to restructured assets slipping into NPAs. It said that, "Assuming that 15% of the restructured assets get converted into NPAs in FY11 in addition to the normal system NPAs, this ratio is expected to approximately touch 3.5% for FY11."
Monday, July 8, 2013
I had written on 8th of July 2013 that Hiding NPA Is Good For All Bank , Borrower And Government
It is in the interest of bank as well as borrowers if the bad accounts are not declared as Non Performing Assets. In other words if NPA accounts are considered as Standard or you can say if bank management hide NPA.
Banks have to make less provision and continue to earn interest on loan which ultimately helps in inflating profit.Bank officials need not waste their time in initiating recovery measures to recover the money form bad borrowers.Banks will be able to achieve credit target easily and thus attract appreciation from all corners.Bank top officials will get appreciation from Ministry of Finance and Government of India . More and more dividend will be available to investors as well as Government of India who holds majority shares.
Borrowers will not be forced to repay the installments in time .They will repay the loan as per their whims and fancies. They will not be under tension of banks seizing their house in case of their default.In case of continued default bank will offer discount on repayment and ultimately come closer for amicable compromise settlement. Even when bank officials agree for waiver of loan or compromise settlement after sacrificing a significant portion of outstanding loan, bank officials are not going to lose money or loss their salary or suffer any loss in career.
Government will also be happy and comfortable if banks continue to conceal bad assets and book higher and higher profit and give higher and higher dividend.
Investors will also get large amount of dividend on their investment in shares of banks.
Common men and general public who deposit their hard earned money in these banks are not united and hence they may do nothing to either bank management or the government or the officials of bank who cheated them and who caused huge loss to their savings.Common men will cry for a few days and then bear with loss in the name of God wishes. They usually suffer when chit companies or NBFC cheat them and they fly away .
As such it is in the interest of all other than common men if bank treat all bad or good assets as Standard and minimum of assets is declared as NPA. Management of public sector banks as such try to restructure and rephase all bad accounts so that the account remain in standard category.
Perhaps this is why banks in general thought it wise to conceal NPA for last ten years and more and booked as much profit as they liked by manipulating all books of accounts in their favour in collusion with team of Chartered Accountants, politicians, ministers, senior bureaucrats of RBI and GOI.
Had CBS not been invented , all banks and all bank officials would have been declared as Heroes of the country.I think clever Chidambram has a vision in his economist mind to force bans to move in this direction.After all he also has aspiration in his core of heart to be considered as Successful Finance Minister rightly or wrongly as Chairmen and Managing Directors of banks and other officials are interested to be popular.
Clever Finance Minister as his predecessors , can change rules of Income recognition and prudential norms set by RBI of asset classification in banks to facilitate bankers to conceal NPA, he can dilute provision norms, he can promote restructuring in legal way to replace fraudulent restructuring undertaken by bank officials to conceal NPA, he can promote General Manager to the post of ED and CMD who is expert in committing fraud and concealment of fraud, he can allow banks to recruit and promote bank staff after taking some gifts in lieu of the same as the prevalent culture in other government department and in political arena and so on.
Banks have to make less provision and continue to earn interest on loan which ultimately helps in inflating profit.Bank officials need not waste their time in initiating recovery measures to recover the money form bad borrowers.Banks will be able to achieve credit target easily and thus attract appreciation from all corners.Bank top officials will get appreciation from Ministry of Finance and Government of India . More and more dividend will be available to investors as well as Government of India who holds majority shares.
Borrowers will not be forced to repay the installments in time .They will repay the loan as per their whims and fancies. They will not be under tension of banks seizing their house in case of their default.In case of continued default bank will offer discount on repayment and ultimately come closer for amicable compromise settlement. Even when bank officials agree for waiver of loan or compromise settlement after sacrificing a significant portion of outstanding loan, bank officials are not going to lose money or loss their salary or suffer any loss in career.
Government will also be happy and comfortable if banks continue to conceal bad assets and book higher and higher profit and give higher and higher dividend.
Investors will also get large amount of dividend on their investment in shares of banks.
Common men and general public who deposit their hard earned money in these banks are not united and hence they may do nothing to either bank management or the government or the officials of bank who cheated them and who caused huge loss to their savings.Common men will cry for a few days and then bear with loss in the name of God wishes. They usually suffer when chit companies or NBFC cheat them and they fly away .
