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..
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..
