Bank's Achhe Din Are Yet To Come

Banking industry yet to see achache din: Andhra Bank chief-Hindu Business Line-30.01.2015 ( my comments given below)

Andhra Bank, the mid-size public-sector bank whose home turf is Andhra Pradesh-Telangana, has been struggling with a large-size bad loan volume. The NPA situation is so bad that some employees’ unions had gone to the extent of staging dharnas in front of the defaulters’ offices. One union now plans to march to the residence of a Telugu superstar who owes the bank ₹40 crore! At a whopping gross NPA of 6 per cent, Andhra Bank has the sixth largest bad loan stockpile among the banks and rumours have been afloat that it would be merged with Bank of Baroda or some other bank.

 

CVR Rajendran, Chairman and Managing Director, said the splitting of Andhra Pradesh had taken a huge toll on the bank’s health. In an interview with BusinessLine, Rajendran, who will be retiring soon, says achche din is yet to come to the banking industry. (My Comment : He is retiring very soon and now  only he will tell the truth, As long as one is in service he remains to be number one Yesman of Minister to survive ))

Excerpts:

When the Modi Government took over, many bank chiefs were positive that its pro-business orientation would help reduce public sector banks’ NPAs in three months. Has achche din come to the banks yet?

 

We are all a little disappointed. The government is not as quick in making economic policy changes as we had expected. Maybe, it is making long-term policies. But you must remember that the PV Narasimha Rao Government had taken all the key economic decisions in its first 100 days. These policies changed India’s economy.

As a banker, when do you expect the economy to make a turnaround?

 

My guess is, one year. There are a lot of favourable factors that can help the government take critical decisions on key economic issues. The oil price is less than a half of what it had been. The current account position is comfortable. Global attitude to India is positive. And, the government has a majority in the Lok Sabha.

You attended the Gyan Sangam of public sector banks held at Pune in the first week of January. What were the takeaways?

 

Again, a little disappointing. We made our presentations and the government listened. The Prime Minister wanted us to work towards building two-to-four global-size banks like China’s through mergers and acquisitions.

But he said the government would not push for it; and that the process should be market-driven. He is willing to listen.
 

There was an informal consensus against mergers and takeovers at the meeting. Most banks are in trouble now and no one is willing to take over weak banks and bear the additional liabilities. For the next two years, I don’t think there would be any mergers between public sector banks.

So, Andhra Bank is not going to be merged with another bank?

 

No, at least not for two years. If it remains weak after two years and even after the economy improves, maybe. We are going to work hard to retain our separate identity. Our employees are against merger. Our top priority now is to recover the bad loans.

How did your bank acquire so much NPAs?

 

A huge chunk of the NPA is from the infrastructure and power sectors. A large number of infra and power companies in the country are owned by the Telugu people and naturally, being the lead bank in the State, they had taken loans from us. Many of these companies are now in ICU (intensive care unit). Delay in government’s policy-making is one major reason for this. Of course, there are a lot of wilful defaulters too.

How did the division of Andhra Pradesh impact your bank?

 

The long agitation for a separate State of Telangana hit our business badly as 1,300 of our 2,300 branches are located in Andhra-Telangana States. It also fundamentally changed the credit culture in the region. Since political parties made competing loan waiver offers, borrowers refused to repay their loans. This affected farm and small loans most. We were the lead bank in the undivided Andhra Pradesh, now we have lost that status in Telangana (mainly because of ‘Andhra’ in the bank’s name).
 

But, in the long run, the split will benefit all the banks as well as the economy. There is going to be a feverish pace of development activities in both States because of their competitive development agendas.

What is your view of the Modi Government’s decision to split the Chairman-cum-Managing Director post in banks?
 

I support it because there is a lot of power concentrated in the hands of the CMD. The banks’ boards are not powerful in controlling the CMD.
 

However, the benefits will depend on who becomes the Chairman. If the Chairman, is corrupt he/she can collude with the CEO for their mutual benefits.
 

Also, if the Chairman’s post is created to accommodate a retired IAS officer or a ruling party politician, the situation will be worse.
http://www.thehindubusinessline.com/industry-and-economy/banking/banking-industry-yet-to-see-achache-din-andhra-bank-chief/article6835351.ece

PSU banks’ NPAs rise to Rs 2.16 lakh cr-The Statesman 30.01.2015
Mumbai, 29 January: The non-performing assets of nationalised banks increased sharply from Rs 9,190 crore in 2011-2012 to Rs 2,16,739 crore in 2013-2014, according to the Reserve Bank of India.

Former journalist Mr Ketan Tirodkar obtained this data from the Central bank under the right to information.

Mr Tirodkar has filed a public interest litigation in Bombay High Court seeking a CBI investigation into what he terms “an NPA scam”.

The High Court had, in March last year, directed the CBI to inform what action it had taken against 140 cases of fraud registered by the RBI in connection with the NPAs of nationalised banks

My Comment on above news is as follows: 

This refers to quarterly result of a few PS banks booking lesser profit and greater NPA in quarter ended December 2014 compared to past quarters. Keeping in view NPA position of banks, , CMD of Andhra Bank has also expressed his opinion candidly in an interview that position of banks is not likely to improve very soon and Achhe Din are yet to come. His has to retire very soon and hence some clarity has come out.As long as top officials are in service , their one and only one duty is to please ministers willingly or unwillingly.

They promise every quarter that bank's Balance Sheet will improve from next quarter as Previous Prime Minister Mr. Manmohan Singh used to say on price rise issue. When people used to cry on rising price, he used to tell them that situation will ease from next quarter. He used to dilute the intensity of angry people by saying that economy of the country is in control and in good condition and all possible efforts are being taken to contain rising prices.

Similarly in Public sector banks, Non Performing Assets has been rising every quarter and it will continue to rise quarter after quarter. And after bad quarterly result, CMD of each bank says that bad debts will be contained from next quarter and soon they will improve.

In one quarter they somehow or the other manage the data but in next quarter they declare some bad debts. This hide and seek policy has been in play since long. In every quarter , some bank will declare bad debts and book lesser profit or loss and in next quarter some other bank will book greater profit and improvement in NPA position. This vicious circle will never end. NPA of PS banks have crossed two lac crore in March 2014 and will undoubtedly cross 5 lac crore in March 2016 if RBI does not change the policy of  NPA and that of restructuring to please Crying CMDs and to please Modi Sarkar who are building pressure for more and more lending .

