Government Active On Merger & Silent On Wage Hike

Trade union leaders in public sector banks are perhaps sleeping or waiting rain of money by virtue of luck. They protested merger of banks in the past but are  now silently watching the developments taking place towards achievement of merger of banks. Perhaps government will get success in changing the agenda of leaders from fight for wage revision and that for 5 days week to fight against merger and attack on unity of bank employees.

Neither Government of India nor Indian Bank Association (IBA) is serious on wage hike. There is no doubt that even mother does not feed a child until he or she weeps. When leaders are silent spectators of indifference and casual approach of IBA and when they are even not able to build pressure for getting date of dialogue on wage settlement , they cannot be expected to fight for better scale and better amenities for bank employees in Xth Bipartite .

I hope these leaders should now prepare Charter of Demand for next settlement and submit the same to member employees so that members feel relaxed at least with Charter of Demand. Members will fly in dreamland created by Charter of Demand envisaging 50% or 100 % hike in wage as they have been flying for last two years waiting hike of 30% to 40% . Leaders should start  trying  for XI bipartite settlement keeping in view the loss of time in arriving at success in signing of Xth Bipartite.

Another remedy for weak and incompetent leaders in my view is that leaders should totally boycott the meeting with IBA and leave the issue fully in control of Government and IBA. Through this step, I think members will at least save monthly  subscription payable to unions as well as save contribution amount  payable to Unions out of arrears generated by delayed settlement. It will be better for bankers to amalgamate them with central government employees or even with state government employees. They should ask the government  whether bank staff are part of state government or that of central government .

Both ways , either as state government employees or central government employees bank employees will prove to be gainer in long run.These leaders should now at least stop the job of trade unionism and leave the fate of staff on the mercy of government and politicians .

In seventies and eighties bank unions used to treated as active, militant  and member friendly .At least leaders of award staff used to build pressure on government for amicable and better wage hike. And officers used to get the hike automatically. Unfortunately leaders of award staff have also aligned with that of officers union and hence they all now wish to remain in good book of local Bank head , perhaps to serve their self interest , at least not for the betterment of their colleagues for whom they are picked up as leaders. 

 Now a days when we are in era of reformation, these leaders have also become management friendly and government friendly so that their kith and kin , their friends and relatives and finally their own colleagues of their own choice are served better . Leaders are busy perhaps in saving corrupt officers who became wealthy by indulging in wrong lending for earning bribe money and costly gifts from borrowers. They perhaps  care only for top officials who are trapped in CBI or CVC inquiries. They work in nexus with top management so that their few blind followers called as flatterers are given preferred chance in promotional processes and given cream posting. Or at best , they will win the heart of top management in getting reimbursement of newspaper cost or some tea allowances.

I am unable to understand why only wage revision of bank employees is delayed by such a abnormal period and not that of SAIL. Coal India, and central government employees. This is astonishing that majority of bank employees are annoyed with leaders but they continue to have trust on leaders . Perhaps they wonder in dreamland if they think that leaders are as honest as they used to be in eighties and before. Time has changed, perception of union leaders have also changed. They (union leaders ) become Hero as soon as they are elected leaders in the same way as politicians become Heroes when they re voted to power.

Politicians are at least voted out in next election, but in banks, leaders cannot be removed because members are scared of these leaders. They are  least bothered of their future , permanent future. I think members should try to understand whether they are safe in the hands of their leaders and if no, they should now ponder over better alternatives. Otherwise  Government will accomplish their task of merger and consolidation , task of financial inclusion, task of tax collection or salary payment of government employees, task of looting banks through write off of loans , building pressure on wrong lending towards big projects etc keeping bank employees engaged in saving their service and their present wages and allowances.

God knows what will happen when two or three banks of different culture will merge so far as future of bank employees is concerned. But it is also sure that government will not gain in the long run as they are dreaming to gain and more emphatically I may say that health of banks will also not improve.

 At most , government may come out of current trouble arising due to current need of capital to comply Basel Norms . It is also certain that volume of bad debts will continue to rise and rise , cases of fraud and bad lending will go on rising and finally interest of bank employees will continue to suffer and suffer.

In the past also , RBI and Government of India have undertaken course  of merger , but only to save  a sinking bank  and that too to get rid of public annoyance and to safeguard them from exposure in public domain. When management of a bank got exposed in bad lending and lost huge volume of capital and profit, such banks used to be merged with some stronger bank so that politicians and officials of RBI as also Government could not be abused of failure in handling of banks even after enjoying full powers and even after carrying out so called audit and inspection.I do not know whether previous government reformed these public sector banks or deformed them.But the result is crystal clear to those who are unbiased.