As such it is in the interest of all other than common men if bank treat all bad or good assets as Standard and minimum of assets is declared as NPA. Management of public sector banks as such try to restructure and rephase all bad accounts so that the account remain in standard category.
Perhaps this is why banks in general thought it wise to conceal NPA for last ten years and more and booked as much profit as they liked by manipulating all books of accounts in their favour in collusion with team of Chartered Accountants, politicians, ministers, senior bureaucrats of RBI and GOI.
Had CBS not been invented , all banks and all bank officials would have been declared as Heroes of the country.I think clever Chidambram has a vision in his economist mind to force bans to move in this direction.After all he also has aspiration in his core of heart to be considered as Successful Finance Minister rightly or wrongly as Chairmen and Managing Directors of banks and other officials are interested to be popular.
Clever Finance Minister as his predecessors , can change rules of Income recognition and prudential norms set by RBI of asset classification in banks to facilitate bankers to conceal NPA, he can dilute provision norms, he can promote restructuring in legal way to replace fraudulent restructuring undertaken by bank officials to conceal NPA, he can promote General Manager to the post of ED and CMD who is expert in committing fraud and concealment of fraud, he can allow banks to recruit and promote bank staff after taking some gifts in lieu of the same as the prevalent culture in other government department and in political arena and so on.
What Are Factors That Are Affecting the Health of PS Banks ? -By Danendra Jain
Link of My Blog on How And Why NPA are Going Beyond Control
Nexus of Top Management & Big Corporates and Bulk Loans Bleeding Banking in India :
Big corporatess are looting banks in nexus with top bosses, mid-segment borrowers have looted bank's branches in towns and cities and small borrowers have decided not to repay the bank loan in villages and towns. Slow poison of small bad loans or deep poison of bulk loans , both have harmed banks to a great extent . Bank staff are mostly silent spectator of large scale loot and to save their corrupt colleague they allow Chirharn of good bankers.
Politiicians are buy in using banks for political gain and they do not want to punish officials of administrative and legal machineries who are wilfully not acting against defaulters of banks.
Who will save the banks? Who is botherd of bank staff and their families.
Poor Auditing Systems in Banks :
Audit and inspection department of each bank is also manned by dirty officers or are suffering from heavy work load due to less number of staff. They just do the formalaities of auditing and inspecting the branches.They are not allowed to give true report of bad lending and fraudulent transactions even if some of honest auditors like to report on it. They have to give good rating to all branches and submit certificate of good health to their bosses even if they detect cases of fraud or bad loaning by bank officials or any irregulalities.
RBI nominated Statutory auditors or concurrent auditors or RBI inspectors are also functioning in the same way as others are . They are victim of gifts and bribes. They all want red carpet wrlcome by bank officials. Huge money spent on auditors, internal or external after all comes from banks expenditure accounts or bad borrowers who managed all illegal expenses to reamin in good book of banks bosses.
RBI Fails In Its Duty As Regulator :
RBI believes in getting certificates of good health from bank CEOs. Whenever any exposure of top bosses comes to light , they will write a letter to the concerned bank and bank in turn will give a certificate that everything is OK. RBI has neither will to verif the truth nor do they have enough staff to verify the veracity of such certificates. Several scams and numerous frauds similar to Satyam Scam has surfaced but none of top officials , ministers, politicians, borrowers and government officials have been taken to task. Always a few junior officers are subjected to little punishment to close the cases of frauds and scams involving hundreds and thousands of crores of rupees.
If RBI honestly investigates the reason of each bad accounts of one crore and above I think majority of current or retired CMD, ED, GM, DGM ,AGM and CMs will go to jail. It will not be an exaggeration to say that only and only corrupt officers have reached top levels and only corrupt officers have moved fast in their career. And it is they who have damaged banks and who will further add fuel to fire because till now no concrete step has ben taken to reverse the trend and no action has been taken against real culprit to send clear message down the line that cases of corruption will not be tolerated.
Similarly Chief Vigilence Officers and CVOs are palying their role . Afte they picked up from gang of courrpt officers sitting at top posts in various banks. CVOs in general are more corrupt and it is they who earn money to close the chapter of corruption for ever. They too do not have enough staff and neither they are dry honest . As such all cases of bad lending or fraud are closed without any drastic action against real culprit
Pathetic Situation of Aam Banker and Political Games Played by Bank Unions :
Bank staff has lost their self respect and doing slavery to earn their livelihood. Situation is more pathetic than it was before nationalisation.
