Banks in general have again started concealing bad
assets and the same hiding approach which was applied when the work
of identification of bad assets used to take place manually.
Management of banks in
general have started threatening and using coercive methods to force
branch officials, branch heads, regional and zonal heads and top ranked
officials to stop slippage of assets into NPA category and hence they all
have started using various unlawful tools to keep the account always standard
despite sickness in the account as per RBI prudential norms. They have started
using age old ever greening process to keep all accounts standard.
As a consequence slippage
during last two quarters fell and further due to window dressing
in credit growth as also in provisioning, ratio of Gross NPA and that of net
NPA to total advances have been contained.
Reality of bad assets hidden in the banking system and reality of lending
culture can come to surface only if hundreds of teams of honest, competent and
devoted RBI officials go deep into entire process and work culture prevailing
in public sector banks.
One point to be noted here
that due to reign of terror let loose by top management in almost all PS banks,
there is fear in all field functionaries and there is no doubt that it will
adversely affect the bottom line of banks and there is no doubt that the
hollowness of banks and unattended cancerous disease will finally cause
collapse of entire social banking system in future and lead to growth of
private banks and that of exploiter moneylenders.
To add fuel to fire, banks
are not using experienced manpower to stop further deterioration in bank’s
health and rather they have aggravated the situation by promoting young and
inexperienced officers to higher level and posting them at vulnerable key
posts.
No doubt ,
that health of officers in banks is also moving from bad to worse and equally
that of family members who are finding themselves totally isolated and uncared .
Lastly It is important to point out that clever Finance Minister Mr. Chidambram has again started telling bankers to treat all advacnes as standard .It is his old culture not to treat bad as bad so that share of banks goes up and bank officials sanction new loans as per political requirement. He is ready to make the RBI norms liberal and give banks more freedom to restructure and use ever greening tactics to keep loan account standard.
( see news item published in ET today )
Banks in general have again started concealing bad
assets and the same hiding approach which was applied when the work
of identification of bad assets used to take place manually.
Management of banks in
general have started threatening and using coercive methods to force
branch officials, branch heads, regional and zonal heads and top ranked
officials to stop slippage of assets into NPA category and hence they all
have started using various unlawful tools to keep the account always standard
despite sickness in the account as per RBI prudential norms. They have started
using age old ever greening process to keep all accounts standard.
As a consequence slippage
during last two quarters fell and further due to window dressing
in credit growth as also in provisioning, ratio of Gross NPA and that of net
NPA to total advances have been contained.
Reality of bad assets hidden in the banking system and reality of lending
culture can come to surface only if hundreds of teams of honest, competent and
devoted RBI officials go deep into entire process and work culture prevailing
in public sector banks.
One point to be noted here
that due to reign of terror let loose by top management in almost all PS banks,
there is fear in all field functionaries and there is no doubt that it will
adversely affect the bottom line of banks and there is no doubt that the
hollowness of banks and unattended cancerous disease will finally cause
collapse of entire social banking system in future and lead to growth of
private banks and that of exploiter moneylenders.
To add fuel to fire, banks
are not using experienced manpower to stop further deterioration in bank’s
health and rather they have aggravated the situation by promoting young and
inexperienced officers to higher level and posting them at vulnerable key
posts.
No doubt ,
that health of officers in banks is also moving from bad to worse and equally
that of family members who are finding themselves totally isolated and uncared .
( see news item published in ET today )
Asset quality: Is the worst over for PSBs?
NPAs, debt recast fall in March quarter
Public Sector Banks reeling under asset quality pressure for the past couple of years, reported lower non-performing asset (NPA) ratio in the three months ended March, according to the Reserve Bank of India’s (RBI) Financial Stability report.
( My Comment___Banks have again started concealing bad assets and the same hiding approach which was applied When it was manually identified)
Both gross and net non-performing ratio (to net advances) of the banks fell at the end of the March quarter, compared to end-September, the report said.