In current year too , financial health of United Bank, Allahabad bank and Central bank exposed and very soon that of SBI , PNB and other so called stronger banks will be exposed if government do not strike at the root cause of the sickness. If they stick to merger policy, they may remain in comfort for a few quarters only. 

In no wayn merger of banks will prove beneficial in the long run . It is simply a temporary solution to come out of mess created by banks in span of two decades of so called reformation imposed by previous government. Merger presently in pipeline will further add fuel to fire and health of bank will further deteriorate because no change is likely to take place in culture of recruitment, culture of promotions, culture of lending, culture of write off, culture of political exploitation and finally in legal and administrative set up in the country which have jointly made the life of bankers miserable.

Last but not the least, bank employees are also going to suffer if merger really takes place in the way they are moving. Bank staff will slowly fight for wage hike and strive for survival and make efforts to save their dignity and status in the bank and in the society.

Government undoubtedly failed to keep big banks safe (like SBI and PNB) and also failed to keep small banks like United bank and Allahabad Bank safe. They failed in all respect and they will fail even after merger. They are going to give license for creation of small banks on the one hand and they are building pressure for merger and consolidation on the other hand. Only clever politicians can understand this magical stand of the government.

( Read Adds (advertisements ) appearing on his blog as a token of liking my views. You will at least gain new information in these adds. These adds are unique in nature. Adds will give you what you usually search in Google.

Leaders do not give what you expect from them. Adds are better than leaders. In fact people are afraid of Adds in the same way as they are afraid of their leaders,But truth is that having trust on adds is more beneficial than imposing trust on union leaders.  )

Expect turbulence with public sector bank mergers-Business Standard
The resistance from bank staff and employees' unions and local political interest could pose a formidable challenge
The government-driven exercise to consolidate public sector banks (PSBs) is likely to run into problems. Beside issues with organisation integration, there is strong opposition from employee unions.

While mergers take care of accounting, legal and regulatory requirements, the banks face challenges of wages and compensation fitment, culture and systems and info technology platform integration, said experts and senior PSB executives.

And, the resistance from bank staff and employees unions and local political interest could pose a formidable challenge. C H Venkatachalam, general secretary, All India Bank Employees’ Association (AIBEA), said there is absolutely no case for consolidation. There is enough space for many banks to do business when half the population is yet come under the ambit of financial services, he said.

Adding that the unions will begin agitations against the move to merge some state-run banks with other larger ones. AIBEA will prepare detailed plans in early August, he said.

Earlier, mergers of commercial banks with public sector lenders was predominantly done at the behest of the Reserve Bank of India and the government. This was mainly to salvage a troubled bank and protect depositors’ interest. One prominent example of a private lender being merged into a state-owned bank was of the new-generation Global Trust Bank (GTB) with Oriental Bank of India. Hyderabad-based GTB landed in trouble due to aggressive lending often flouting prudential norms.

A second example is of United Western Bank (UWB), an older generation private bank, merged with IDBI Bank. UWB faced problems with a mounting bad loan book and maintaining the prescribed capital adequacy. It was thought that its wide network in the semi-urban and rural parts of Maharashtra would provide IDBI a footprint in building priority sector loans. The latter has had limited success in doing so.

Compared to mergers with PSBs, experts believe those of private sector banks, done more voluntarily, have been smoother. Shinjini Kumar, executive director, PwC, says when two lenders from the same sector are merged, there is an advantage.

"The upside in such cases is that both the parties will have a similar background, focus and structure. Therefore, the consolidation process is a little easier. However, any merger requires a very detailed plan and every merger has some or the other hiccup," he added.

HDFC Bank's merger with Times Bank was smooth. To ensure this, an external human resource consultancy was hired to manage the people integration. ICICI Bank's merger with Bank of Rajasthan also had not met with many obstacles. BoR's acquisition helped ICICI strengthen its network in western and northern India. BOR was under the Reserve Bank of India's and the Securities & Exchange Board of India's scanner at the time and the merger was a bailout for it
Link Business Standard




Bank staff body lists 406 bad loan a/c worth Rs 70k cr
AIBEA also demanded the government release the list of major loan defaulters and make recovery norms stringent
The All India Bank Employees Association (AIBEA) has released the details of 406 bad loan accounts with public sector banks. These 406 loans account for non-performing assets (NPAs) worth Rs 70,300 crore.

