I fully agree with the views of Mr. Rajan and I also feel that volume of NPA in Public Sector Banks (PSU) is not only 7 or 8 percent of total advances. It is many more times of what is stated and reflected in Balance Sheets of various banks declared.
As a matter of fact , majority of top bankers verbaly instruct their juniors not to classify bad debts as NPA . And officers who do not obey the oral advices are subjected to frequent transfers and rejction in promotion processes. On the contrary who abide by instructions flowing down from top officials blindly and use various tools to conceal bad debts are awarded with choice posting and quicker prootion.
This is why officers who do not know much about even banking laws and practices and those who do not know even ABC of lending principles are given promotion in shortest tenure of service. IN this way, inexprinced officers are being elevated to higher and higher scale and given higher and higher responsibility and on the other hand experienced , efficient and talented staff are to work under them. As such, there is no doubt that bank management is inviting more dangerous position.
I may say (as I have been saying for years and decades ) without any hesitation that volume of NPA will continue to move up and up unabated. All efforts said to have been taken or promised to be taken will totally fail and prove ineffective.
Culture of lending is so bad that one cannot dream of any reduction in speed of creation of bad debts. In the way Human resource is treated by top management in each bank, one may say that majority of officers in PSU banks are busy in keeping their bosses happy than in safeguarding the interest of the bank they are serving.
RBI Governor Raghuram Rajan will be remembered not only for his relentless pursuit of India’s monetary policy reforms, controlling inflation and advocating a stable policy framework but also for his precise diagnosis and direction for “deep surgery” for the chronic NPA problems of the banking sector, especially in PSU banks. He minced no words when he said that routine “band-aid” would not clean up the balance-sheet mess and put them back on a healthy trajectory.
Gross bad loans at commercial banks could increase to 8.5 per cent of total advances by March 2017, from 7.6 per cent in March 2016, according to projection made by the Reserve Bank of India (RBI) in its Financial Stability Report. The report says “The macro stress test suggests that under the baseline scenario, the gross NPA may rise to 8.5 per cent by March 2017,” and “If the macro situation deteriorates in the future, the gross NPA ratio may increase further to 9.3 per cent by March 2017.”
Here I would like to say that if all hidden bad debts and all stressed accounts are truely scanned by absolutely honest officials and assessed strictly as per prudential norms presribed by RBI in this regrrd, there is no doubt that Gross NPA of bank may go up to 30 to 40 percent level.
As of now, banks which are considered comparatively better are better not because of they are doing quality lending but because they are good manipulators and they know the art of hiding stressed assets .
Gross bad loans of Indian banks widened to 7.6 per cent from 5.1 per cent in September 2015 and from 4.6 per cent in March 2015. Gross NPAs rose 79.7 per cent year-on-year in March 2016.
Clever officers of PSU banks put entire blame for such unprecedented and abnormal rise in bad debts to adverse economic situation , to recession and to global slowdown. They do not want to own responsbility for rise in bad debts and for wilfull window dressing going on in PSU banks for years and decades.
Here it will be wise to point out that Private sector banks have been doing well under the same economic environment in which PSU banks are working.
The net NPA of the banks also increased sharply to 4.6 per cent in March 2016, from 2.8 per cent in September 2015. Public sector banks’ net NPA was 6.1 per cent, while the ratio for private sector banks was 4.6 per cent.
PSU banks have been lootd by large borrowers in nexus with evil minded and corrupt bank officials sitting at top posts in PSU banksand politicians ruling this country.
Banks were nationalised to save poor from exploitation in the hands of private banks and local money lenders. But slowly banks reduced their exposure on poor and increased their exposure on large borrowers . Finacial Stability Report published by RBI says that large borrowers, and significantly the top 100 largest debtors, are primarily responsible for the bad loan problem in Indian banks.
Top 100 borrowers account for 19.3% of all bank bad loans at the end of March 2016 compared with 0.7% a year ago. In March 2015 share of large borrowers i.e. of top 100 borrowers was 58.1% in total advances and that of NPA was 72.8% in total NPA. In March 2016 , share of large borrowers is 58% in total advances whereas share of .bad loan is 86.4% in toal NPA.
Since 1991 bank management have been enjoying unregulated freedom not only in recruitment and promotion of bank staff but also in lending. IN the name of target given for crdit growth and for booking higher profits, they shut their eyes and distributed bank's costly funds to large borrowers who can oblige bank officers in different ways.