In my view , no power on earth can stop rising trend in NPA  without manipulation or without changing the norms of NPA. I have been of this view for last several years and I may be termed as negative minded by extremely positive minded person or by Yesman of the system. But sooner or the later reality precipitates and surfaces out in open.

We have seen the fate of many banks in the past , not only weak banks but also so called strong banks. I do not blame United Bank or Uco Bank or Central Bank or Allahabad Bank, Indian Bank or Indian Oversea Bank. Even banks considered as strong banks like SBI, PNB, Union, Oriental bank are gradually exposing their hidden sins. A bank used to be strong not because of inherent quality asset but due to clever mind of top officials of that bank who had so many fraudulent tools to conceal bad assets quarter after quarter. This is why , many times bad result comes out only after retirement of a Clever CMD. This has happened in SBI, PNB, Union Bank, Oriental, United , Central Bank, Indian Bank , IOB , Vijya Bank and other banks so many times.

Unfortunately neither RBI nor Ministry of Finance ever took the trouble to know why and how a CMD conceals Bad debts and how another declares it after former retires . Even if some audit is carried out for doing some SHOW business, the auditors is so chosen that he or she submits favourable report or the bad report if submitted is put under carpet to save top officials of the bank who have very excellent relation with top RBI officials or politicians. System has been bad since long. It is not that a few top officials are corrupt , but the corrupt officers at top post one after other has damaged the entire system and there is none to change the system. Now corruption has become the system and the culture of the bank.  Good officers in such case avoid taking promotion or taking higher responsibility and bank thus run by mostly bad officers or inexperienced officers.

The reign of flatterers and bribe earners is not going to end as long as drastic steps are not taken to correct the culture from its source , from its origin and until  a few from each bank are punished ,irrespective of the fact that he is in service or retired. Message of good or bad governance percolates down from top and not goes up from bottom. Unfortunately for every fault of top officials or ministers , blame goes to juniors and sometimes to middle management officials who had little role either in sanction of loan or in monitoring of loan or in account turning bad.

It is bad luck that inspecting, auditing, vigilance and all Regulating agencies are birds of same feather and hence they all avoid taking any punitive action against erring officials and try to pass the time or postpone taking decision on files related to corrupt officials. Actions are taken against some officers who do not have any Godfather backing him. There is deep rooted and strong unity among bad officials in all organisations specially in banks where good officials treat it better to keep mum and remain away from mainstream.

FE Best Banks awards: When the going gets tough, these people get going-Financial Express

It was a tough year, one that most banks would not like to recall — a time when the economy had slipped into a slowdown, quality assets were scarce and more loans were turning toxic. But amidst the gloom of 2012-13, a few banks showed they could rise to the task and come through with flying colours.

And it’s to these eight banks that The Financial Express will raise a toast on Friday. Giving away the FE Best Banks awards at a glittering ceremony in the country’s financial capital will be Jayant Sinha, union minister of state for finance. Also present on the occasion will be Maharashtra chief minister Devendra Fadnavis.

The FE Best Banks awards are the most coveted in the banking space with banks vying with one another to own one. For 2012-13, HDFC Bank walked away with the prize in the new private sector banks category while Bank of Baroda (BoB) was at the top of the heap in the public sector banks category.

HDFC Bank also picked up a couple of awards for profitability and efficiency. As always, Aditya Puri, managing director, accepted the announcement with his usual equanimity. “We’re more optimistic now than ever before about the future,” Puri remarked.
Ranjan Dhawan, executive director, BoB, told FE his bank was highly honoured to be recipient of the Financial Express award.

Ravneet Gill, chief executive, Deutsche Bank, adjudged the winner among foreign banks, said he was delighted to win an award from a publication as highly admired as The Financial Express. “The award is a recognition of Deutsche Bank’s sustained and unwavering focus on clients, product innovation and principled growth,” Gill said.
Rana Kapoor, MD & CEO, Yes Bank, runner-up among new private sector banks, endorsed the prestige the survey carries with it. “Yesbankers are pleased to win this coveted recognition from The Financial Express which reinforces Yes Bank’s growing stature as a leading Indian private sector bank,” Kapoor said.

HS Upendra Kamath, MD & CEO, Tamilnad Mercantile Bank, also expressed his delight. “We are happy to receive this award from a prestigious institution like Financial Express this year as well,” Kamath said.

K Venkataraman, MD & CEO, Karur Vysya Bank, said it’s been a great honour to receive this award for the fourth year in a row. “In the tougher environment, getting continuous recognition gives satisfaction to all of us the in bank,” Venkataraman said.

The Financial Express has always taken care to ensure the survey is a fair one. Since numbers play a big part in the methodology, consultancy firm EY makes sure the weightages assigned to various parameters are relevant. Given the criteria are tough, only the very best make the cut.

Among others who rose to the challenge, this time around, are HSBC, which won for strength and soundness, BNP Paribas, which was ranked number one for credit quality, and Bank of Maharashtra, which picked up an award for growth.

Oriental Bank of Commerce Q3 net down 91.3% at Rs 19.56 crore-Businss Standard

The bank had posted net profit of Rs 224.3 crore for the October-December quarter of 2013-14

 

Public sector lender Oriental Bank of Commerce (OBC) today reported a 91.27% decline in net profit at Rs 19.56 crore for the third quarter ended December 31, 2014, dragged by higher provisions.

The bank had posted net profit of Rs 224.3 crore for the October-December quarter of 2013-14, OBC said in a BSE filing.

OBC's total income rose by 7.79% to Rs 5,458.79 crore during the October-December period from Rs 5,063.98 crore in the same period last year.

During the quarter under review, the bank's provisioning other than tax and contingencies jumped by 57.75% to Rs 885.14 crore from Rs 561.1 crore in the same quarter of the previous fiscal.

The bank's gross NPAs increased to 5.43% at the end of third quarter from 3.87% in the corresponding period in the previous year.

Shares of Oriental Bank of Commerce were trading at Rs 292.70 apiece, down 6.49% from its previous close on the BSE.

Union Bank slips on poor results-Hindu Business Line 28.01.2015
January 27, 2015:  

The stock of Union Bank of India slipped 7 per cent on Tuesday, after the company delivered disappointing results for the December quarter. The bank’s net profit fell by 13 per cent over last year, primarily driven by increase in employee cost and provisioning on bad loans.

 

The bank’s advances grew by a subdued 8.9 per cent during December, lower than the industry credit growth of 10 per cent during this period.

