News Published in Indian Express on 4th June 2016 --RBI review unearths Rs 2,41,000 cr bad loans in last 6 months of FY16
Gross NPAs have gone up from Rs 349,113 crore in September 2015 when the RBI ordered the asset review to Rs 590,772 crore by March 2016.
SBI 72.73% (Rs.98172 crore In March 2016 from Rs.56834 crore in September 15)
PNB 122.81% ( Rs.55581 crore in March 16 from Rs. 24945 crore in September 2015)
Bank of Baroda 70.91% (Rs. 40521 crore in March 16 to Rs. 23710 crore in September 15)
Canara bank 125.65%
Indian Overseas Bank 54.70%
IDBI Bank 68.55%
Banks in general are in bad health. Some banks declared bad debts in finacial year ended March 2016 and some other banks declared part of bad debts before March 2016 . Still good volume of bad debts are concealed by clever bankers by using various tools like restructuring or evergreening or rephasing . They will come out in coming quarters .
Volume of NPA is more than 10 percent of their total loan book in six banks , namely PNB, BOI, BOI, IOB, IDBI, CBI ad Uco bank. Other banks are approaching near 10 percent. This pathetic position of so called strong banks has come to light in public domain only when RBI conducted Asset Quality Review of 150 accounts during March 2015 to Sept 2015 and built pressure on involved banks to treat all those accounts as sub standard (NPA) which has been found under stress by RBI officials.
Otherwise , all those accounts though bad were always certified as good accounts in preceeding years by team of auditors who use to carry out internal audit, concurrent audit, statutory audit and RBI audit from time to time of banks . Even now , I may add here that if all banks strictly and honstly follow RBI norms of classification of assets, NPA ratio may rise even above 50% in some banks.
One may dream of a position when RBI conducts audit of all loan accounts which run in lacs and crores in number. Management of PSU banks as also that of private banks has been treating even bad loans as good loans for years and decades.
When some of their bad accounts exposed in the eyes of RBI officials, management of these banks tried their best to convince RBI Governor Mr. Raghuram Rajan to give them time or to change RBI norms of identification of NPA accounts. But RBI Governor did not bow down and continued to maintain his position that either banks should recover the overdues and remove irrgularities immediately or treat them as NPA.
Lastly RBI allowed banks to classify those bad loan accounts which has been pinpointed by RBI as NPA in phased manner, partly in December 2015 quarter and partly in March 2016 quarter. This is why , part of 150 accoouns coming under perview of AQR of RBI were treated NPA in December 2015 and part of it in March 2016.
RBI has further advised all banks to declared all hidden bad debts as NPA by the end of March 2017 and start action for recovery of dues from defaulting borrowers.
Here it is important to point out that all banks are audited by team of vetern Chartered Accountants every quarter and none of CA team thought it wise to say bad loans as bad . They did not consider it necessary to insist that bad loans be classified as NPA.
Because CAs earn lacs and crores of rupees in lieu of giving certificate of good health for bad accounts. It is team of these corrupt CAs who use to give certificate of good health to every banks every quarter after receipt of costly gifts and red carpet welcome by clever and shrewed officias of these banks.
It is Chartered Accountant who gave certificate of good health and best corporate governance to Satyam Computers till its promotor Mr. Raju declared ongoing fraud in the system. Global Trust Bank was given the award of best bank in a year and next year the same bank booked unprcedented loss of Rs.1200 crore , lost its networth and finally merged with a PSU bank. More than two decades have passed after these two exposures, but government did not take any action to stop malpractices .
During last three decades , many banks failed , many Regiona Rural banks failed and many cooperative banks failed, but the then government did not think it wise to change the evil culture of blindly trusting corrupt auditors. Similarly government took no lesson from Harshad Mehta stock scam or Ketan Parekh scam .
Majority of Charterd Accountants in our country sell their signature .It is open secret. They are least bothered of correctness of accounts. They know how to manipulate sale figure, how to hide profits, how to distribute income by forming fake companies and so on. They know how to prpare a foged balance sheet to cheat bankers.
It is CAs who teach tips of tax evasion to business men and it is they who teach how to create black money by avoiding tax payment. It is they who prepare financial statements as per whims and fancies of business houses and collude with Income tax officials to help business houses in saving income tax payment .
It is Chartered Accountants who prepare Balance Sheet and Statement of Profit and Loss account as per will of business men , as per value of loan needed and to suit the loan proposals submitted to a bank for getting finance .
It is CA who are undoubtedly and totally rsponsible for increasing stress in bank assets , for increasing black money in Indian economy and for remitance of money in illegal ways to foreign banks by way of inflated export or import.
And to add fuel to fire, bank officials also work in nexus with CAs to sanction loans to unscrupulous business houses so that they may earn bribes and get promotions quickly .
Our government has established a culture of trusting blindly on certificates of Chartered Accountants for all accounts, on rating of companies by rating agencies and certification of rectification submitted by various banks and PSUs. Even government departments manage certificates of good health from CAs and take a sound sleep even though they drain out crores and crore of rupees to serve their greed and cause loss to government by hundreds and thousands of crores of rupees.