Bank staff are subjected to sufferings only to serve the political interest of a few dirty leaders. Dirty game of few selfish leaders has not only ruined the future of bank staff , but also contributed largely in deteriorating health of bank assets and sharp rise in NPA and erosion in profit.
Leaders are mostly followers of left parties which have lost their place in political domain. CPI or CPM minded leaders of UFBU do no want early wage settlement to tarnish the image of BJP and Modi. Some of bank staff blame Mr. Narendra Modi , PM for delay. But in fact neither IBA nor UFBU have ever approached PM Modi for expeditious settlement.
Pending issue of Wage Revision and Internal Rifts among Banker
A reading of the messages and comments at Face Book clearly indicates that youngsters in Public Sector Banks are mostly crying on Facebook but they do not think it necessary to strictly follow union line of action.
On the other hand Union leaders do not think it necessary to talk to youngsters before taking a final call on any issue. Leaders act as if they are forced to act. They do not have inner feeling to fight against injustice.
Young bankers do not make effort and do not have enough courage to safeguard banks from bad bosses and bad union leaders.
Old leaders are in general speakers of top bosses. Staff in general are afraid of union leaders and not their bosses. There may not be bigger tragedy than this
Wage structure of bankers have suffered erosion in each settlement during last two decades as compared to that of central government employees. . Delay in settlement has become unavoidable . Is it imaginable for any PSU where wage talks are not finalised even after two years?
Even other PSUs are paying huge sums in Ex-gratia to all staff of all cadres which is as good as bonus. Bankers are deprived of bonus for last two decades. Only a few Subordinate staff are paid bonus.
Whether Things Are Likely to Improve in Near Future ?
I am unable to dream that government of India will be able to control the vicious circle of bad officials sitting in all offices .All top officials preach good sermons and all speak good words when they are addressing public or bank staff but in practice they do just the opposite . But when someone talk of corruption of high level, they will pass the matter to some others.
See the latest example of Supreme Court order cancelling allocation of coal mines . More than 25 percent of banks advances are related to infrastructure sector and power sector and most of them have been in bad health for years together and for even decades . But clever politicians and clever bankers have put entire blame on Supreme Court order of cancellation of coal licenses. In 2008 they blamed Subprime crisis of USA and later they accused RBI for not lowering interest rate . None of regulators like to pinpoint accusing fingers towards the real guilty , it is their culture. Who will bell the cat?
If the same situation persists, bank staff should leave the idea of improvement of banks and should not hope for respectful service and neither hope for respectful wage hike.
Politicians who have caused much damage to banks to serve their political interest now talk of paying capacity of banks and suggest denial of wage hike as demanded by bank unions on the ground of less profitability and more NPA. Neither Finance Secretary nor FM is bothered of delay in wage settlement and neither they are worried of bank's health. They do not understand that billions of rupees are to protected by bankers and if these bankers are dissatisfied and frustrated, the quality of health will further deteriorate .
Role of RBI Rising NPA and Bad Bankers
We have seen downfall in net profit of Union bank, Vijaya Bank, Uco bank, Indian Bank, Federal Bank and now in SBI. These banks have added 7 to 8 thousand crores worth NPA in their balance sheet and they still talk of being star performer. Executive called as ED, Deputy General Manager, General Manager, Assistant General Manager in banks who has contributed crores of rupees in NPA are treated as star performers.
What is reason behind abrupt rise in NPA? Is it not due to the fact that quality of asset in banks has suffered continuous erosion though it has been year after year concealed by talented executives? Bankers have been hiding bad assets for last so many years just to please Ministry and befool innocent public by showing false rise in profits so that their share prices goes up and up like Satyam Computers? But how long? It has to face puncture like Satyam Computers.
Flattery culture prevalent in banks and in government departments including Ministry of Finance has resulted in growth of bad assets and bad man power. Lobby of corrupt bosses is so strong at controlling offices that only corrupt officers are chosen as Branch Heads, Regional Heads, Zonal Heads, EDs and who in turn freely indulge in bad lending .improper waiver of loan, dishonest compromise with so called bad borrowers to earn bribe , buy deposits from government offices and manage their survival. Big bosses are indulged in earning commission not only from their team of corrupt manager but also from contractors, suppliers and what not.