 

Credit growth

Aside from a slower credit growth, rise in bad loans, which is now 5 per cent of loans, up from 4.69 per cent in the September quarter, also impacted the bank's earnings. With restructured assets, another 5 per cent of loans, the bank’s stressed assets have been weighing on the bank’s capital base.

 

Union Bank of India has a tier I capital of 7.3 per cent (6.5 per cent norm) as of December 2014, stretching it thin. The return on equity is an abysmal 6.6 per cent down from about 8.3 per cent in the previous year.

 

Net interest margin

The bank’s net interest margin, which has been under pressure, is likely to face further stress as the bank lowered its base rate by 25 basis points after the RBI’s policy rate cut on Januay 15. The yield on loans is already down 10 basis points sequentially in the December quarter

PSU banks under pressure post Bank of Baroda Q3 results; CNX PSU Bank index tanks 6%

BOB, SBI, PNB, Canara Bank, Andhra Bank, Oriental Bank, Union Bank, BOI and IOB were down 4-14% on NSE

Shares of Bank of Baroda plunged 14% to Rs 186 after reporting a sharp 68% year on year (yoy) drop in net profit at Rs 334 crore for the third quarter ended December 31, 2014 (Q3), due to higher provisions for stressed loans and tax provisions.
The government-owned bank had profit of Rs 1,048 crore in a year ago quarter.

Net interest income (interest earned minus interest expended) however grew 7.5% at Rs 3,286 crore on yoy basis.

Analysts on an average had expected profit of Rs 1,329 crore on net interest income of Rs 3,626 crore for the quarter.

The provisions for bad loans increased by 66% at Rs 1,262 crore against Rs 762 crore in previous year quarter, Bank of Baroda said in a statement.

The bank’s net non performing assets (NPA) as a percentage of net advances were at 2.21% in December quarter, from 1.74% in September quarter.
Read also Government Plan for Merger of Banks and Idea Of Low Interest Regime

RTI For NPA In Banks

Over Rs 3,350-cr worth NPAs with Union Bank of India-Economic Times

NEW DELHI: Union Bank of India has Non- Performing Assets (NPAs) worth about Rs 3,350 crore from 20 defaulters.

Replying to an RTI query, the bank, however, declined to share the names of the defaulters citing "commercial confidence".

"List of the borrowers cannot be provided as they are of commercial confidence and exempted from disclosure under Section 8(1)(d) of the RTI Act.

"We inform you, however, that the amount involved in the top 20 NPA accounts as on December 31, 2013, is Rs 3,350.17 crore," the bank said.

The Section bars making public of information related to commercial confidence, trade secrets or intellectual property, the disclosure of which would harm the competitive position of a third party.

Exercising his Right to Information, Venkatesh Nayak had sought details of the top 20 borrowers responsible for NPA from five banks, including Union Bank of India.

The other four -- State Bank of India, Bank of India, Central Bank of India, Indian Overseas Bank declined to share information on the amount of NPAs and list of borrowers.

"The information cannot (be) provided as it is related to third party personal information and held by the bank in fiduciary relationship and exempted from disclosure," SBI said in its response to the RTI application.

BoI, too, cited the "third parties" clause to deny information on defaulters.

Central Bank of India said the information cannot be provided as it comes under "commercial confidence and personal information of the borrowers, which is exempted".

IOB said the information and details of the top 20 NPA borrower accounts with various details as to the property secured for the loans or credit limits sanctioned and value of such properties "formed the commercial confidence and is held in fiduciary relationship".

"The disclosure of information amounts to invasion of the privacy of the constituents and exempted," IOB said.

Nayak had earlier this year filed another set of RTI applications with Bank of Baroda, UCO Bank, Canara Bank, Punjab National Bank and State Bank of Mysore seeking the names of defaulters and details of NPAs.

The information was denied by all five banks. "It is public money and depositors have all the right to know about it. The NPAs are being restructured. The names should be put in public domain. ..

 Link Economic Times

BEFI Blames Bank Management

'Govt, bank mgmts not making serious efforts to recover NPAs'---Business Standard-27.97.2014

The Bank Employees Federation of India (BEFI) today came down heavily on the central government and the bank managements over accumulation of Non-Performing Assets (NPA) to the tune of Rs 2 lakh crore. 

Speaking at a state-level summit here, BEFI General Secretary Pradeep Biswas said, "There are no serious efforts to recover the banks' money with the defaulting big corporates. Their assets should be confiscated." 

"Our data also suggest that Rs 50,000 crore NPA is related to big borrowers who have borrowed over Rs 10 crore and above. Why are the banks silent over this? This is public money," he added. 

The BEFI, he said, will also launch a campaign across the country next month to create an awareness about the dangers of privatising PSU banks. 

"The limit of private shareholding in nationalised banks has been raised to 49 per cent. Now the private shareholders are demanding proportionate voting rights equal to their stake, which was earlier limited to just 1 per cent and then increased to 10 per cent. This is a very dangerous trend and is an indication that they want to establish their control over banks," Biswas said. 

He further said the Indian banking industry survived through the global crisis when huge multi-national banks failed because they were not in private hands. 

The BEFI summit also decided to agitate over pay and pension related issues in the coming months. It will demand 25 per cent salary hike for the employees and improvement in pension and family pension in tandem with the inflation rates.

Bring in necessary legislation to prevent default: BEFI-23.07.2014

There was an urgent need to bring in new legislation or necessary amendment to the existing Act for timely recovery of loans extended by nationalised banks so that huge NPAs can be prevented, Bank Employees Federation of India said today.

Releasing the list of defaulters of repayments of loans in various banks, numbering 1,129 Corporates and industries, amounting to nerly Rs 54,000 crore since 1991, R Maheswaran, Central Committee Member, BEFI, told reporters that this was the need of the hour to save the public sector banks.

In the absence of a stringent law, as the defaulters moved to court and obtain stay, the Government should bring in new legislation or make necessary amendments to existing Act, so as to prevent the NPAs in the Banks, which otherwise would not survive for long, Maheshwaran said.

The improper recovery system had resulted in two major public sector banks running into huge losses, he said.

Why Public Sector Banks Are Sick

Inspite of all efforts said to have been taken by Reserve bank of India and Ministry of Finance, stress assets in public sector banks are relentlessly increasing. Every quarter some bank of the other exhibit rise in bad debts and fall in profit. In the quarter ended June 14 some banks like PNB, Indian Bank, Allahabad bank have already declared bad results. 

