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
Where the rot started
Time to Put RBI in crosshairs
Restructure of Loan proved curse for banks
Can RBI or GOI improve culture
When CMD or ED are bad
.
No comments:
Post a Comment