Save Public Sector Banks

The United Forum of Bank Unions has decided to observe July 19, the 48th anniversary of nationalisation of major banks, as 'Save public sector banks' day.All members will wear a commemorative badge on the day, display posters in front of all branches, distribute leaflets and hold rallies/demonstrations at all centres across the country.

Public banks have to bear losses due to defaults made by big corporate .Banks has to be defended and saved from corporate looters. Banks have to weed out erring officials who work in nexus with corporate to serve their self interest. Banks  have to expose politicians as also top officials who build pressure on junior and mid segment bankers for lending to unscrupulous industrialists, traders and service providers. Today these banks face greatest challenge from alarmingly increasing bad loans called as Non Performing Assets NPA.

Even a common man knows that large share of NPA comes from corporate defaulters and smaller share from agriculturists or traders or small scale industrialists. But the government has failed during last years and decades. Instead of recovering money from defaulters , our government give more and more concessions to big corporates and write off small loans . Former is deep poison and the later is slow poison. Big borrowers are given the benefit of One Time Settlement Scheme OTS and small or mid segment borrowers are given the benefit of Loan Waiver Scheme LWS . In both the cases , large amount of bank loan is sacrificed . 

It is surprising that though position of each PSU banks has deteriorated quarter after quarter during last one decade and more , none of erring top officials of the bank and none of erring political leaders who build pressure on banks for lending and for OTS or for Loan Waivers are ever punished . 

It is always the honest depositors who are denied even reasonable  interest rate, int is investors who are denied dividend and it is taxpayers whose money is infused in these banks to save them from disaster and going bankrupt .And the most funny part of this dirty management of bank is that when there is erosion in profit of the bank, even bank staff are denied respectable wage hike  It is undeniable truth that when profitability of banks goes down , banks do not pay adequate interest even to senior citizens and start curtailing benefits of working staff. Banks  are unable to upgrade pension amount to retired bankers . 

Though by dint of mergers and consolidation , government can save some expenses by closing some superfluous branches and by removing surplus bank staff , but they cannot stop the culture of creation of bad debts . They can merge weak banks with a little bit stronger bank and save capital infusion for the time being but may not stop further deterioration in health of these banks. Rather merger of weak banks with strong banks will further weaken the health of merged entity.

If Government really want to save banks , they have to undertake following tasks without delay, sincerely and honestly without caring for alleged loss in vote bank.

Stop Vote Bank Politics :—

Government will have to stop doing vote bank politics with public sector banks . Culture of announcement of loan waiver on the eve of election by political leaders and then after coming  to power forcing banks to write off loans has killed the repayment culture . Due to such dirty trend of write off of loans , even good borrowers also avoid repayment in anticipation of waiver of loans.Avoidance of repayment of loan in time has become a culture not only in small borrowers but also in big borrowers. 

Politicians demand loan waiver of agriculture loans to please farmers. Now corporate houses in power sector, telecom sector, steel sector and real estate sector involving lacs of crores of rupees are also facing crisis and they are applying their lobby to build pressure on various ministries of Government for sanction of various concessions. Even top 12 NPA borrowers ( involving about 1.9 lac crore of loans) for application of bankruptcy and insolvency code identified by RBI are not going to reduce any load on bank. Rather banks will have to make higher provisions .To add fuel to fire, concerned banks of these loans will have to sacrifice 40 to 50% of loan dues from these 12 top NPA borrowers even after selling the assets or selling the business to prospective buyers  to clear total outstanding. 

It means to say that concerned banks will have to suffer great loss , many more times than they incur loss in case of waiver of agriculture loans. Same is the fate with mid segment loans where individual banks sacrifice huge amount every year to arrive at amicable settlement with defaulters and to avoid litigation.  Here it is important to mention that lacs of cases filed by bank for recovery of dues from defaulting borrowers are languishing in various courts for years and decades which forces banks to conclude that it is wastage of time and good money behind bad money in choosing the option of legal route for recovery of dues from bank loan defaulters.

This is why I use to say that let bank branch take its prudent decision on loan waiver in genuine cases like death of borrower or natural calamity like well defined situation . There should be perfect transparency in each case of loan waiver or OTS to avoid misuse of power and in no case such waiver should be publicised . And waiver of loan and OTS should be as minimum as possible to send the clear message among borrowers that there is no ways left to get rid of loans other than repaying the same .Charity business of the government should not be mixed with lending business. If Government is desirous of doing social welfare , they should separately give financial help to needy persons and companies instead of mixing it with bank loans.