Only difference is that some officials of some banks are clever and some are less clever. Some banks get success in concealing bad debts in March Quarter and some others in some other quarter. Some banks are expert in art of hiding Non Performing Assets by adopting the process of evergreening of loan and some other are apt in process of restructure, reschedule and rephasing the bad loan so that it remains in standard category. Some other banks are selling bad debts to Asset Recovery Companies and some other banks are sacrificing good money of banks by giving extraordinary discounts to bad borrowers to recover the money and some others think it wise to write off bad loans.  

None of the bankers are interested in real improvement of quality of lending and effective steps for recovery of dues form bad borrowers,  , I say none because majority of top officials are bent upon simply hiding the bad loans by applying easy tools so that they may win the heart of clever politicians. Government of India or governments of states are little interested in recovery of loans from bad borrowers because they focus only on credit growth, rightly or wrongly. Politicians are themselves beneficiary of bad loans directly or indirectly and hence they do not like to have strong legal action against bad borrowers. 

This is why officials in judiciary and in administration or in Debt Recovery Tribunals show casual approach towards recovery and hence cases against bad borrowers do not result in real recovery. There is sharp rise in bank cases for recovery pending in various courts. Officials believe in peace process or you may say postponement of remedial measures so that they may retire from banks peacefully without facing any penal action. Bad borrowers who have taken crores of rupees in loan and who are not willfully repaying the dues lead luxurious life, change their firm's name or start business and lastly declare them bankrupt. 

Bank officials or RBI officials do not like to nip in the bud , they willfully and strategically delay the process of recovery and during this delay period , borrowers manage their assets and discover ways to safeguard them from bank's action. Two to three decades ago United bank, Indian Bank and UCO bank were identified as bad banks and there news of merging them with other stronger bank. But clever politicians in nexus with clever bank officials manipulated Balance sheet of these banks and kept the bank as standard. Now after two decades symptom of sickness are again surfacing not only in these three banks , but almost in all banks, even in so called strong banks like State Bank, Punjab National Bank, Bank of India and so on. 

If forensic audit of all these banks are carried out honestly, I think greater scam will come on the surface. Fraudulent activities are persistently and consistently going on in recruitment, promotion, lending, developing infrastructure, opening of new branches, opening of new ATM etc will come to light and people of India as well as bank staff who are denied wage hike for less profitability of banks will also understand the ground reality of banks.

There is not only mismatch in assets and liabilities of public sector banks but also in Human resource of these banks. Liquidity problems of these banks are self created problem. They mobilize short term fund to lend in infrastructure projects. They lend money to write off or to sacrifice bank’s fund in compromise. It is only public money which is sacrificed on the altar of self-oriented motives.

Some banks although book profit but they are unable to earn profit which they should earn in real sense. Profitability is on continuous downfall trend.

Similarly these banks recruit bank staff sometimes in scale I and sometimes in scale II and scale III. It means they are using liberty to give benefits to some officers and deprive others of rise in career. 30 years experienced officers are paid same salary as three year old officer. This happens in these banks only. Officers are not getting promotion in thirty years and some officers are getting promotion in three years. This mismatch has damaged the fundamental work culture and promoted flattery and bribery culture and this bad culture as a matter of fact forms the root cause of downfall of these banks.

RBI conducted forensic audit of United bank and that of Allahabad bank a few months ago, but the outcome is not known to common men of India. Every report is managed and manipulated as per whims and fancies of politicians. This is why system does not change; only new rules and policies are framed. Old wine in new bottle has become the working style of bank, politicians and Government as a whole. Neither judiciary nor administration nor police officials nor CBI and CVC nor auditing officials can function honestly and devotedly for the sake of growth of India.

It is quite evident from news appearing in Newspaper pertaining to United Bank and ongoing forensic audit , that health of United Bank of India is now critical and RBI has thought it better to keep it in ICU (Intensive Care Unit) by stopping new loans. 

It is though too late for RBI and Ministry of Finance to understand and realize the deep rooted mess prevalent in United Bank in particular and in all public sector banks in general. Still RBI is not ready to understand that health of almost all banks is almost similar to United bank .They do not want to attract the displeasure of corrupt ministers who appointed corrupt officials as ED and CMDs of the past.

 Only difference is that case of UBI is exposed by unbiased and bold CMD of the bank whereas CMDs of other banks are still hesitant and timid to declare their real volume of bad assets .It is because majority of them know that it is only the top officials of these banks who sanctioned high value loans to serve their vested interest willfully sacrificing the interest of the bank as also that of bank staff.

 RBI should at least now call the explanation of past EDs and CMDs of United Bank to know why they failed to stop rise in bad assets and why they continue to loot or allow the loot in the bank in the name of credit growth and to please the ministers and politicians. 

Will RBI now at least  fix accountability on top officials as also on ministers and RBI officials who  were indirectly involved and indulged in reckless lending and careless monitoring of credit made by them. 

Will RBI now ask retired ( or those who are posted in other bank now)  EDs and CMDs why they concealed bad debts for years together? 

It is to be noted here that NPA which are now coming on the floor are not newly created NPA but simply exposure of NPA hidden willfully for years and decades. 

Even now it is open secret that majority of bankers are unethical evergreening process to keep bad debts in standard category. By their dirty tools CMD and EDs of every band used to project attractive balance sheet and win the hearts of Minister but spoil the future of all including bank staff, bank customers and investors in the bank.

It is very easy to penalize junior and middle level officers of the bank and deny bank staff their right of respectable wage hike but it is very hard to accept the truth and punish the real guilty top officials of the banks as also of the government. I condemn FM who holds bank staff responsible for rise in bad debts and for fall in profits of the banks and then deny bank staff a respectable wage hike saying that entire profit of banks cannot be given in wage hike. FM should introspect to find out who are real culprits for fall in profits of the banks.

Last but not the least 

Are politicians not responsible for polluting and damaging the credit discipline and repayment culture in banks by using Loan Melas and then by advocating write off and compromise to enhance their vote banks? 

It is only politicians who are primarily responsible for the current poor health of banks. When protectors become destructers ,none can save banks from further damage.

Great writer late Munsi Presmchand said long ago   

"jab rakshak hi bhakshak ban jaye to vinash nischit hai"

Also Read

special audit of Allahabad bank

RBI curtails powers of United bank

RBI fines 12 banks Rs 1.5 crore for Deccan Chronicle default-Times of India

MUMBAI: Reserve Bank of India has fined 12 banks Rs 1.5 crore ​​for not following proper guidelines in advancing loans to the Deccan Chronicle group which has defaulted to the extent of Rs ​4000 crore.