"The total NPA in public-sector banks till September, 2013, was Rs 2.36 lakh crore. The bad loans restructured and shown as good loans amount to another Rs 3.25 lakh crore. This is public money and it has to be recovered for the benefit of the public," AIBEA General- Secretary C H Venkatachalam told reporters while releasing the list of defaulters here on Tuesday.

Venkatachalam said the NPAs registered by all public sector banks in March 2008 was Rs 39,000 crore. The bad loans constituted by the top four defaulters in public sector banks is around Rs 23,000 crore and the bad loans in top-30 bad loan accounts in 24 banks is Rs 70,300 crore. Fresh bad loans in public sector banks in the last seven years is Rs 4.95 lakh crore.

According to AIBEA, bad loans written off in the past 13 years come to the tune of Rs 2.04 lakh crore. Profits transferred and adjusted for provisions toward bad loans from 2008 to 2013 was Rs 1.40 lakh crore. The bad loans in 172 corporate accounts of Rs 100 crore or above was Rs 37,000 crore, it added.

AIBEA also demanded that the government release the list of major loan defaulters and make loan-recovery norms stringent so that action under criminal procedure can be taken against wilful defaulters.

If top bank executives are responsible for the increase in NPA, then there should be investigation against them and, if found guilty, they should be punished, the Association said.

According to Venkatachalam, political as well as corporate nexus was also a reason behind the increase in NPAs. Almost 65 per cent of the total bad loan is taken by industry, he added.

He said AIBEA would publish a larger list of about 3,000 bad loan accounts that have defaulted Rs 1 crore and above each. The Association also mulls protesting in front of the defaulted firms and publishing their names in public places.

Last year, AIBEA had released a list of the top-50 bad loan accounts. It had observed an All India Demands Day to highlight the issue on December 5, 2013. The Association has about 500,000 bank employees as members.

Loan Waiver Culture

My Opinion And Observation on trend of Loan waiver, compromise, restructure to conceal Non Performing assets----

Since there is no full proof and time bound legal machinery which can ensure recovery of loan from defaulters and since there is intolerable and unrealistic pressure for achievement of target fixed for lending, bankers think it better and wise to lend recklessly and carelessly  and let it become NPA and then go for either evergreening or writing off of loan or sacrificing some amount and then relending . In this way they achieve the target of lending as well as that of recovery and in return they not only get admiration from bosses but also get early elevation in career. 

But the said trend of playing with assets gives alarming signals for existence and future of public sector banks. Some banks have given i.e. delegated huge volume of powers to Branch manager , majority of whom are neither well versed in principles and processing of loan sanction nor they do know how to monitor and safeguard the interest of the bank and nor they know the processes applicable for recovery of dues from defaulters. Power to sanction loan and then power to compromise with borrowers and extension of heavy discount by same person will give ample scope of corruption.

Branch Manager and Regional Head or Zonal Head  think it better to adopt evergreening process to survive and to remain in good books of their bosses . This is why volume of frauds and stressed assets in banks is going out of control day by day. None can stop until and unless the culture of banking is entirely changed and rejuvenated. Inexperienced and incapable officials have become Head of branch or the Region and they simply learn easy tools to survive and get rid of torturous treatment from bosses. Very few persons are really serious about interest of the organization they serve. And it is also true that such devoted persons are rejected and shunted lot in the banks. None can deny this bitter reality of public sector banks

 Banks are taking suicidal steps to reduce load of stressed assets. They are subjected to frequent tortures by their bosses. Finance Minister pulls CMD, CMD rebukes General Manager and GM then humiliates their juniors. In result it sends terror wave below the line. To overcome this, many banks, you may say almost all PS banks have framed a policy of giving heavy discount to loan defaulters on repayment of loan.  They are offering heavy discounts to persons who repay the loan at the cost of investors and depositors of banks.