Stop Reckless Branch Expansion:-

Government will have to stop reckless expansion of branches and stop corruption going on in banks in the name of renovation of branches, in the name of technological upgradation of branches. At one time Government put pressure on banks for expansion and at another time they start talking of profitability and then closure of loss making branches. First GOI give licenses to new banks and then ask for consolidation of them .This has been happening since nineties. 

Rapid branch expansion did take place in late seventies and early eighties in the name of service area approach. Then it was stopped after incurring losses in many branches. Again it started and closed. Then in the name of inclusive banking , thousands of new branches were opened by all banks during last three to five years. Now government is asking for mergers .  Government has given license for opening of more new banks . At the same time , GOI is talking of consolidation also. 

This visionless policy has damaged the basic of banking. On one occasion , GOI will ask for credit growth and on another occasion they will ask banks for doing Non-banking business. It exhibits clearly lack of vision, lack of planning and lack of consistency in policy making bodies.

Stop Spending On Renovation Etc:-

Government will have to stop unwarranted spending more emphatically in the name of business development and credit growth. Management of each bank spend on renovation of branches and offices without ensuring quality of such work which results in frequent spending for same work. Similarly a few years back , government advised banks to keep three tier system only instead of four tier. AS a result ,many administrative zonal offices were closed or merged with other zones. After  a year or two ,banks started ignoring this guideline and again started four tier control system and in some banks it has gone to five tier mechanism also. It clearly says that none of guidelines are followed honestly. Bank officers sitter at top work for pleasure of Ministers and their bosses , not for safety and security of the organisation they serve or customers they are supposed to protect.

Stop Non-Banking Business And Focus on Core Banking Only:—

GOI will have to stop immediately bankers who are focusing on Non-banking business like insurance and mutual funds for earning commission to be payable to top officials of the bank and penalise officials who are  jeopardising the health of loan assets of the bank in the name of mobilisation of insurance business. It is seen that top officials of each PSU bank for the same of foreign trip or earning high commission from insurance companies build undue pressure on each branch for selling insurance policies to their clients. Due to this , branch officials bag business from borrowers and compromise with quality of lending and quality of monitoring and indulge in sanctioning additional loans to save existing  bad loan from becoming substandard. Customers give some insurance business and some gifts to greedy managers of banks and get big amount of loan sanction without creating assets in the same proportion.

Stop Corruption in Human Resource Management:-

Government will have to stop corruption at all levels in all banks in case of recruitment, promotion and transfer postings.Government will have to ensure that seniors who are true performers ,are given due respect and flatterers who reached top position by dint of flattery and bribery are taken to task immediately. It is known to all that promotion is given to those staff in general who are perfect yeoman of their bosses or who pay share of bribe earned in lending to them or who keep their trade union leaders in good stream by some reason or the other. In some banks trade union leaders are working as partner in foul game being played by bank’s top officials. Corruption does not mean only giving and taking of bribe but also include the case when a deserving person is denied promotion and a yesman and non performers is given elevation. Playing with respect, experience  and dignity of workers is more harmful than any other thing.

Stop Mindless Promotion To Undeserving Officers  :-

Government will have to force bankers to stop giving promotion to juniors who are not well conversant with credit skill , operational skill, marketing skill, customer serving skill  and communication skill . If needed proper time may be imparted on theory as well as practice for a year or two under some experienced and matured officer. It is playing with fire if officers with inadequate exposure is made Branch head and then such branch head is forced to reach the assigned target. Target based lending also lead to corrupt culture at all levels. 

Government will have to stop target based lending and in its place promote culture of awarding who mobile good growth with consistent good quality . For this purpose  Head of a branch or Region or Circle may be allowed to continue in the same post and place for a longer period if there is no complain against him regarding misuse of power or bribery or is accused of other illegal practice.