​The Reserve Bank had carried out a scrutiny of the loan and current accounts of Deccan Chronicle Holdings Ltd., in certain branches of these banks in late 2013. Based on the findings of the scrutiny, the Reserve Bank issued show cause notices to these banks in March 2014, to which the individual banks submitted written replies. " After considering the facts of each case and the individual bank's reply, as also, the personal submissions etc., by some of the banks before its Committee of Executive Directors, the Reserve Bank came to the conclusion that some of the violations were substantiated and warranted imposition of monetary penalty," said RBI in a statement.

The 12 banks that have been fined are Andhra Bank (Rs 10 lakh), Axis Bank (Rs 15 lakh), Canara bank (Rs 10 lakh), Corporation Bank (Rs 10 lakh), HDFC Bank (Rs 5 lakh), ICICI Bank (Rs 40 lakh), IDBI Bank (Rs 15 lakh), IndusInd Bank (Rs 10 lakh), Kotak Mahindra Bank (Rs 10 lakh), Ratnakar Bank (Rs 5 lakh), State Bank of Hyderabad (Rs 10 lakh), and Yes Bank (Rs 10 lakh)as determined above.

What was unusual about the loans was that these advances were not backed by enough security. The mortgaged assets are expected to fetch a third of the loan exposure. Secondly, most of the lenders were unaware of the extent of leverage by the company and the exposure of other lenders to the group. Sources said that RBI was shocked that advances were made by lenders without speaking to each other.

​T​his action is not intended to pronounce upon the validity of any transaction or agreement entered into between the concerned bank and the borrower the central bank said.​

​In July, Canara Bank, which has an exposure of Rs 350 crore to Deccan Chronicle, said that the company's promoters had approached the bank for restructuring. However the bank had asked for a one-time settlement as the promoters might not be in a position to meet the huge funding requirement.
Last year the Central Bureau of Investigation had filed a case of cheating, fraud and criminal conspiracy against Deccan Chronicle Holdings chairman T Venkattram Reddy, vice-chairman and managing director T Vinayak Ravi Reddy , vice chairman PK Iyer as well as the company's auditors CB Mouli & Associates.

Bad loans take a toll on AllBank net--The Telegraph

Calcutta, July 25: Public sector Allahabad Bank has reported a 72.71 per cent dip in net profit at Rs 112.7 crore in the first quarter ended June.

Net profit stood at Rs 413.09 crore in the same period a year ago.

The city-based lender’s bottomline was dragged down by a sharp rise in provisioning to offset an increase in bad loans.

Profit from treasury operations was also lower at Rs 203.31 crore against Rs 206.54 crore in the same period a year ago.

The bank’s total provisioning during the quarter stood at Rs 851.94 crore against Rs 445.50 crore in the year-ago quarter.

Gross non-performing assets (NPA) increased to Rs 7,619.06 crore from Rs 6,164.47 crore a year ago. Gross NPA, as percentage of advances, was 5.48 per cent against 4.78 per cent a year ago.

Net NPA stood at Rs 5,271.74 crore against Rs 4,921.74 crore. Tax expenses increased to Rs 254.87 crore from Rs 163.33 crore in year ago period.

Net interest income — the difference between interest earned and interest spent — increased 22.7 per cent to Rs 1,609.7 crore from Rs 1,312 crore in the corresponding year-go quarter.

As a result, the capital adequacy ratio under Basel II norms declined to 10.25 per cent from 11.07 per cent a year ago. According to Basel III norms, the ratio fell to 9.99 per cent from 10.60 per cent.

At the end of the quarter, the bank’s total business grew 4.24 per cent to Rs 3,22,231.19 crore.

There was a rise in credit to both agriculture as well small scale industries. Credit to the agriculture sector grew 30.54 per cent to Rs 23,243 crore from Rs 17,805 crore a year ago. Loans to the retail sector stood at Rs 19,635.72 crore against Rs 17,757.87 crore .

Chairman and managing director Rakesh Sethi had identified these sectors as the focus areas in the absence of lack of appetite for loans from the corporate sector.

The bank is planning to achieve a total business of Rs 3,80,000 crore by March 2015, a growth of 14.54 per cent.

The Allahabad Bank scrip today ended at Rs 118.75, an increase of 1.28 per cent over the previous close on the BSE

Public Sector Bank Profit Fall NPA Rise

State-run banks' profitability remains under stress-Business Standard

Rise in bad loans, higher provisioning and loss on sale of investments have dragged down their earnings growth

State-run banks' profitability in the first three months of this financial year have remained under stress. A rise in bad loans, higher provisioning and loss on sale of investments have dragged down their earnings growth.

Four public sector banks - Allahabad Bank, Indian Bank, Punjab National Bank (PNB) and UCO Bank - announced their first quarter earnings on Friday. Of these, two reported year-on-year decline in their profit after tax; the other two saw moderate growth in net profit.

PNB

PNB said its net profit for the quarter ended June increased by 10 per cent from a year earlier to Rs 1,405 crore. However, there was a sharp rise in non-performing assets (NPAs). The gross bad loan ratio deteriorated to 5.48 per cent from 4.84 per cent a year earlier, while its net NPA ratio was up four basis points to 3.02 per cent at the end of the quarter.

"NPAs continue to engage our attention in the current environment. An improvement in economic situation will probably help us better our asset quality. We are hopeful that our next NPA number will be better," said K R Kamath, chairman and managing director, in his post-earnings comments.

UCO Bank

Kolkata-based UCO Bank saw its April-June net profit rise only two per cent over a year, to Rs 521 crore. While the lender was able to improve its asset quality, lower treasury income and higher tax provisions limited its earnings growth.

"We have been conserving capital, acquiring assets cautiously and focusing on the retail banking business. We have been improving our asset quality for the past few quarters. But a drop in profit on sale of investments impacted our operating profit. Also, the bank coming out of the purview of MAT (Minimum Alternate Tax) and having to pay Rs 163 crore income tax in the quarter impacted our net profit," said Arun Kaul, chairman and managing director.

Allahabad Bank

Allahabad Bank's net profit fell 73 per cent from a year earlier to Rs 113 crore. "One large account, of Rs 400 crore, slipped into NPA during the quarter. Also, we had to make Rs 460 crore provisions against one account, which is a standard asset for us but has become an NPA for other consortium lenders. These factors resulted in a decline in our net profit," Rakesh Sethi, chairman and managing director, told Business Standard.

