Bleeding Bad Loans Go Unbridled In Government Banks

Bad loans bleeding public sector banks: Government
Times of India
NEW DELHI: The government on Friday said public sector banks were facing a crisis of loans turning bad due to the current macro-economic situation in the country. The bad loans of these banks went up from Rs 94,000 crore in 2011 to Rs 1.70 lakh crore as of September 2012. 

Lower growth and high interest rates are the reasons for substantial increase of non-performing assets of these PSU banks, minister of state for finance Namo Narain Meena said in response to a question in Lok Sabha. 

"The government has recently advised PSU banks to take new initiatives to increase the pace of recovery and manage NPAs," Meena said on actions taken by the government. The steps taken, he said, included appointment of nodal officers for recovery, conducting special drives for recovery of loss assets, putting in place early warning systems and replacing the system of post-dated cheques with electronic clearance system. 

"The government has recently directed all PSU banks to constitute a board level committee for monitoring recovery," Meena said. 

The ratio of gross NPAs to gross advances in respect of banks increased from 2.51% in March 2010 to 2.94% in March 2012 and 3.57% in September 2012. 

Farm loans top all other sectors in pushing the level of NPAs of these banks. Agricultural NPAs increased from 2.42% in 2010 to 4.32% in 2012 while that of small scale industries rose from 4.14% to 4.13% and other priority sector NPAs increased from 3.77% to 4.26% during this period. 

Retail sector NPAs declined from 3.89% in 2010 to 2.95% in 2012 and in the real estate sector, it came down from 1.93% to 1.63% during this period. Concerned by the rising NPAs, the RBI had recently instructed banks to have a loan recovery policy which sets down the manner of recovery of dues, targeted level of reduction, norms for permitted waiver and factors taken into account before considering these waivers. 
http://timesofindia.indiatimes.com/business/india-business/Bad-loans-bleeding-public-sector-banks-Government/articleshow/17620337.cms

My Views:  If RBI and Ministry of Finance actually like to reduce volume and value of Non Performing Asset in bank they will have to first make ground level study of at least all Very Large Branches (VLBs) and Extra ordinary Large Branches (ELBs ) of top ten public sector banks .

 I say only top five or ten banks only because it is they are who are found to be topper in the list of bad loans. Top Ten percent of branches contribute at least 75% of total volume of loans and total value of bad assets. As such it is desirable to focus on these banks and these branches.

Here is important to mention here that small and medium branches undertake various social welfare advances and have to sanction loans to weaker section, farmers, small traders which may go bad in shorter period but Government of India and Bank may find it difficult to recover bad money from these willful defaulters.

It is observed that 10 percent of total network of a bank comes in the category of VLB and ELB and they altogether constitute more than 75% of total advances of a bank. Therefore if these 10 percent of branches are thoroughly investigated, GOI will be in a position to understand the main reason behind rise in NPA.

Until real nature of disease is detected by a Doctor, he cannot prescribe correct medicine and cannot undertake correct operation steps to cure the patient and safeguard the life of the person admitted in a hospital for treatment. When sickness is critical, Doctors undertake various pathological test to detect the real reason of sickness and then he start making and suggesting ways for curing the sickness.

The reason may be any one or all of these and other reasons too.

• Poor pre sanction assessment of loan before sanctioning of high value proposal. Poor post disbursal monitoring of loan accounts. Malicious intention of borrowers, bad Chartered Accountant and valuers misleading banks, role of brokers and consultant in motivating bankers to sanction loans to ineligible loan seekers, 
• Lack of knowledge,
• Global recession
• Malicious intention of sanctioning officers
• under pressure of higher bosses or ministers
• natural calamity
• government policies becoming unfavourable
• product not accepted by consumers
• Higher rate of interest
• Political interference
• Bad HR Policies, incompetent juniors becoming bosses of competent seniors, poor salary etc. Defective recruitment policy or defective promotion policy or arbitrary. Non recognition of performers and awarding non performers creating negativity among mass , transfer culture etc
• Culture of write off launched by politicians for vote bank has resulted in rise in bad assets.
• Legal steps are too ineffective that borrowers do not fear even judiciary and therefore willfully avoid timely repayment in nexus with or without bank officer. There are judges and advocates who play in hands of bad borrowers to earn illegal money and it is they go on delaying judicial process for decades .
• Bad HR policy and /or  bad Human Resource Management
• Officers who have been promoted to scale IV and above by their bosses on the basis of bribery and flattery and given charge of big branches like VLB and ELBs. But such corrupt and incompetent officers are not able to grow business and not able to properly monitor and take care of their customers and their bank as a whole. Such Inactive, inefficient and corrupt officers are the root cause behind negative work culture and it is they are who are mainly responsible for unbridled rise in bad assets in all public sector banks.
• Lastly officers promoted to higher and higher scale but not performing seriously whereas real performers rejected in promotion process and posted at remote areas, It is found that 50 percent and more of promoted officers are not able to perform and showing negativity  in all parameters .They are adding more and more bad accounts every year .
• Managing Director, Executive Director and General Managers of the bank is incompetent, corrupt and inefficient to deal with volume of business they are supposed to handle.
• After all private banks are growing but public sector banks are not in the same area where VLB and ELB of a bank fail to perform. I willfully avoid small and medium branches , because it is practically not possible for RBI and MOF with available manpower to reach all branches and know about truth of bank's bad assets.
• And so on-----------------