It is true that corruption prevalent in banks cannot be proved because of so many legal hurdles and shortcomings in the system. But RBI or CMD of the bank who treat them as honest and star performer should at least prepare a list of executives who is instrumental directly or indirectly in sanction of maximum bad advances. Borrower wise thorough investigation will reveal the name of corrupt officers and will at least reflect the name of real culprits behind sudden spurt in NPA and considerable fall in profits in banks. It is not that banks who are showing rise in profit or fall in NPA are really healthy but in fact they are master in concealment of bad assets and they are master in manipulation. As such, sooner or the later Indian government like US government has to understand the ground reality. Regulators of banks have to understand why private banks are showing rise in profit, fall in NPA and rise in share prices too.
Now Mr. Clean Prime Minister Mr. Manmohan Singh and Finance Minster Mr. Pranab Mukherjee should therefore ask CMDs of all banks to prepare and provide the reason of increase in rise in NPA along with the name of sanctioning officials and controlling circle head of that bank. List so prepared will at least expose the corrupt top officials who are inculcating wrong culture in the banks and who are really responsible for rise in NPA. Name of Branch Head or circle head whose advances are invariably bad will come to light so that government can take corrective steps even now before it is too late.
Does anyone in India feel that all bad advances are caused due to due to global recession or due to bad monsoon?
Don’t they believe from the core of heart that bad advances are also due to corrupt practices, wrong management, wrong promotion culture, inadequate safety measures, deficient monitoring, and inefficient legal system and so on?
Don’t they feel that posting of good officers at wrong places and bad offices at sensitive places has caused a great loss to banks?
Top executives are incapable as also unwilling to work honestly and devotedly because they have unlimited greed for money and power and this is why they select bad officers who can earn bribe and share with big bosses as happens normally in all government offices.
I therefore reiterate that RBI should now collect a list of bad borrowers where amount of NPA involved is more than one crore or five crores and ask the name of officers who sanctioned such loans. RBI may also collect the names of sanctioning authority in all big amounts NPA account which has come on the floor during last year or during last five years. It is the duties of RB to identify all those officers who are holding executive post in banks and who are behind bad advances. An officer who is capable to lend to bad borrowers is promoted quickly by big bosses because such officers are corrupt and think it wise to take care of personal interest of big bosses and number one in flattery of big bosses for quickest promotion and best posting.
Until strong punitive action is taken against top officers, culture in juniors cannot improve. Corrupt culture is the rot cause of deteriorating bank's health. Cancer of corruption has been killing PSU banks. It is unfortunate that auditors,CBI officials, even officers in RBI and Banking Division has shut their eyes and ears because they are given warm welcome whenever such big officers visit such banks. Even selection of ED and CMD is not based on merit but based on relation .Every successful officers at top posts has a God father to back and support him even if he or she is caught on wrong footing.
If hidden bad debts are declared by all banks there is no doubt that visible profitability of all PSU banks will vanish and all tall claim of shining banking industry in India decoupled from the global recession prove to be farce.
Banks in USA has seen closure or erosion in their capital and share value in the year 2008 and 2009 not because of a sudden hear stroke but due to sickness in the banking system continuing since last one or two decades. Similarly in India PSU banks has started adding NPA worth thousands of crores every quarter. It is astonishing that SBI management proudly say after declaration of their September 2010 half yearly results that thousand of crores of NPA can be managed and tolerated every quarter and RBI accept their logic blindly.
If the existing trend continues NPA in banks will grow upto many lacs of crores of rupees and to add fuel to fire there is no in built fool proof legal and administrative system to ensure recovery from bad borrowers. Continuous rise in NPA will no doubt block circulation of good money of good investors and in future adversely affect liquidity of banks. Ultimately the small investor and small depositors who has reposed faith in government banks will have to suffer. Small borrowers are already victim of wrong policies of the government because they have to borrow money at higher rate from newly introduced Micro Finance Companies. These MFIs use to charge interest rate at more than 24% and upto 2400% from small borrowers whereas bulk financing made by PSU banks is around base rate of 8%.Financial inclusion policy propagated by PSU banks has become useless for rural people because it allows only zero balance account opening facility and nothing else. Rural people, poor farmers and small traders still depend on local money lenders and they are still in clutches of local exploiters as they used to be before nationalization of banks. Reformation started in banks in India in 1991 by cleaver Manmohan Singh has made the life of poor more miserable.
