Basic Principles of Lending

What are current assets and what are non current assets? 

Will anyone of you say what are those assets which are current as well as non current assets and depend on perception of the same and which  largely depends on how the lender views the same - such as validity of stock , period or tenure of debtors etc . Please explain the same to some comprehensible extent.

If possible give in brief what are current liabilities and what part of term liability should be considered as current liability too. 

All these are asked and necessary to know  for computation of permissible bank finance

Whether security deposit deducted from the bill of a contractor by government department is current asset or non-current. Under what circumstances it is current and non-current?. 

Similarly whether margin for LG or LC held as FDR should be taken as current asset? 

I have willfully asked these questions and hope RBI will also clarify on these points very carefully because bankers are treating assets in a balance sheet as per their whims. 

If they want to sanction a loan even debts older than 180 days may be considered as current assets, even security deposits deducted by government department from the bill of contractors is considered as current assets, even margin on LG and LC held in form of bank FDR is considered as current assets. 

On the contrary if they do not want to sanction loan to any person due to some hidden reason they have many pleas to treat current assets as non-current .They may sanction a credit facility for working capital even if current ratio is less than one and if they have to deny they may do so even if the ration is more than 1.5. The ground reality is that sanctioning of loan facility purely depends of sweet will of bank officials , there is no minimum benchmark financial ratios or guidelines  for any lending which must be adhereed to while sanctioning a credit line

Though there are guidelines from RBI but there is hardly anyone to ascertain any guideline issued by RBI or GOI is followed in true spirit by corrupt and clever bankers? 

Laws in India are explained as per whims of the interpreter. Most of the Indian laws are old and outdated but there is no one to modify the same to make it suitable to changed circumstances. . None of laws and guidelines or rules are crystal clear and most unfortunate is that there is none to ensure strict compliance of guidelines, rules and laws.

During last one year several guidelines have been issued by Ministry of Finance either by Dy governor RBI Sri K C Chakravorty and finance secretary MOF,Mr. D K Mittal but none of regulating authority ever took the pain to verify whether their guidelines are honestly followed .Whenever any bad  incident takes place or some loan assets suddenly turn bad, some communication and correspondence takes place in between bankers and regulating agencies or   some rules are framed and then forgot. This is why bankers use the rules as per their whims and ultimately contribute in rise of bad assets. 

Not only banker , but all officers working in government department uses the law book as per his suitability and interpret the laws as per his convenience.

Executives know it very well that hardly one in lac aggrieved persons go to court for justice and then hardly one in lac cases filed in court is decided in a year or two.

And therefore in most of the bad cases ,it is negligence and ill will of the top executives to a great extent that sickness of banks is growing year after year. Bankers never followed RBI prudential norms fixed for income recognition, asset classification or for restructuring of loans. This is why bankers do what do they like. 

Same is the position in case of recruitment, promotion and transfer of bank employees. Banks are gradually becoming sick as other government departments because flattery and bribery culture is growing and this is why meritorious workers are discarded and flatterers are given the higher post which ultimately badly  affects the quality of asset and future of investors and customers turn bleak.

Who will save and regulate these top executives? 

Those who are in power know the art of even defying the orders of the court. they know the art delaying decisions on court cases filed against their ill motivated decisions either by bank officer or by layman or any any aggrieved customer .

Government can infuse taxpayer’s money as capital to save sick banks , but how long? 

Until top executives learn to lead a honest and devoted life ,they cannot keep the bank or any public sector undertaking safe and it is they who help private sectors to grow.

 I therefore making an attempt to strike at the root of sickness so that assets created by bankers now may not turn bad in a year or two . Similarly manpower working in bank should not turn hostile and should be motivated and promoted in such a way that they work wholeheartedly for the growth of bank and not for only earning money .Qualification of bank employees is not that much significant in service industry like banks as it is important to know the art of doing safe banking with maximum social benefits.

Questions asked by me in the beginning are very simple and every bankers should know and understand the spirit behind it. But unfortunately neither field level workers nor top executives want to understand the seriousness of the basic principles of banking. 

In the past by way of experience bank employee could learn basic of banking , but in the modern era top executives give value not to experience but give more value to smart , young and number one flatterer .