Indian Bank

Chennai-based Indian Bank saw its net profit fall 35 per cent to Rs 207 crore during the quarter. T M Bhasin, chairman and managing director, said in the corresponding period of previous year there was an 'exceptional gain' of Rs 314 crore, reduced to 36 crore in the first three months of this financial year. "In the next quarter, as the market conditions improve, we would be able to perform better on this count," he said

Link Business Standard

NPA IS A Matter Of Concern

Growth of bank non-performing assets is a cause for concern: Economic Survey-Fin Exp

The four-fold rise in bad loans over the past two years, mainly of public sector banks is a matter of concern and steps are being taken to improve the situation, the Economic Survey said.

"During 2012-13, the deteriorating asset quality of the banking sector emerged as a major concern, with gross NPAs (non-performing assets) of banks registering a sharp increase...Growth of NPA is a cause for concern," the Survey tabled in Parliament by Finance Minister Arun Jaitley said.

The bad loans of public sector banks were at 4.4 per cent in March 2014 compared with 2.09 per cent in 2008-09, it said, adding, the gross NPA increased by almost four times from March 2010 (Rs 59,972 crore) to March 2014 (Rs 2,04,249 crore).

Increase in NPAs of banks is mainly accounted for by switchover to system-based identification of NPAs by PSBs (public sector banks), slowdown of economic growth, and aggressive lending by banks in the past, especially during good times, it said.

Overall NPAs or bad loans of the banks, including private sector lenders, increased from 2.36 per cent to 3.90 per cent in March 2014. Increase was sharp in case of infrastructure with NPAs rising from 3.23 per cent to 8.22 per cent, it said.

Infrastructure, iron and steel, textiles, aviation and mining are five main sector that are stressed.

"The next wave of infrastructure financing will require a capable bond market."

Despite, asset quality deteriorating, the survey said the capital positions of Indian banks, including that of public sector, remained strong and above the stipulated minimum.

Highlighting challenges and outlook, the Survey said financial markets continue to suffer from illiquidity and a major objective should be to develop bond-currency derivative (BCD) nexus to equity market quality levels.

It said most households are as yet cut off from large parts of the financial system and bank-centric notions of financial inclusion have limited value.

The speed of reforms in the financial sector has not kept pace with financial innovation and the next wave of reforms will be through strengthening the laws, organisations, well designed policy decisions, consistency, and transparency for a globalised India, it said.

On financial inclusion, the Survey said it "is an important priority of the government".

To extend the reach of banking, PSBs opened 7,840 branches in 2013-14 compared to 4,432 in 2012-13, it added.

Going forward, the draft Indian Financial Code of the Financial Sector Legislative Reforms Commission (FSLRC) seeks to address the present weaknesses of the Indian financial system, and meet the requirements of the Indian economy over the coming 30 years.

PSBs can tide over ALM issues with long-term bonds: India Rating-Business Standard

Says rise in ALMs in state-run banks is due to the growing divergence in the tenors of loans and deposits

ssuing senior long-term bonds may help public sector banks correct their asset liability mismatches and also improve liquidity coverage ratio, says a report by rating agency India Rating.

"Permitting state-run banks to issue senior long-term bonds will help correct asset-liability mismatches (ALM) and provide a tool to improve liquidity coverage ratio by extending funding outflows," India Ratings said in a report today.

It also said the rise in ALMs in state-run banks is due to the growing divergence in the tenors of loans and deposits.

For the state-run banks, the cumulative negative funding gap up to one year has increased to 15.7% of assets as at end-March 2014 from below 4% in 2002.

For some banks, there is even a shortage of ready collateral that could be used to repo with the Reserve Bank in a liquidity squeeze, the report said.

The rating agency believes that the trend of rising funding gaps in the banking system is unsustainable, particularly as an economic revival may require continued bank funding for longer tenor infrastructure loans.

Senior bonds are rated at the same level as banks' long-term issuer rating in the absence of a bank resolution regime and are not treated like loss-absorbing hybrid capital, the report said.

State-run banks have easy access to long-term investors such as insurance and pension funds and hence are well placed to tap this market, the report said.

The existing guideline that permits banks to issue 'infrastructure bonds' has not found favour with investors, perhaps due to the implicit link with a sector that has been struggling to perform for some time.

Senior bonds issued globally by domestic banks have a good investor base. A similar (and possibly larger) market can be created among domestic investors, the report said.

It further said the banking system's dependence on short-term liabilities has grown to a point where refinancing pressures are hurting margins.

"This also poses unique policy challenges, including diluted monetary transmission, a persistently flat-to-inverted yield curve and crowding out corporates from the commercial paper market," the report said.

Deposits maturing within one year increased to almost 50% of total deposits in 2014, up from 33% in 2002. The ratio had dipped in 2013 after growth in advances had moderated, before rising in 2014, it said.

A significant portion of these deposits had maturities within six months and, for some banks, included a growing share of wholesale money market borrowings.

Nayak Panel Report To Cure Ailing banks

In my view Nayak panel has done nothing or suggested no such good idea which may help in the improvement of health of Public Sector banks. Panel has not fixed responsibility of erring officials and erring ministers. What they have suggested is nothing but old wine in new bottle. This is purely an attempt to hide the past mistakes of top bankers and regulators and set up a new governance committee, new board for selection of top management etc. 

It has now become clear to RBI and Government of India that they have damaged the fundamentals of public sector banks and time is ripe now for public revolt against regulators. One crystal clear point which emanates from panel report is that RBI and GOI failed to do their duty in last two decades and it is their sheer negligence which has resulted in current critical sickness of PS banks. They remained silent spectators when CEOs of banks were looting banks in the name of credit growth. They remained deaf and dumb when corrupt bankers were humiliating senior officers and workers of banks in the name of merit oriented policy for promotions, transfers and recruitment. They maintained complete silent when politicians were exploiting banks in the name of revival of economy. They were sleeping when legal set up for recovery failed to recover money from defaulters even after lapse of two or three decades.

I am of strong view that health of PS banks have gone from bad to worse during last two decades only due to bad Human resource policy and due to worst execution of good policies. If one peeps into performance and appraisal reports of all officers of last two decades , it will become crystal clear that good officers have always been neglected in all promotion processes and bad officers who were master in flattery and bribery got one after other elevation. And now gang of bad officers is ruling the banks with unity. They unitedly protect bad officers and sideline really good officers similar to case of Mr. Khemka in Harayana .

