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Tuesday, March 27, 2018

Know About Bankers

A banker has nicely depicted the modus operandi of sanction of loan which eventually  results in creation of bad debts I.e. Non Performing Assets NPA in public sector banks.

I am submitting it here

Modus operandi that was in vogue in the Banking Industry that gave birth to NPAs :
Bit long , but read at your liesure .
How large loans/ Credit limits used to be sanctioned in Banks ???

1)There are gradation of branches headed by  officers of  Scale 1 / Scale 2 / Scale 3 / Scale 4 / Scale 5 . Scale one being the junior most .

2) No bank credit is sanctioned directly from R/O , Ho , or Central Office without the proposal being received from the Branch .

3) only small retail loans can be sanctioned at branch level . Rest have to be sanctioned at Regional /zonal / head/ Central Office

4)There are brokers mostly CAs who canvass bank credit of large amounts
It is they who approach the MD / ED / Gm (Credit ).

5) Once they have struck the deal on rate of commission to be palmed , the project report will b submitted to a branch headed by Scale 4 or Scale 5 executive who will be telephonically advised by the CO/ Ho. Normally,these Scale 4 Scale 5 heads of branches are the blue eyed boys of the executives at the R/O , ZO , Head Office And Central Office .

6) Broker CAs will be advised to approach one of those Branches ( also known as exceptionally large branches / or Industrial Finance Branches ) . The broker normally takes the head of the Branch along with the customer to a 5 star hotel  where they discuss the proposal . During the discussions broker makes it obvious that the proposal has already been discussed at the highest level.

7) at the branch level Regional / zonal office level
There will be a series of letters exchanged raising queries on the proposal . This shadow boxing is deliberately created to make believe that the proposal has been vetted seriously .

8)with every query letter there will be a meeting with Branch head / customer / broker on finalization /guidance as to how each query needs to be replied .

9) proposal travels from the branch to R/ o , Zo , Head and Central office where General Manager Credit will sponsor the proposal in the Committe of executives .

10)) then a sanction letter is issued  ‘in Principle “
11) then the customer will be orally advised by the broker to make a representation to reduce the rate of interest , reduce the margin , dilute the security , increase the length of repayment schedule .

11) at this stage customer is made to part with the promised price thru the broker .
Sometime it’s paid partially and the Bal to be settled after the first disbursement of the facilities .

12 ) Final  sanction letter comes to the branch and branch feels elated that it’s business , profit goes up and the branch is recognized for its great performance and the branch Head gets promotion at the next earliest opportunity. So on record it’s a business canvassed by the Branch .
CMD / ED / GM Credit are happy thru the brokers .
Customer is happy as he parts with a 10 % cut or commission from 100% money lent to him by the Bank .
Broker collects his part of the cut and vanishes in search of another proposal .

Bank lords are happy with the extra income and NO ACCOUNTABILITY as the proposal has come from the Branch and approved in the Committee of Executives/ Board of Directors with no individual executive having taken the decision .

13 ) such large proposal reflect in Banks Growth of business , growth of profits
And every executive in the chain gets preferred posting and promotions at the next earliest opportunity.

14 ) seeing this trend , every other director appointed by the Min of Finance also bring in their proposal and wash of  their hands in Behti Ganga .

Added to this , Finance ministry , other political heavy weights refer cases where they have vested interests Fr bank facility.

15 ) By about 3 years every one who had involved in this sanction gets elevated to the next higher positions

16) when the A/c becomes NPA after 3/4 years these very executives who have moved up in the hierarchy,  would handle the papers and cover up for each other and push the matter under the carpet .

17 ) when the matter really explodes after 7 years 0r 8 years most of the executives
Who had milked the bank would have retired and Vigilance Dept and present set of executives will be doing the firefighting or shadow boxing .

18) Do you know most of the Bank executives of PSU banks particularlyCMDs / Ed’s / GM ( Credit ) after their retirement, are employed by some corporates ???

19 ) Do you know most of the Scale 7 executives of PSUs  have risen from the junior officer level from a humble start ?

20 ) Do yu know most of them now live in the posh apartments valued at 8to 10 crores ???? Besides owning assets beyond their known income ?

21 ) but in all the NPAs and scams it’s the junior officers that are made to bear the burden of the Cross .

22) we need to Credit the present Govt under whose regime , for the first time , Investigating Agencies are questioning , ex - MDs , ex auditors and the Culprit Accountants Sorry , I mean Chartered Accountants.

23 ) just the way BJP Govt is hassled when the bombs are exploding in their hands and looking for Congress culprits who planted the bombs , there is need to search real Parents who left the Banking industry with some corrupt minds , Non - Parent - Assets .

While this used to be the general practice by and large , there could be some exceptions who tried to be righteous . But such fellows used to be misfits in the scheme of things that prevailed .

Hence merely booking Shetty like creatures at the lower levels is like putting balm to the bruised skin , without actually getting into the bottom of the cause of the bruise thru thorough blood check to establish the root cause .
Forwarded as received

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