Hundreds of scams have been brought to light during last ten years , but none to Ministers ever took proper steps to effectively deal with evil culture and to stop corrupt practices . Because persons sitting at top posts are mostly birds of the same feather. They are nourished in same evil environment of flattery and bribery.
All Public Sector undertakings or private companies use CAs to hide their evil work, their fraud, their corrupt practices. Government preaches sermons to all to maintain transparency in action and in accounts but in practice there is none to cross check correctness and genuinity of certificates submitted by auditors.
As a matter of fact , majority of officials working in banks or in PSUs in general are clever and corrupt and hence they protect each other from punitive actions and isolate good officials from mainstream so that their reign of injustice do not face any hurde. It is an established culture for decades and decades. They have so many lame excuses to get rid of punitive action against for their evil work and they use pressure from top officials and ministers to close their files related to irregularitis and that of corruption.
In addition to present volume of stressed assets, declared or hidden , A whopping Rs 1.14 lakh crore of bad loans have been written off by 27 public sector banks (PSBs) during FY 2012-15
For the fiscal ended March 2015, public sector banks have written off loans amounting to Rs 52,542 crore, an increase of 52.6 per cent over the previous fiscal, as per the RBI data.
These 27 banks had written off Rs 34,409 crore in 2013-14 while Rs 27,231 crore in 2012-13. So in aggregate, a staggering Rs 1.14 lakh crore were written off in the last three fiscals.
If we take into accounts, sacrifices made by banks in interest , it will become clear that about ten lac crores of interest amount has been sacrificed in arriving at compromise settlement with defaulting borrowers during last five to ten years .
I am submitting below news published four years ago which expressed concern on rising NPA in banks. In fact , Government did not take any action to stop rise in NPA in Banks, other than making false promises year after year.
NPA levels in 2011-12 highest in 5 yrs: RBI-Business Standard-02.102012
Net NPA ratio for private banks declining for last 3 years
The banking system’s non-performing assets (NPAs) in 2011-12 were the highest in the last five years, according to Reserve Bank of India (RBI) data. Net NPA ratio in 2011-12 stood at 1.28 per cent, with the net NPA ratio of nationalised banks (excluding State Bank of India, or SBI, and its associates) crossing the one per cent mark for the first time in the last five years, at 1.43 per cent. At 0.68 per cent, the ratio was the lowest in 2008-09.
As a matter of fact culture of hiding bad loans started from the year 1991 when our country adopted the policy of reformation, privatisation and liberlisation. Culture of sanctioning loans by organising loan mela to serve political interest of political parties is older than that .Politicians started exploiting banks for personal gain after natiolisation of banks. Unfortunately same culture still persists in some form or the other. Politicians first used banks for poor and downtrodden. Then they started using banks for development of infrastructure and other high value projects in which government is suppposed to invest.
Since government use their resources in distributing freebees, charities, aids and subsidies to please various sectors of the society to enhance area of their vote bank, they are left with only one alternative , that is to use bank's short term fund for long term projects . It is they who created asset liability mismatch in banks. It is they who created liquidity problems for banks by gradual reduction in SLR and CRR.
Government cannot increase taxes on rich classes because they are source of political fund. They canot reduce subsidy of poor because of loss in vote bank. They usually face scarcity of resources to cater to public demand of freebees. It is only banks which has been used by politicians to increase their fortunes and hence banks have to suffer losses and there is no hope for any improvement until there is change in attitude of politicians.
From time to time , paticularly on the eve of general election , ruling parties announce waiver of loans to attract voters in their fold. Then opposing parties make promises that if they are voted to power , they will write off small loans of farmers and traders . This has adversely affected repayment culture.
This is why , I use to say that politicians are more responsible for pathetic health of public sector banks in particular and all PSUs in general.
Even judiciary do not give value to court cases filed by banks to recover money from defaulters. They add fuel to fire. Large scale corruption in courts and use of political power in recruitment of judges and transfer of judges have created an impression in the minds of clever defaulters that neither banks nor courts can recover money from them until they have got political patronage ,they know that all are manageable.
Time has come to fix responsibility on all who have directly or indirectly contributed in creation of bad assets and in creation of black money in the economy. Government has to understand differenc between man made problems and natural problems. If we continue to make lame lame excuses to justify fraud and corruption , we maynot cure the sickness of banks , nor of any PSU or any government department.
It is necessary to award honest performers and it is equally necessary to punish erring officials and specially to those whose intention is bad. It is necessary to stop politicians exploiting banks for vote bank . It is necessary to stop and punish politicians who build pressure on banks to achieve imposed target in short time just to please Ministers.It is necessary to stop top bank officials to advise branch officials on phone for sanction of loan as per their sweet will.
We have to stop totally target based lending . We have to stop organising loan melas to please Ministers and politicians. We have to stop culture of loan waiver schemes. And we have to activate judiciary so that money is recovered from wilful defaulters in fixed time frame.
WE Have to learn to give value to honesty and sincereity and stop giving value to flatterers in transfers and promotions.
ALL INDIA BANK OFFICERS’ ASSOCIATION (Central Office : Chennai)