Until flattery culture in promotions and posting is stopped there is no power on earth which can stop erosion of bank's health. Every year government has to infuse capital in banks for their survival.
But how long such ventilators will be provided to dieing banks.
Government has to punish bad lenders sooner or later to salvage banks, otherwise they will face the same fate as banks in USA faced in the name of Subprime Crisis and as Satyam Computers faced two years ago. Obama in USA has tightened the bankers in USA despite huge protest from bankers after facing severe Subprime crisis. It is true that our government kept Indian banks unaffected by global crisis but all these could happen only after sacrificing lacs of crores of rupees by RBI in favour of sinking PSU banks. After all the core value of banks has not shown any real improvement and neither there is any improvement of position of common men in India.
I hope government will investigate and find out the real reason of rising NPA and take immediate steps to reverse the trend before it is too late.
http://blogs.siliconindia.com/danendra/NewIndia/Role-of-RBI-Rising-NPA-and-Bad-Bankers-bid-ftw84JYC75206785.html
All are corrupt in the Government .Who will take action and against whom? Politicians normally are busy in making money. Inquiries are set up after exposure but such inquiries seldom result in real punishment to real culprit.
Role of RBI Rising NPA and Bad Bankers
We have seen downfall in net profit of Union bank, Vijaya Bank, Uco bank, Indian Bank, Federal Bank and now in SBI. These banks have added 7 to 8 thousand crores worth NPA in their balance sheet and they still talk of being star performer. Executive called as ED, Deputy General Manager, General Manager, Assistant General Manager in banks who has contributed crores of rupees in NPA are treated as star performers.
What is reason behind abrupt rise in NPA? Is it not due to the fact that quality of asset in banks has suffered continuous erosion though it has been year after year concealed by talented executives? Bankers have been hiding bad assets for last so many years just to please Ministry and befool innocent public by showing false rise in profits so that their share prices goes up and up like Satyam Computers? But how long? It has to face puncture like Satyam Computers.
Flattery culture prevalent in banks and in government departments including Ministry of Finance has resulted in growth of bad assets and bad man power. Lobby of corrupt bosses is so strong at controlling offices that only corrupt officers are chosen as Branch Heads, Regional Heads, Zonal Heads, EDs and who in turn freely indulge in bad lending .improper waiver of loan, dishonest compromise with so called bad borrowers to earn bribe , buy deposits from government offices and manage their survival. Big bosses are indulged in earning commission not only from their team of corrupt manager but also from contractors, suppliers and what not.
It is true that corruption prevalent in banks cannot be proved because of so many legal hurdles and shortcomings in the system. But RBI or CMD of the bank who treat them as honest and star performer should at least prepare a list of executives who is instrumental directly or indirectly in sanction of maximum bad advances. Borrower wise thorough investigation will reveal the name of corrupt officers and will at least reflect the name of real culprits behind sudden spurt in NPA and considerable fall in profits in banks. It is not that banks who are showing rise in profit or fall in NPA are really healthy but in fact they are master in concealment of bad assets and they are master in manipulation. As such, sooner or the later Indian government like US government has to understand the ground reality. Regulators of banks have to understand why private banks are showing rise in profit, fall in NPA and rise in share prices too.
Now Mr. Clean Prime Minister Mr. Manmohan Singh and Finance Minster Mr. Pranab Mukherjee should therefore ask CMDs of all banks to prepare and provide the reason of increase in rise in NPA along with the name of sanctioning officials and controlling circle head of that bank. List so prepared will at least expose the corrupt top officials who are inculcating wrong culture in the banks and who are really responsible for rise in NPA. Name of Branch Head or circle head whose advances are invariably bad will come to light so that government can take corrective steps even now before it is too late.
Does anyone in India feel that all bad advances are caused due to due to global recession or due to bad monsoon?
Don’t they believe from the core of heart that bad advances are also due to corrupt practices, wrong management, wrong promotion culture, inadequate safety measures, deficient monitoring, and inefficient legal system and so on?
Don’t they feel that posting of good officers at wrong places and bad offices at sensitive places has caused a great loss to banks?
Top executives are incapable as also unwilling to work honestly and devotedly because they have unlimited greed for money and power and this is why they select bad officers who can earn bribe and share with big bosses as happens normally in all government offices.