As long as workers of any organization do not feel satisfaction after doing devoted duty, there is no chance of bank improving their health whatsoever may be the finding and suggestions of Nayak Panel. It is only in PS banks that 20 year or 30 years experienced good officers are rejected and brand new officers in higher scale are recruited directly to please top bosses and politicians. Juniors are ruling seniors  not because they are more intelligent and talented ( barring some exceptions) but because they used money and powerful bosses for getting quicker promotions and got success in getting new job in higher scales.

It is this dirty game of top bankers that health of banks have deteriorated during last  two decades whereas private banks have improved their health under similar and fully same external situations like global recession or natural calamities, or interest rate freedom or recruitment freedom or government policies or legal set up etc.

Officers of PS banks work to please and protect the self interest of their bosses whereas officers in private banks work for betterment and for protection of their organization.

Anger of investors, bank customers, bank staff and that of all concerned against government is on rise due to relentless rise in stressed assets and due to government failure in containing the same and in recovery of bad loan from defaulters. Before it becomes violent, government as usual set up a panel for suggesting alternate ways and switch over the responsibility of failure to another set of body and get rid of punitive action for their past mistakes. And panel is also manned by such persons who can submit reports as per whims and fancies of the officials who are behind all stories of scams, frauds, bad debts and all types of irregularities.

It is the habit of Government; first they exploit the government organization and government fund for self interest and then change the name of the scheme and name of regulators or merge the maligned schemed to some other schemes. In the past many small banks , big banks , rural bank or cooperative banks or chit funds have failed and then merged with some stronger entity to avoid the consequences of public anger against mismanagement and large scale fraudulent activities perpetuated by the management of the failed bank.

As long as officials and the persons who hold the key post in any organization are bad and ill-motivated, no power on earth can stop misuse and pilferage of government money and no power can ensure good health of any public sector undertaking or any department. When top officials in banks are bad, assets created by them will definitely be bad and no power on earth can stop rise in bad assets of these banks. Nothing is to change if rules for constitution of bank’s board are altered or stake of government is diluted to below 50% in PS banks.

This is why they , corrupt bankers in nexus with corrupt team of politicians and regulating officials either write off the bad loans or keep bad loan evergreen by fresh lending or restructure bad loans or sell the bad loans to ARC to clean the balance sheet. All efforts are to conceal evil works and bad assets .This is a usual phenomenon in banks and in all government offices dealing with finance and money. When a bank become weak or goes beyond control, it is merged with some other stronger banks. 

It is the Habit of the government not to cure the root cause of the disease but to make lame excuses for failures or to put carpet on the malady or carry out little surgical operation to befool innocent masses.

And finally flattery and bribery culture is the root cause behind all mismanagement and all scam stories . Weak and ineffective judiciary adds fuel to fire.

Nayak report credit-positive for state-run banks: Moody’s-Hindu Business Line-19.05.2014

The rating agency said corporate governance characterised by poor board supervision and excessive government interference is a structural credit weakness of public sector banks.

The recommendations by a Reserve Bank committee to improve corporate governance structures at public sector banks are credit-positive for them, Moody’s said on Monday.

Last week, a Reserve Bank of India (RBI) panel headed by former Axis Bank Chairman PJ. Nayak had suggested that the government cut its holding in public sector banks to under 50 per cent.

It said State-owned banks suffer due to ‘externally imposed constraints’ such as dual regulation by the RBI and the finance ministry and external vigilance by agencies such as the CVC and CAG, among others.

The Nayak report said if the government’s stake in these banks were to reduce to less than 50 per cent, together with certain other executive measures, these external constraints would disappear.

The panel said the Government should distance itself from several governance functions and all banks should be incorporated under the Companies Act. A bank investment company should be constituted and the government’s holding in all banks should be transferred to this entity.

“These measures, if implemented, would be credit positive for public sector banks because they would address a key credit weakness,” Moody’s said in a report on Monday.

The rating agency said corporate governance characterised by poor board supervision and excessive government interference is a structural credit weakness of public sector banks.

Government interference has meant that policy objectives, rather than commercial factors, have dictated some business decisions at these banks, it said.

The quality of the top management at such banks has been hampered by a non-transparent appointment process, relatively short tenures and a lack of accountability.

“The effects of this weak governance have become apparent as the economy has weakened, with public sector banks’ performance lagging that of private sector banks in terms of asset quality and profitability,” Moody’s said.

“Once the banks complete the process of recruiting fully independent boards, the BIC (bank investment company) would transfer many of its oversight powers to the bank boards, leaving the BIC to operate primarily as an investor rather than as an owner,” the report said.

The rating agency said the fear of being subject to probes by external agencies such as the CVC and CBI inhibits PSU banks from taking commercial risks that they deem acceptable and slows down the decision-making process.

However, Moody’s said although it does not think that the government would allow its stake in public sector banks to fall below 50 per cent, there is a higher probability that the government would implement a watered—down version of the RBI’s working group’s recommendations.

“Even such an outcome would be credit positive for public sector banks,” Moody’s added.

Link Hindu Business Line

All govt banks violate Sebi listing norms, says Nayak-Business Standard

The former Axis bank and Morgan Stanley India head says one of the main focus of the report was to level the playing field for public sector banks

Shyamal Majumdar & Manojit Saha  |  Mumbai  

May 15, 2014

Former Axis Bank chairman and Morgan Stanley India chief, P J Nayak, who headed the Reserve Bank of India (RBI) —appointed committee on governance requirement at banks, says one of the focus areas of his report is providing a level playing field to public-sector banks (PSBs), which are facing deep stress.

In a wide-ranging interaction with Business Standard — his first after giving the report that RBI made public on Wednesday — Nayak said, contrary to some misleading reports, the committee did not make any case for privatisation of PSBs. Rather, it focused on an urgent need to remove discriminatory external shackles, so that these banks could compete fairly with private peers. The shackles included the government’s failure in distancing itself from several governance functions and dual regulation by the RBI and the government.

For example, Nayak said, there were  almost no independent directors on the boards of government banks, despite the Securities and Exchange Board of India (Sebi) regulation for listed companies mandating that 50 per cent of directors must be independent. “This is wholesale violation of Sebi’s listing requirements. We have to bring everything under the Companies Act.”

Nayak said the Bank Nationalisation Act talked about eight different categories of boards of directors. Similarly, the SBI Act had seven different categories of directors. This, he said, was like splitting the board into tiny components and finding people for each component. The companies law, on the other hand, has three categories of directors — full-time directors, part-time directors and part-time non-independent directors.