Promoters of large business firms usually have best liasoning with political masters , with Ministry of Finance and with RBI officials too in addition to top officials of all banks . They help bank officers not only in incresing their wealth but also in getting promotion out of way.Bank officer at junior level in general make efforts to please their bosses some how or the other and for this purpose they do not hesitate in violating even normal principles of lending, monitoring and recognition of Non Performing Assets.
Bank officers are loyal to their bosses because it is their bosses who can make or mar their career and it is they who can disturb their life, thier family life and their mental peace .
As such it is always safer for them to keep bosses always in happy mood , either by giving bribe in cash or by offering costly gifts or by indireectly helping bosses and helping friends, kith and kin and friends and relatives of their bosses or by sitting late in office or by doing household work of families of bosses or by extending red carpet welcome to higher bosses during their visit.
Similarly political masters i.e laders of ruling political party who rule over bank officials are also less loyal to their voters but more loyal to their superiors so that they may grow up by leaps and bounds in wealth , in power and in postion.
Society also gives values to those who give them illegal help, who give them aids and subsidies and who allow them in carrying on their illegal activities. In our society, people are worshipped not due to his values and efficient working but based on caste, community or religious attitude.
There used to be a popular proverb and which usually taught in every schools and colleges that "Honesty is best policy and Survival for the Fittest". In modern era this proverb no more holds good. People considers such culture of an officer as his weakness and hurdle in path of progress. That is why , the proverb in practice is now changed to "Dishonesty is the best policy and Survival for the Flatterers.
Present Government is wondering in dreamland if they think that merger and consolidation of banks will help them in containing bad assets and in changing the culture of lending. They are totally mistaken if they think that health of PSU banks will improve only whey become voluminous and they attain a global rank in business volume or in branch network or in capital base. On the contrary, there is all possibility that brainless merger will aggravate the problem instead of resolving it.
In fact efforts taken by present government may change the colour of bad assets , but cannot improve the quality of lending and monitoring and that of efficiency of administrative and legal machinaries.
After exit of Rajan from RBI and apointment of new person who will be frinedly to current government as Governor in palce of Rajan , Government may try to deal with problem of stressed assets by permitting liberal restructure of stressed advances , by evergreening of bad advances , by liberal compromise settlements and even by writing off of bad loans. They may form a bad bank or sell stressed assets to ARCs working in the country.
All these steps may give temporary relief and help banks in fraudulently reducing volume of bad assets for the time being. This evil culture has become the way of life for bankers. They have forgotten their actual job of banking. But in the long run , health of banks will deteriorate and cause more and more devastating results than what are visible now.
Government may change the Port-Mortem report to project murder or suicide to appear as natural death. But truth cannot be altered, bad culture cannot be changed and hence slippage and bad lending will continue to make the health of PSU banks more and more critical. Crime in a state does not come down if police officers stop lodgement of FIR. Similarly banks balance sheet cannot be considered clean if they hide all bad loans as Nd SD how NPA accounts as standard.
Lastly it is taxpayer's easy money which will be used by government as hitherto done and more and more capital infusion in sick banks for survial and for hiding evil works of bankers and politicians will be resorted to.
Due to faulty policies and due to large scale corruption in political and banking circles, banks in general are not in a position to pay even respectable wage to working staff, reasonable interest to their depositors and dividends to their invesotrs and stakeholders in banks.
Unfortunately , there is no one in the system who can fix responsibility on evil officers and evil politiicans. Volume of bank's loaning scam and writing off of loan scam is ,as I think greater than all other scams of the past.
Significant Part Of Bank Non-Performing Assets A Result Of Fraud: CAG
NDTV 30th June 2016New Delhi: A "significant" part of the banks' non-performing assets (NPAs) were a result of loans obtained by fraudulent methods, Comptroller and Auditor General (CAG) of India Shashi Kant Sharma said here on Friday.
"There is a significant part of NPAs that amount to fraudulently obtained advances," Sharma said at the Assocham (Associated Chambers of Commerce and Industry of India) conference on financial and corporate frauds.
Sharma also added that a large part of these loans may now be irretrievable as they are likely to have been transferred abroad.
"There is also the belief that a large part of these advances may have been transferred abroad and may never be recovered," he said.
"In recent times, there have been frauds against institutions,
frauds committed against banks, especially public sector
banks that are struggling. Banking fraud can be related t
o technological flaws related to both the employees and
the customers of the banking system," he added.
Bank NPAs may hit 8.5 % by March-The Hindu 30th June 2016
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