I therefore reiterate that RBI should now collect a list of bad borrowers where amount of NPA involved is more than one crore or five crores and ask the name of officers who sanctioned such loans. RBI may also collect the names of sanctioning authority in all big amounts NPA account which has come on the floor during last year or during last five years. It is the duties of RB to identify all those officers who are holding executive post in banks and who are behind bad advances. An officer who is capable to lend to bad borrowers is promoted quickly by big bosses because such officers are corrupt and think it wise to take care of personal interest of big bosses and number one in flattery of big bosses for quickest promotion and best posting.
Until strong punitive action is taken against top officers, culture in juniors cannot improve. Corrupt culture is the rot cause of deteriorating bank's health. Cancer of corruption has been killing PSU banks. It is unfortunate that auditors,CBI officials, even officers in RBI and Banking Division has shut their eyes and ears because they are given warm welcome whenever such big officers visit such banks. Even selection of ED and CMD is not based on merit but based on relation .Every successful officers at top posts has a God father to back and support him even if he or she is caught on wrong footing.
If hidden bad debts are declared by all banks there is no doubt that visible profitability of all PSU banks will vanish and all tall claim of shining banking industry in India decoupled from the global recession prove to be farce.
Banks in USA has seen closure or erosion in their capital and share value in the year 2008 and 2009 not because of a sudden hear stroke but due to sickness in the banking system continuing since last one or two decades. Similarly in India PSU banks has started adding NPA worth thousands of crores every quarter. It is astonishing that SBI management proudly say after declaration of their September 2010 half yearly results that thousand of crores of NPA can be managed and tolerated every quarter and RBI accept their logic blindly.
If the existing trend continues NPA in banks will grow upto many lacs of crores of rupees and to add fuel to fire there is no in built fool proof legal and administrative system to ensure recovery from bad borrowers. Continuous rise in NPA will no doubt block circulation of good money of good investors and in future adversely affect liquidity of banks. Ultimately the small investor and small depositors who has reposed faith in government banks will have to suffer. Small borrowers are already victim of wrong policies of the government because they have to borrow money at higher rate from newly introduced Micro Finance Companies. These MFIs use to charge interest rate at more than 24% and upto 2400% from small borrowers whereas bulk financing made by PSU banks is around base rate of 8%.Financial inclusion policy propagated by PSU banks has become useless for rural people because it allows only zero balance account opening facility and nothing else. Rural people, poor farmers and small traders still depend on local money lenders and they are still in clutches of local exploiters as they used to be before nationalization of banks. Reformation started in banks in India in 1991 by cleaver Manmohan Singh has made the life of poor more miserable.
Until flattery culture in promotions and posting is stopped there is no power on earth which can stop erosion of bank's health. Every year government has to infuse capital in banks for their survival.
But how long such ventilators will be provided to dieing banks.
Government has to punish bad lenders sooner or later to salvage banks, otherwise they will face the same fate as banks in USA faced in the name of Subprime Crisis and as Satyam Computers faced two years ago. Obama in USA has tightened the bankers in USA despite huge protest from bankers after facing severe Subprime crisis. It is true that our government kept Indian banks unaffected by global crisis but all these could happen only after sacrificing lacs of crores of rupees by RBI in favour of sinking PSU banks. After all the core value of banks has not shown any real improvement and neither there is any improvement of position of common men in India.
I hope government will investigate and find out the real reason of rising NPA and take immediate steps to reverse the trend before it is too late.
http://blogs.siliconindia.com/danendra/NewIndia/Role-of-RBI-Rising-NPA-and-Bad-Bankers-bid-ftw84JYC75206785.html
All are corrupt in the Government .Who will take action and against whom? Politicians normally are busy in making money. Inquiries are set up after exposure but such inquiries seldom result in real punishment to real culprit.
They are allowing reckless branch expansion without taking care of quality and quantity of bank staff . Billions of rupees are lost in frauds and scams and bad debts, but the are least bothered. They are positive minded.
Fix Accountability for NPA
As usual, bankers have raised the issue of interest rate hike before RBI Governor and requested for a pause or stop on interest rate which have been hiked many times during last 15 months. Bankers have pleaded that high interest rate will adversely affect loan growth and also increase the amount of bad loan. I have been advocating for last three four years that uniform rate of interest for deposits and advances should be decided by RBI keeping in view national and international situation and the same should be followed by all banks so that banks do not compete each other on the issue of interest rate and customers do not get the opportunity to adopt frequent change of bank for availing cheap loan and in turn adversely affecting the quality and quantity of loan portfolio of banks.
