When FM tells a CMD of any bank either on phone or in meeting for performing any task, entire workforce led by CMD become active.
Now since the FM has asked to open branches in unbanked areas , all banks are running from pillar to post to reach the remotest village to take the credit . They do not bother whether adequate manpower is available in bank or not, whether proper infrastructure for opening a new branch is available or not in a bank in the bank, whether suitable premises is available or not, whether the area is profitable or not,whether potential for business even for crossing the break even point is there or not and so on. New branches are opened even on registers , they least bother for future of bank , neither for bank staff, nor the comfort of customers.
Now when banks have been given the stiffest target of attaining the level of one percent in net NPA by hook or by crook. Bank management will not allow any Branch Head or Regional Head to treat any loan account as bad , as substandard called as Non Performing Asset NPA whatsoever may be the quality of assets.
This was the culture during nineties and upto the year 2010.Due to this volume of bad assets went of accumulating and which has suddenly been exposed after the implementation of Core Banking Solution. Now the time has come for clever banks to use new techniques to taper with CBS and conceal as much bad assets as possible.None of branch officials will now dare to treat any bad asset as NPA.
But the actual solution does not lie only in fixation of target which are apparently unbelievable and unachievable keeping in view the quality and quantity of manpower available for branches. There may be hundreds of officers working in administrative offices but there are hardly one or two staff in most of the branches. One or two staff have to undertake all types of routine transaction , increase non banking products like mutual fund and insurance business , process, sanction and monitor new loans and finally listen to any good or bad advice flowing in from officers of higher offices.
Last but not the least , even if bank staff manage to work late and work on holidays to ensure maximum recovery from bad borrowers , they will not get adequate support from legal and administrative machinery. Lacs of cases are pending in various courts for decades , but the Finance Minister do not have time to take cognizance of such inordinate and abnormal delays in disposal of cases.
And the most important is how learned FM will stop rampant corruption in all offices working under him . Not a single file moves without greasing in the office of DM, Certificate officer, DRT etc .
Further how he will verify the data furnished by banks pertaining to net NPA.
What will happen if bank officers stop sanctioning new loans in fear of punitive action.
What will happen to customers if all bank employees are engaged in the task of recovery of loan.
Are team of Chartered Accountants reliable in the eyes of FM? Since long team of CAs have vetted the balance sheets of all banks and inspite of all such bought certificates , banks continue to be sick of many bad accounts and volume of bad debts.How will FM control bad mind of CAs.
How will FM change the minds of advocates and judges who work in nexus with each other to indefinitely delay the decision on cases filed by banks against loan defaulters for recovery of bad debts?
How FM or PM will stop political exploitation of banks ? Will he be able to stop the culture of loan mela and culture of waiver of loans or the imposed compromise settlement culture?
Thursday, April 11, 2013
Ministry OF Finance Asks Banks To Activate Junior Level Officers To Accelerate Recovery of Bad Debts, But not To District Administration and Courts to Quicken Their Decisions on Cases Related to Bank Recovery
Click on following link to read more on how the government completely failed to safeguard bank's assets and how did they indulge in political exploitation of bank's money either by loan mela or by waiver of loan culture.
http://importantbankingnews.blogspot.in/2013/04/ministry-of-finance-asks-banks-to.html
Finance Ministry asks banks to bring down net NPA to 1% by March ’14
NEW DELHI, APRIL 14:
Setting a stiff target for all public sector banks, the Finance Ministry has directed them to expedite the recovery process and bring down their net NPAs to 1 per cent of their total advances by the end of 2013-14 fiscal.
“We have asked banks to bring down their net NPA to 1 per cent of the total advances by March 2014,” Department of Financial Services Secretary Rajiv Takru said.
"Banks are free to choose the way they would like to bring down their bad loans. Whether they do it through the specialised recovery branch or other methods, is up to the individual banks to decide," he added.
The gross NPAs of public sector banks rose to 4.18 of advances by the end of December 2012, compared to 3.22 per cent a year ago. Net NPAs, which are arrived at after making provisions from the gross amount, increased to 2.12 per cent in December 2012.
In absolute terms, the gross NPA of PSU banks jumped to Rs 1,84,193 crore in December 2012 compared to Rs 1,37,102 crore in March 2012, an increase of Rs 47,091 crore in the nine-month period.
The gross NPAs in corporate lending rose to Rs 98,884 crore in December, as against Rs 68,221 crore in March. In the case of farm loans, gross NPAs rose to Rs 30,800 crore in December as against Rs 24,827 crore in March.
Last month, Finance Minister P. Chidambaram had asked banks to take firm steps against affluent promoters to recover loans from sick companies owned by them.
“We cannot have an affluent promoter and a sick company. Promoters must bring in money... We wish banks to take firm steps to recover NPAs,” he had said.
He had further said recovery has improved in the past one or two months and banks would take more steps to deal with the rising NPAs.
Taking a cue, SBI reduced its gross NPAs by 1 per cent during the last month.
SBI’s gross NPAs as a percentage of total loans rose to 5.30 per cent at the end of December 2012, from 4.61 per cent in the year-ago period. The net NPA was at 2.59 per cent of loans in the December quarter.
http://www.thehindubusinessline.com/industry-and-economy/banking/finance-ministry-asks-banks-to-bring-down-net-npa-to-1-by-march-14/article4616711.ece?homepage=true&ref=wl_home
VERY GOOD ARTICLE, SIR !
ReplyDeleteVERY NICE AND REALISTIC ANALYSIS
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