Now Banks Have to Identify Non Performing STAFF

Suggested directives for public sector banks

V. H. RAMAKRISHNAN ( From Hindu Business Line)

August 26, 2012:  

There is criticism that the Banking Division of the Finance Ministry is micro-managing banks. But what the critics must understand is that this is being done to make the bank chiefs more dynamic. However, it appears that the Banking Division is itself now running out of ideas.

This article suggests a few model directives which will help make not only the chairman and managing director (CMD) but also the board more dynamic and vibrant.

THE WORK SCHEDULE

The CMD should report at 8.30 am and leave at 8 pm. (This will be in keeping with the timings followed by the Banking Secretary.)

He should be at the headquarters from Monday to Friday and visit the zones/branches only on Saturdays. However, he should visit all the branches of the bank at least once during a year.

At 9 am every day the CMD should meet with his Executive Directors and General Managers and plan the tasks to be achieved during the day. The meeting should not last more than 30 minutes.

There should be another meeting at 2 pm for a midday review and course correction, if required. At 7 pm a meeting to review the day’s work must be held. A summary of the evening meeting should be sent by email to the Banking Division so as to reach it by 8.30 pm.

ATMs should be inaugurated only by officers of the rank of Chief Manager. Rural branches should be opened by only Assistant General Managers, and semi-urban and urban branches by General Managers. Metro branches can be opened by Executive Directors.

The Chairman should only only inaugurate branches in the constituencies of Finance Minister and the Minister of State for Finance.

Board meetings should commence at 9 am. There should be a power-point presentation for each paper lasting 10 minutes.

Lunch during the board meeting should be a working lunch, consisting of soup, sandwiches, cutlets, and so on. No desserts. This will help Directors to stay awake during the afternoon sessions.

Taking into account the age group of the Directors, no cashew-nuts or almonds should be served during the meeting. Only low-calorie biscuits and coffee/tea without sugar should be offered.

No board meetings should be held in five-star hotels, nor should the board members stay at these hotels. They should come in the morning and go back in the evening. A transitroom should be provided at the head-office for the Directors’ use.

There should be a rating of Directors. For this, a senior official of a consultancy firm (preferably foreign) should be made an observer in the boardroom.

He will rate the Directors on a scale of 1 to 10. If a Director continuously scores less than four in three meetings he must be sent to a B-school, say an IIM, for training. If there is no improvement thereafter, his services should be terminated.

The Chairman and Executive Directors should not travel together. Each one should take a different flight.

NON-PERFORMING STAFF

Just like non-performing assets (NPAs), there is a proposal to calculate the percentage of non-performing staff (NPS) . This is one of the recommendations of a committee appointed under the chairmanship of a former CMD of a bank.

All staff who have secured less than 50 per cent in their annual appraisal for three years in a row will be classified as NPS.

This number divided by the total number of staff will give the gross NPS ratio.

This should be one of the parameters to be taken into account while fixing the incentive for the Chairman/Executive Directors.

http://www.thehindubusinessline.com/industry-and-economy/banking/article3824641.ece

RBI widens StanChart, HSBC probe to other foreign banks

Apex bank to check alleged breach of controls against money laundering and terror financing

Press Trust of India / New Delhi Aug 26, 2012, 12:19 IST The Reserve Bank has widened its probe into the affairs of British banking giants HSBC and Standard Chartered to a host of other foreign banks for alleged breach of controls against money laundering and terror financing. Besides, capital market regulator Sebi may also join the investigations, as there are concerns of funds from these banks being routed to the stock market through foreign investors and other entities, sources said.  Standard Chartered Bank (StanChart) is listed in the Indian stock market. A senior regulatory authority official said the inspections are being conducted to ensure these banks' compliance to various fair banking norms in the wake of certain global events. However, executives at some of the banks admitted that queries being raised by the regulators are serious in nature and particularly aimed at ensuring effective controls against money laundering and financing of terrorism, among others. The investigations by Indian agencies follow developments in the US, where a host of European banks, besides StanChart and HSBC, are being investigated for their alleged role in exposing the American financial system to money laundering and terror financing risks. Sources said Indian investigations would not be affected by the recent settlement reached by StanChart in the US, wherein it agreed to pay $340 million to settle charges that it entered into secret transactions involving $250 billion with Iran despite sanctions against that country.     The settlement has been reached only with respect to an investigation by the New York state banking regulator, the New York Department of Financial Services and does not cover the probes being conducted by the various federal regulators in the US, including the Treasury Department.     Last week, the Indian government informed the Parliament that Reserve Bank of India (RBI) is scrutinising the Anti- Money Laundering (AML) and Know Your Customer (KYC) systems of StanChart and HSBC.     Besides, Financial Intelligence Unit-India (FIU-IND) has also initiated a fact-finding exercise related to HSBC's operations in India and its compliance to AML and CFT (Counter Financing of Terrorism) regime.     RBI is also seeking details from British financial sector regulator FSA (Financial Services Authority) about the two UK-based global banking giants, who have significant presence in India and whose outsourcing of key oversight jobs to India has come under the US scanner in separate probes related to issues like money laundering and terror financing. Both the matters have come to the fore within a month's time, raising serious concerns over the impact on the image of Indian outsourcing industry and possible implication on India's fight against money laundering and terror funding.     Indian agencies are gathering all possible details about the two banks, as also various other banks under scanner of the US regulators, for any possible lapse in their compliance to controls against money laundering and terror financing.     RBI and UK's FSA signed a new Memorandum of Understanding (MoU) last month for exchange of information and co-operation in surveillance operations.     The MoU provides for period discussions between RBI and FSA about matters like HSBC and StanChart, along with other supervisory developments and matters concerning banks having operations in India and the UK.     New York state's key banking regulator, the Department of Financial Services (DFS), had accused StanChart of hiding about 60,000 secret transactions with the Iranian government, involving a whopping $250 billion, and exposing the US financial system to terrorists, weapon dealers and drug kingpins.     HSBC's staff in India have also come under the scanner in a separate probe in the US for deficiencies in their role as "offshore reviewers" of the global banking giant's compliance to safety mechanism against money laundering and terrorist financing.     Stanchart was also charged of having deficient money laundering controls in its outsourcing of work to a captive unit in India.     Another probe found that an OCC (Office of Comptroller of the Currency, which is the primary federal regulator for banks in the US) visit to India in 2007 had revealed "weak monitoring procedures" in HSBC's internal control systems.     While HSBC has been charged with outsourcing these jobs mostly as cost saving measures, Stanchart has been accused of sending such important functions to offshore locations to escape "watchful eye" of the US regulators.       Besides seeking information from the UK regulator, the RBI is also waiting for inputs from the US regulators, including the US Federal Reserve, state regulators and other agencies, sources said.     RBI's main focus is on the banking operations of HSBC and Stanchart in India and therefore it is relying mostly on assistance from the UK, where these banks are headquartered. http://www.business-standard.com/india/news/rbi-widens-stanchart-hsbc-probe-to-other-foreign-banks/184159/on