Stop Dirty Politics Based On Vote Mathematics:

Government will have to shut the mouth of all politicians who are demanding waiver of loans or building pressure on bankers for agreeing to ONE Time Settlement .It is seen that under pressure from Government or RBI or top officials of a bank, field officials has made a practice of first giving loan blindly and then writing off it under a scheme and get rid of all accusations. Some of Officers take advantage of this culture and earn huge amount of money as bribe and commission in sanctioning of loan. Similarly some borrowers exploit banks in availing loan and then availing waiver of loan under another scheme. Local leaders use these eye-catching policies to fill their pockets. Entire system become corrupt when lending is target based and when waiver of loan or compromise settlement become a routine affair.

Stop Window Dressing And Policy of Hiding NPA And Start taking tough action as soon as Account turns Bad

Government will have to stop building pressure on banks for restructure of bad loans to hide NPA and those who indulge in such unhealthy practice must be punished within a fixed time framework.Government will have to stop the idea of creation of Bad Bank or selling the bad assets to Asset Reconstruction Company . Because such idea give room for manipulation and concealment of bad advances.

Make Legal And Administrative Machinery Strong And Effective:-

Government should ensure that all cases lodged by banks against defaulting borrowers in all courts including Debt Recovery Tribunals and District revenue Offices are decided in minimum fixed time schedule and the decree thus awarded to bank is executed in fixed time frame without fail. Erring officers of court ,police and administrative offices who delay in decision on court cases or in execution of decrees should be punished without delay. 

There should be no pendency in court for more than a year . No Decree should be allowed to remain pending for execution for more than six months. Onus of execution of decree should lie on police and administrative officers and onus of filing cases in time should lie on banks. Bank officers who are found wilful defaulters in taking proper documentation at the time of lending or at the time of monitoring should be punished without delay. 

Stop Subsidy and Charity Business Along With Loan:-

Change Culture Of Subsidy And Concessions :-

Government will have to stop giving subsidies on advances of any type because these subsidies promoted elements to enter into banks to promote bad advances in nexus with bad bank officers . If government want to help poor farmers or poor traders or any industrialist , they may give direct benefit to them if they really do good job , if they really produce farm products, if they really start an small scale industry and if they finally repay the banks due in time. 

These incentives should be in form of award after doing good job and not as incentive for doing a job. Because people in general take advantage of such subsidies by forming fake firms, fake companies and by showing fake business activities and they are very much certain that government of bank will never take punitive action against them . IN this way brokers and agents  make bankers also as partner in their dirty dame of cheating banks as well as government.

Penalise erring CA and Other Professionals: 

Government will have to penalise Chartered Accountant who prepare fake balance sheet , who manipulate figure in financial reports, who hide truth , who indulge in window dressing of data to suit the customers or to bank, who certify wrong financials of a branch or a bank under temptation of some gifts and some bribe money. At the same time , bankers should be penalised who buy signature of Chartered Accountants at the cost of bank’s money or who motivate a good client of the bank to buy CA and get the desired certification from CA.

Similarly GOI will have to tighten the policy and penalise Valuers, architects, lawyers , surveyors, Risk assessor, credit processors , contractors etc who cause loss to bank to serve vested interest. 

All policies should send the message that strict discipline is more important and there will be no compromise with those who try to cheat the system , whosoever it may be. Borrowers or politicians or professionals or bankers or policy makers whoever are found guilty must be taken to task . Once the rule of law is established, people will never try to play with rules.

It is easy to make policies and rules but very difficult to ensure their strict execution in true spirit.

I have seen during last four decades how health of banks has been neglected and how policies are changed to suit a particular section of the government or that of bank without going in depth of root causes of growing sickness. 

Window dressing in boosting up business has been a routine affair in the bank despite strict guidelines not to do so issued from to time by various governments of the past. Therefore need of the hour is to frame policy after threadbare discussion and once the policy is framed, it must be followed in true spirit by every banks including private banks. It is important to mention here that private banks are also playing game with public money . As long as they are earning profit , it is their own gain, when they will incur loss , entire burden will come on public exchequer only. 

Role of Trade Unions :- 

Lastly I would like to say that it is the duty of trad union leaders to remain alert 365 days and not take up the issue when it is too late. Fact is that as long as their colleagues are safe they do not bother how much harm is meted out to the organisation by their colleagues to the organisation. Now, the day has come when organisation has become too weak to protect the interest of their colleagues and to protect their survival.


04.04.3018 Reply recrived ftom PMO after 9 months.