Bankers are ready to write off and sacrifice huge volume of loan to reduce volume of stressed and bad assets. They have given huge power to head of branches to sanction the loan and when loan goes bad, they can compromise with defaulters giving huge discounts. Obviously , banks are first distributing bank's fund as charity in  form of loan and then sacrifice bank loan either by write off or by giving huge discount. Their steps will prove to be disaster in long run. They are digging grave for them. Culture of repayment has already been adversely and critically affected by three decades long wrong policies adopted by previous governments of Congress Party. Such unhealthy discounts and waiver of loan will finally end repayment culture and people will learn not to repay the dues and wait for loan waiver scheme. There are tax consultants in India who guide black money earner businessmen how to evade taxes in nexus with IT or ST officials. In short run, people may find brokers in all bank areas who will in nexus with bank officials help in getting sanction of  loan from branches of banks and then another team or same team of brokers will help in getting rid of repayment or getting heavy discounts and that too in collusion with bank officials of the branch concerned or bank concerned.

For last three decades politicians of the country used banks for their political advantage. Politicians like Devi Lal and V P Singh master minded loan waiver culture and then other politicians followed the suit for their political advantage. These politicians not only advocated loan waiver culture but also built pressure on banks to grant fresh loan to loan defaulters so that total credit of the bank does not fall short of allotted targets. Politicians came out with loan write off scheme in nexus with RBI and now management of banks are themselves indulged in such suicidal acts in some form or the other. 

Now only God can save these Public Sector banks. Top officials of PS banks are taking such suicidal steps to brighten their own career. But the million dollar question is who has given them right to sacrifice bank's money which is public property. Is there anyone who can stop it? It is public money which is being sacrificed by selfish bankers to make their own wealth and own career.

If you are a banker or an official to regulate and monitor banks  or an auditing or inspecting official or an investor in bank shares ,you should  read the article which appeared recently in Reuters,

There is an established practice in almost all coooperative banks to keep the loan account EVERGREEN. To Illustrate and to make it more clear :   say a bank  disburse a loan of  Rs10000 to a farmer and the account become overdue after a year or two , the same bank sanction a loan of Rs20000 or Rs.30000 which enable farmer to repay first loan and avail only extra loan . In the same way banks use to sanction inflated loans to same defaulting borrowers year after year which keep the account always standard.

During the course of time, public sector banks have also learnt the art of keeping  the loan account evergreen. They have many tools in their clever brain to keep assets of bank always standard.

First and foremost is the  restructuring or rephasing of loan on flimsy ground and second to give additional loan to repay overdue loan.

If even after such self deceptive acts ,banks fail to keep the account in standard category they feed wrong information in CBS system so that such accounts may not be identified as NON performing asset in the exercise of identification of the system driven NPA.

Then they try to prevail upon team of auditors to help them in hiding bad assets from the balance sheet.

Next better option is to sell the bad loan to ASSET RECONSTRUCTION COMPANY known as ARCs at discounted rate without caring for loss bank has to suffer and ultimately investor has to suffer by such unhealthy actions.

Lastly they have option to write off the loan or sacrifice major portion of overdue loan which again adversely affects the bottomline of the bank and is indirectly a cheating treatment with investors and employees whose earnings depend on health of bank.

Bankers seldom make efforts to strike at the root cause of rising volume of bad assets. And neither owners of banks have got time to nip in the bud.

Prudent bankers who are apt in art of keeping assets evergreen and standard , who know the art of managing auditors and concerned officials at various offices may only become ED or CMD of a bank .One who preach sermons to others but do not follow, one who can deliver good speech , who can manage boss and keep him happy by hook or by crook may only get the chance in promotion.

In our country none is bothered of real health of the system, real health of the organization and real welfare of common men ,but everyone is busy is dressing and decorating the outer appearance attractive .And this is the root cause that an institution or a country all of a sudden lands in unmanageable crisis.

Only CBI inquiry and deep rooted investigation of what is going on in these banks for last several years and then punishment to those who propagated bad culture of serving self interest at the cost of bank’s interest may only help in correcting the evil culture. 

Otherwise government will continue to cry and bank officials will continue to put lame excuses for growing sickness and weakness in the system. They may change the name of policy or frame new policy but fail to executing them in true spirit. I can say that Old wine in new bottle will continue to rule and ruin the country as well as these banks.

Ultimately bank staff, depositors, investors and finally Indian citizen will face the losses in form of taxes or deficiencies in services..

Takeover Bad Loans

Bankers seek bad loan takeover-Hindustan Times--( Read My opinion given below)
India’s top financial sector executives on Tuesday asked the government to set up a national behemoth that would consolidate bad loans to clean up bank balance sheets, more tax breaks to encourage household savings and sale of stakes in Life Insurance Corp (LIC) by listing it on exchanges

"There were some suggestions on setting up of 'National Asset Management Company'," financial services secretary GS Sandhu said after the pre-budget meeting with heads of banks and financial institutions with finance minister Arun Jaitley.