Talking about the need to move to a uniform licence regime across banks, irrespective of ownership, Nayak said the report talked about many banks that defied ownership logic. Bank of Nainital, despite Bank of Baroda having a 99 per cent ownership stake in it, is classified as an old private-sector bank. ING Vysya Bank, in which ING (42 per cent stake) is the only foreign shareholder, is also an old private-sector bank. “There clearly are historical reasons for these specific forms of licensing but they appear illogical from an ownership standpoint.”

On the proposed Bank Investment Company (BIC), Nayak said it was like a passive alternative investment fund. All the government functions will have to be transferred to the BIC, whose only accountability would be to give adequate returns to the government on its investment in banks. “It should act like a private equity fund which manages the asset and ensures returns to investors,” Nayak said, adding the chief executive of BIC should be a professional banker or someone who has worked in the private equity sector. The return he delivers on the capital he manages is a major parameter by which his performance will be analysed.

“The choice for the government is obvious. I am sure it wants the banks it owns to be well governed, by giving it to a professional intermediate investment company,” he said.

Nayak said the committee identified many other areas where government banks did not have a level playing field. On the contentious proposal to reduce the government’s stake to below 50 per cent, he said it would actually be a good bargain for the government, which would still remain the owner of these banks.

For example, even with a 45 per cent stake, the government can exercise complete dominance at shareholder meetings. “All we are saying is that the government disadvantages the very banks in which it has invested in. What could be more ironical,” he asked.

Nayak said the government's ability to provide capital to its banks would have an impact on fiscal consolidation. “We have made some projections on how much Tier-I capital government banks would need till 2018. The most prudent projection suggests they will need Rs 5.87-lakh-crore capital infusion till that year according to the Basel-III norms”.

Nayak also said he had no idea whether the government would agree with the contents of the report. "I can only hope the RBI can use this document in its dialogue with the finance ministry." Giving examples of how governments encroached on the RBI's turf, Nayak said the instruction on uniform card rates for deposits were against the interest of depositors and also against the RBI policy of deregulated interest rates. If telecom or FMCG companies could compete on prices, there was no reason why banks could not compete as well, he said.

The first step, he said, was to empower public-sector banks' boards, which should choose the CEO. For example, DBS is the foremost bank in Singapore and its board selects the CEO, though the bank is owned by Temasek, which is a private equity fund owned by the Singapore government.

On private sector banks, Nayak said it was a good idea for an entrepreneur to be a CEO, provided the bank was governed by an adequately independent and professional board.

On allowing private bank promoters to retain 25 per cent stake, against the current limit of 15 per cent within 12 years, Nayak said promoters would have little incentive left if the maximum shareholding was set very low. In Indonesia, he said, a 25 per cent stake was defined as a controlling stake.

Link Business Standard

All you wanted to know about Nayak panel's PSU banks

 report (source MoneyControl)

An RBI-constituted committee led by PJ Nayak 

Tuesday submitted its recommendations to 

improve the governance structure of state-owned banks 

and also to help private sector banks attract more capital.

An RBI-constituted committee led by PJ Nayak Tuesday submitted its recommendations to improve the governance structure of state-owned banks and also to help private sector banks attract more capital.

 Following are the key commendations of the panel: 

*Given poor asset quality and low productivity, either privatize PSU banks or transform governance structure to make them efficient.

 *Reduce government stake in PSU banks to less than 50 percent  

 *Remove dual structure of both Finance Ministry and RBI regulating PSU banks. Give all regulatory authority to RBI   

*Improve quality of PSU bank board discussions; focus on key areas like business strategy, financial reports, risk, and compliance.  

 *The government should transfer its stake in PSU banks to a holding company termed Bank Investment Company   

*Government should reduce its stake in BIC to under 50 percent and appoint a professional management for BIC 

  *For better accountability, BIC should be governed by The Companies Act 2013, and not the Bank Nationalisation Acts of 1970 and 1980  

 *Ownership functions to be transferred by BIC to the bank boards. Appointments of directors, CEO to be the responsibility of bank boards.  

 *Have uniform bank licensing regime across all broad-based banks, and niche licenses for banks with more narrowly defined businesses   

*Allow mutual funds , pension funds, PE funds to hold 20 percent in private sector banks, without having to take RBI approval   

*Allow promoter investors to hold up to 25 percent in private sector banks, against the 15 percent ceiling currently  

 *Ensure a minimum five-year tenure for bank Chairmen and a minimum three year tenure for Executive Directors

 *Private equity funds, including sovereign wealth funds, be permitted to take a controlling stake of upto 40 per cent in distressed banks 

*Allow voting rights in proportion to the stake held 

Link Money Control

RBI, not FinMin, should oversee PSU bank regulations: 

Panel The government periodically issues instructions to public sector banks, which have to do with regulations, as well meeting social objectives.

The PJ Nayak-led panel on governance of bank boards has recommended that public sector banks should be answerable only to the RBI, and not to both RBI and the Finance Ministry as is the case now. This would provide a level playing field for state-owned banks vis-à-vis their private sector counterparts, the panel said. "All regulatory functions of the Government need to be moved forthwith to RBI, freeing the public sector banks of dual regulation,” the committee said in its report. 

The government periodically issues instructions to public sector banks, which have to do with regulations, as well meeting social objectives.   In July 2012, the government had written to the CEOs of all scheduled commercial banks, public sector financial institutions and public sector insurance companies ‘may consider’ uniform card rates for bulk deposits for different maturities at least up to one year, so as to create a ‘level playing field’ for all banks. 

The circular warned that failure to do so would be treated as a violation of the government’s instruction. "The circular acts at cross-purposes with the regulatory regime of deregulated interest rates which RBI has established. 

In effect the government becomes a second regulator, with little sensitivity to whether its directives are consistent with RBI regulation,” the report said.

 Last October, the Finance Ministry had asked public sector banks to offer cheaper loans for customers wanting to buy automobiles and consumer durables, in an effort to boost demand in the economy.

 But even more damaging was the interference by the Finance Ministry in 2008 when it asked PSU banks to waive off Rs 76,000 crore worth of outstanding loans to farmers. "Any directions issued which are applicable to a subset of banks (PSU banks in this case) do damage to that subset, however laudable the objectives. 

Those banks not part of the subset (private sector banks in this case) are under no obligation to participate; if they do so the participation is voluntary, while for the subset it is coercive,” the committee said in its report.

 The panel said that for the government to issue other instructions in pursuance of development objectives solely to public sector banks was discriminatory and anti-competitive. "If the tasks are indeed laudable, they should be laid down for implementation by all banks. The straightforward way of doing so is to route it through RBI,” the report said.
Link Money Control