Bank Without CEO Can Perform

There is a news in Economic Times today that Headless bank named as Indian Overseas Bank (IOB) with 20 percent Non Performing Assets (NPA) is a challenge for Narendra Modi led government. 

Read Full News Here In Economic Times

It is not important whether there is CEO or not. More important is what culture for lending and for promoting staff  has been created  by past CEOs and past governments. It is better that there is no CEO in IOB because it is CEOs of the past who are responsible for present pathetic position of IOB. 

I would like to mention here that before the launch of reformation era in 1991, IOB was a bank reckoned as one of the best managed and most progressive bank among PSU banks. Why it turned sick is a million dollar question which need to be answered by leaders of this country who ruled for decades. Media should investigate why banks are loaded with 20% bad debts though it was apparently headed by so called star performers.They should try to find out the role played by past CEOs of that banks instead of making headlines on the fact that IOB is headless for last three months.

Heads   of bank in public sector in the past used to be appointed by the then government not on the basis of merit but on the basis of flattery and money he or she  could  extend to key Ministers. And when head of a bank comes through corrupt way ,it is but natural that same corrupt culture will be taught to juniors working vin that bank and given value down the line. 

Therefore it is safe that there is no CEO in IOB for a short period. Let ED and other senior officers focus on recovery of bad loans and improve culture of lending and that  of manpower. Bank may not lose as much money if it reduces pace of lending  as it incur loss due to bad and ill-motivated lending.

Most of  banks is public sector  are having more than 20 percent of loans as NPA though they all have a CEO sitted in his place. But none of  CEOs has  been able to stop rise in bad debts. They are able to hide bad debt applying their fraudulent mind. They have not fully declared all bad debts as NPA. 

I therefore reiterate banks are victim of dirty politics and dirty culture. Government need to take steps for improvement in culture not only in banks but also in politics.

I have no hesitation in saying that majority of CEOs who headed various PSU banks during last three decades have looted banks in their own style and got safe retirement. Many of such corrupt CEOs even got lucrative post after retirement, some of them are at key posts in RBI too. If CBI is entrusted to inspect and verify the properties of all retired CEOs of last three decades , I hope 90 percent of them will be found to be guilty of corruption and found to have assets disproportionate to their income earned in their entire life. These clever CEOs and other top officials always blame economic recession or interest rate or natural calamities to hide their ill-motivated decisions.

We have seen how in the past CEOs of Indian Bank , Syndicate Bank, United Bank , Bank of Baroda,U Co Bank, Corporation Bank and many other financial institutes have been found guilty of bribery and corruption and still none of them were severely punished . As such message which goes to each branch and to each officer is that if an officer  has patronage of powerful persons he or she can be acquitted of all charges genuinely levelled against him or her by either aggrieved person or my media or by any authority. 

In India it is easy to punish a genuine and honest performer by posting him at critical places and subjecting him or her to various types of tortures and humiliation, even rejecting in promotion processes. Similarly it is very easy to award non performer and corrupt staff by posting him at comfortable and cream yielding places , by providing him more than adequate manpower and by giving him abnormal elevation in career. 

In banks , it is also possible for top management to punish a non-flatterer by giving him promotion and posting him at the most critical place.They can torture a good performer by removing good staff and posting non-performing staff under his or her control. Banking is service oriented industry and there is no fool proof yardstick by which performance of any officer can be perfectly measured,

Normally an officer who can deliver a good speech, who can pose as best yeoman of his or her bosses and who can earn bribe to share with his bosses are given preferences and honor in all meetings and all promotion processes. This culture of flattery and bribery inculcated, irrigated and promoted by past governments has led to cancer of corruption , has resulted in accumulation of so much bad debts and has forced government from time to time  to infuse capital in sick banks to save and salvage faulty banks from public anger and from financial bankruptcy.

Banking is a service oriented industry and customers in general are not attracted by educational qualification of a bank officer or his post or his cadre but is motivated by  good behaviors of officers , prompt service extended by them and transparency in working and in their decisions  which can be provided even by a peon or desk clerk or a low level officer. Customers like a bank by the quality of staff in serving various demands and not by how much senior or powerful person he is.

I do not want to name any CEO of any bank, but an honest investigation of each high value NPA accounts of each bank will make it crystal clear that there is a hand of CEO and other top officials of a bank behind maximum of bad assets or else there is always a hand of corrupt politicians who build pressure on bank officials to sanction loans to persons and companies recommended by them or to persons and companies  which were directly or indirectly related to their family, their kith and kin or their political associates.

Modi government has promised to ensure total stoppage of political interference in functioning of the bank, but how far he will succeed in its honest compliance will be seen in coming years. 

Government has thought it wise to give more freedom to bank management to cure the sickness . In fact freedom without periodical regulation and monitoring has only resulted in ill health of banks . Unfortunately government has committed the blunder of giving more and more freedom to CEOs of bank or by changing the name of harmful policies or by appointing a Board headed by Vinod Rai  without going deep into reasons which led to illness in banks. Because actual reform and transformation will occur only when there is a change of heart and change of culture at field level and which is possible only top officials are dry honest, true performer.and absolutely believer in performance.

I therefore feel that if IOB is not provided by a Head for last three months, It is the duty of ED and other senior officers to strive hard for recovery of bad loans and for improving quality in fresh lending. CEO of a bank simply gives direction to working and does not work itself.. In absence of CEO , high value lending is not possible , but decisions can be taken in 99 percent of loan proposals even in the absence of CEO. There are banks where even loans unto 100 crores can be sanctioned by a committee led by Executive Director of the bank.

Media men may make news and create headlines for their newspaper or for TV news out of Headless banks to strike emotional war against Modi government . But there is no doubt to me that these media men are very poor in their knowledge about functioning of bank and they act as per whims of their employers. They do not know even ABC of bank's culture and hence they get Masala for their news out of Headless Banks.. There are several instances available in the history of banks when it operated without Head. There are several branches which work without Branch Manager and still customers are served if staff of the branch are good and like to serve honestly and devotedly. There is no barrier for next man after CEO in taking appropriate decisions. .