Bankers also asked the government to raise the exemption limit under Section 80C of the Income Tax Act from the current Rs. 1 lakh, which has remained unchanged for a decade and its real value has declined sharply.

The proposed Asset Management Company will take over large non-performing assets (NPAs) of banks and help in reviving companies ridden with bad debts.

Gross NPAs — shorthand for loans that could turn bad — of Indian banks have soared from Rs. 69,000 crore in 2009 to an estimated Rs. 2.8 lakh crore as on March 31, 2014. Between October and March, an estimated Rs. 60,000 crore of bad assets — about 15-20% of overall NPAs of banks — came up for sale, which is almost four-times of last year’s level.

"There was discussion on NPAs. There was also proposal for setting up of National Asset Management Company for improving the performance of DRTs (debt recovery tribunals) to collect loans," HSBC India country head Naina Lal Kidwai said after the two-and-half hour long meeting.

Suggestions were also made for strengthening of present SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act) to ensure fast recovery of bad loans, she said.

Kotak Mahindra Bank managing director Uday Kotak said the government should consider listing of insurance behemoth LIC over the next few years. "Over the next few yeas the government should seriously consider listing of LIC. The kind of money government can raise by listing LIC is significant, it can fund financial needs of public sector banks as well as fiscal deficit," he said.

"This necessarily need not be in July Budget, but over the next few years. Listing of LIC may be a game changer in financial sector."

Public sector banks requested government for capital infusion and long-term instrument for financing infrastructure sector
Link HindustanTimes

My Opinion on formation of NAMC  or ARC or Suggestion to Government for take over of bad loans are as follows..

Clever officials of public sector banks are silent on causes of bad debts. They do not want CBI inquiry to find out whether there was any corruption involved. They want that government should take over bad loans so that they may get fresh opportunity of earning bribe and costly gifts in lieu of fresh sanction of loans. If bad loans are takeover by Government or transferred to proposed National Asset Management company or sold to ARC, this will lead to bad culture and bankers will feel exonerated from all future charges and without any hesitation indulge in more and more corruption.

It is remarkable to point out here that after the introduction of loan waiver culture by politicians like Devi Lal and VP Singh and then perpetuated and promoted by all subsequent government , borrowers have willfully and strategically become  careless in repayment of loans . Borrowers willfully delay in repayment in anticipation of loan waiver scheme by the government or settlement offer by management of bank. Borrowers with malicious intention of grabbing bank's money first turn defaulters and then pray for compromise and sacrifice.

Again it is good and desirable  to point out here that businessmen whose trade promotes black money also willfully and intentionally  evade tax payment in anticipation of Voluntary Income Disclosure scheme offer by the government.Once government start punishing tax defaulters and tax evaders , instance of tax evasion and creation of black money automatically get reduced. Once terror is pushed into the mind of evil doers , the habit of indulging in bad practices will end .

As long as government do not take stern action against erring borrowers, erring bankers , erring officials, erring businessmen , erring politicians and professionals, we may not dream of good governance and honest culture. People commit crime and wait for exoneration by manipulation. Honesty is no more a good policy. 

Dishonesy, flattery and manipulatory tactics are the tools which helps in acquisition of power, money and social status which not only helps criminals getting rid of punishment but also ultimately lead to success at the cost of really good performers .

Scam occurs in implementation of almost all schemes , all projects and all departmental works. Whenever scams are exposed, government change the name of policy , set up a committee to suggest new name of policy and finally exonerate all evil doers . Similarly bankers first created and accumulated bad loans and now when they are exposed the want government to takeover bad loans. They suggest government to absolve them from the lens of CBI and CVC.

I do not say all bad loans are due to evil intention of loan sanctioning officials .^There may be some cases of default due to genuine reasons too.  But what I mean to say that whenever there is doubt  of evil motivated loaning, there must be through investigation and if malicious intention is proved beyond doubt  , the officials must be punished to teach lesson to others and to pave way for good governance.

I have no doubt in saying that present and decade long  dirty culture rampant in banking and other government offices helps in further promotion of dirty culture. Therefore government will have to learn punishing evil doers. And once the punishment is awarded to evil doers, none will dare commit crime in future and good culture will replace bad culture for ever. I do not want to promote reign of terror but I want that good performers must be given due respect if India has to grow in real sense.