But I do not agree that hike in interest rate may affect overall loan growth. Loan portfolio of one bank may grow at the cost of that of others. Good customers seldom care for interest rate whereas bad customers may cheat the bank even if the rate is too low. Interest cost in any company's balance sheet constitutes negligible portion in their overall burden of expenses. As such a lit bit rise from present level may not have that much affect as non rise of interest may affect the inflation pain on entire economy .
Of course it is desirable that interest rate is kept as minimum as possible as possible and hence I always plead that RBI should fix uniform interest rate for different sectors and for different time period for overall sound health of national economy. Unnecessary and unwarranted rate war among bankers cause loss to one bank or the other and it is ultimately the government and the people of India who have to suffer.
Further I do not accept the logic of bankers that rate hike may jeopardize their loan portfolio and as a consequence of interest rate hike instances of bad assets will increase. It is bitter truth that bad assets which have been surfacing now are not creation of interest hike but the creation of the period when low interest rate regime was prevalent. Bad assets have been concealed by clever bankers and it has been in practice for last several years and now when banks are forced by RBI to ascertain amount of Non Performing Assets or bad assets strictly as per system they are constrained to declare their entire accumulated NPA latest by 31st March 2010.
It is beyond doubt to me that all newly surfaced NPA are creation of period when low interest rates were charged to customers. In my view, amount of bad assets has been growing consistently in government banks largely and mainly due to prevalent corrupt practices, due to ill motivated decision on lending taken by corrupt executives of the banks and due to inaction of corrupt officials.
Here it is worthwhile to mention that Micro Finance Institutes in various states are lending at rate ranging from 25 % to 40% to small traders, weak farmers, street vendors, and other socially backward class for various purposes. It is government banks who extend bulk money to these MFIs at low rate of interest for onward lending at higher rate of interest. These bankers without any hesitation justify lending by these MFIs at high interest rate and at the same time advocate for low rate regime .They do not foresee rise in bad debts when MFI resort to lending at high rate but fear their loan going bad if RBI do not pause hike in rate.
It is to add here that instances of loan going bad in PSU banks is much higher even when they lend to farmers at lowest rate compared to MFIs who lend to same farmers at higher rate. Similarly bankers charges rate from 20 to 30% on credit card users but the default in credit card based lending is far less than lending made to traders and manufacturers at comparative low rates.
Of course it is also true that banks are unable to recover the money from willful defaulters due to legal constraints and due to ineffectiveness of administration, police officials and the judiciary. But I have no doubt that rise in bad assets is primarily due to bribe based lending and not due to rise in interest rate or due to global recession or due to based weather as pleaded by bankers from time to time .
Since causes of the disease of poor growth of loan portfolio or that of rise in bad assets are wrongly identified, the diagnosis given to deal with pain caused by above reasons normally prove ineffective. This is why government as also banks in general have been talking of NPA for last two three decades but they have completely failed to prevent assets going bad and failed to recover the money from willful defaulters.
Politicians in general do not like that their voters be pressed hard for repayment of loan. They prefer waiver of loan or compromise to forced recovery to motivate voters in their fold. But the bitter truth is that money once given to borrower cannot come back as long as there is no fear of law or severe action.
I therefore plead that instead of focusing on interest rate government should ensure effectiveness of legal machinery and try to punish corrupt executives as soon as possible to send the message among willful defaulters that government will leave no stone unturned to recover the money from defaulters whosoever he or she may be.
Government must be liberal in lending but must not be liberal and casual in punishing those borrowers who do not repay the loan on demand and also bank officers who sanction loans after taking bribe.
Government should first identify top executives who by phone or by giving verbal instruction build pressure on subordinate officers for sanction of credit to unscrupulous borrowers and these corrupt officers left unnoticed and unpunished when such loan become bad..
Government should try to formulate such transparent policy related to Human Resource Development which do not give rise to flattery and bribery, which gives proper respect and recognition to good and honest workers. For this purpose the good culture has to be inculcated first among top ranked officers, ministers and politicians.
Fix Accountability for NPA
As usual, bankers have raised the issue of interest rate hike before RBI Governor and requested for a pause or stop on interest rate which have been hiked many times during last 15 months. Bankers have pleaded that high interest rate will adversely affect loan growth and also increase the amount of bad loan. I have been advocating for last three four years that uniform rate of interest for deposits and advances should be decided by RBI keeping in view national and international situation and the same should be followed by all banks so that banks do not compete each other on the issue of interest rate and customers do not get the opportunity to adopt frequent change of bank for availing cheap loan and in turn adversely affecting the quality and quantity of loan portfolio of banks.
But I do not agree that hike in interest rate may affect overall loan growth. Loan portfolio of one bank may grow at the cost of that of others. Good customers seldom care for interest rate whereas bad customers may cheat the bank even if the rate is too low. Interest cost in any company's balance sheet constitutes negligible portion in their overall burden of expenses. As such a lit bit rise from present level may not have that much affect as non rise of interest may affect the inflation pain on entire economy .
Of course it is desirable that interest rate is kept as minimum as possible as possible and hence I always plead that RBI should fix uniform interest rate for different sectors and for different time period for overall sound health of national economy. Unnecessary and unwarranted rate war among bankers cause loss to one bank or the other and it is ultimately the government and the people of India who have to suffer.
Further I do not accept the logic of bankers that rate hike may jeopardize their loan portfolio and as a consequence of interest rate hike instances of bad assets will increase. It is bitter truth that bad assets which have been surfacing now are not creation of interest hike but the creation of the period when low interest rate regime was prevalent. Bad assets have been concealed by clever bankers and it has been in practice for last several years and now when banks are forced by RBI to ascertain amount of Non Performing Assets or bad assets strictly as per system they are constrained to declare their entire accumulated NPA latest by 31st March 2010.
It is beyond doubt to me that all newly surfaced NPA are creation of period when low interest rates were charged to customers. In my view, amount of bad assets has been growing consistently in government banks largely and mainly due to prevalent corrupt practices, due to ill motivated decision on lending taken by corrupt executives of the banks and due to inaction of corrupt officials.
Here it is worthwhile to mention that Micro Finance Institutes in various states are lending at rate ranging from 25 % to 40% to small traders, weak farmers, street vendors, and other socially backward class for various purposes. It is government banks who extend bulk money to these MFIs at low rate of interest for onward lending at higher rate of interest. These bankers without any hesitation justify lending by these MFIs at high interest rate and at the same time advocate for low rate regime .They do not foresee rise in bad debts when MFI resort to lending at high rate but fear their loan going bad if RBI do not pause hike in rate.
It is to add here that instances of loan going bad in PSU banks is much higher even when they lend to farmers at lowest rate compared to MFIs who lend to same farmers at higher rate. Similarly bankers charges rate from 20 to 30% on credit card users but the default in credit card based lending is far less than lending made to traders and manufacturers at comparative low rates.
Of course it is also true that banks are unable to recover the money from willful defaulters due to legal constraints and due to ineffectiveness of administration, police officials and the judiciary. But I have no doubt that rise in bad assets is primarily due to bribe based lending and not due to rise in interest rate or due to global recession or due to based weather as pleaded by bankers from time to time .
Since causes of the disease of poor growth of loan portfolio or that of rise in bad assets are wrongly identified, the diagnosis given to deal with pain caused by above reasons normally prove ineffective. This is why government as also banks in general have been talking of NPA for last two three decades but they have completely failed to prevent assets going bad and failed to recover the money from willful defaulters.
Politicians in general do not like that their voters be pressed hard for repayment of loan. They prefer waiver of loan or compromise to forced recovery to motivate voters in their fold. But the bitter truth is that money once given to borrower cannot come back as long as there is no fear of law or severe action.
I therefore plead that instead of focusing on interest rate government should ensure effectiveness of legal machinery and try to punish corrupt executives as soon as possible to send the message among willful defaulters that government will leave no stone unturned to recover the money from defaulters whosoever he or she may be.
Government must be liberal in lending but must not be liberal and casual in punishing those borrowers who do not repay the loan on demand and also bank officers who sanction loans after taking bribe.
Government should first identify top executives who by phone or by giving verbal instruction build pressure on subordinate officers for sanction of credit to unscrupulous borrowers and these corrupt officers left unnoticed and unpunished when such loan become bad..
Government should try to formulate such transparent policy related to Human Resource Development which do not give rise to flattery and bribery, which gives proper respect and recognition to good and honest workers. For this purpose the good culture has to be inculcated first among top ranked officers, ministers and politicians.
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