Gross NPA for all banks improved to 3.4 per cent at end-March from 3.6 per cent at end-September, while net NPA fell to 1.4 per cent from 1.6 per cent. “This decline in NPA is attributed to lower slippage, improved recovery and higher write-off during the quarter,” said RBI. In addition, the proportion of standard loans restructured (of total loans) also registered a marginal fall to 5.7 per cent in March, compared to 5.9 per cent in September.
Public sector banks continue to have higher NPAs and debt recast, compared with private and foreign lenders. Public sector banks’ gross NPA was at 3.8 per cent, while loan recast ratio was 5.9 per cent. State-run banks, however, have seen a decline in the quarterly slippage ratio to 0.5 per cent in March, compared to 0.8 per cent in September.
Both gross and net non-performing ratio (to net advances) of the banks fell at the end of the March quarter, compared to end-September, the report said.
Gross NPA for all banks improved to 3.4 per cent at end-March from 3.6 per cent at end-September, while net NPA fell to 1.4 per cent from 1.6 per cent. “This decline in NPA is attributed to lower slippage, improved recovery and higher write-off during the quarter,” said RBI. In addition, the proportion of standard loans restructured (of total loans) also registered a marginal fall to 5.7 per cent in March, compared to 5.9 per cent in September.
Public sector banks continue to have higher NPAs and debt recast, compared with private and foreign lenders. Public sector banks’ gross NPA was at 3.8 per cent, while loan recast ratio was 5.9 per cent. State-run banks, however, have seen a decline in the quarterly slippage ratio to 0.5 per cent in March, compared to 0.8 per cent in September.
( My comments: Management of banks in general have started threatening and using coercive methods to force branch heads to stop slippage of assets into NPA category and hence they all have started using various tools to keep the account always standard despite sickness in the account as per RBI prudential norms. As a consequence slippage during last two quarters fell and further due to window dressing in credit growth as also in provisioning , ratio of Gross NPA and NPA has been contained )
“All banks groups, except new private sector banks, recorded higher write-off during the quarter ended March as compared to September,” said RBI. The banking regulator added the change in debt recast norms, which prescribe higher standard asset provisioning requirement, will put pressure on NPA unless banks take preventive measures. RBI also cautioned banks against misusing regulatory leeway for evergreen loans (short-term line of credit that is routinely renewed, leaving the principal remaining outstanding for the long term).
“All banks groups, except new private sector banks, recorded higher write-off during the quarter ended March as compared to September,” said RBI. The banking regulator added the change in debt recast norms, which prescribe higher standard asset provisioning requirement, will put pressure on NPA unless banks take preventive measures. RBI also cautioned banks against misusing regulatory leeway for evergreen loans (short-term line of credit that is routinely renewed, leaving the principal remaining outstanding for the long term).
http://www.business-standard.com/article/finance/asset-quality-is-the-worst-over-for-psbs-113062700701_1.html
NPA clause of public sector banks likely to be changed -ET
NEW DELHI: The government will reconsider a clause that requires all state-run banks to treat a borrower's account as non-performing if a loan to the company by any bank has become a bad asset in the books of that bank.
PSBs, which had a net NPA of 2.12% in December 2012, have already in a representation to the finance ministry, sought to delete this clause citing increase in the provisioning amount that has to be made towards such accounts.
"We are aware of the issues that banks are facing. It is being discussed and if required we will remove the clause," said a finance ministry official who did not wish to be named. RBIguidelines on NPAs also state that if the borrower accounts turn NPA with one bank, it will have no affect on the borrower's account with another bank.
According to a report by BofA-ML, loan growth of Indian banks will fall to a 15-year low of less than 13% in the current fiscal. The latest data from RBI shows that in the last two weeks to June 14, credit growth has slipped by 0.39%.
Bankers have argued that adhering to a common NPA norm will further weaken the banks given that RBI has already come up with stringent guidelines in June 2013, increasing the provisioning on the newly restructured account by 300 bps to 5% from June.
"There are cases where a company has taken a loan for a particular project from one bank which has not taken off and hence the account has turned poor but the same company is keeping its other account standard with most banks," reasoned a senior official with Central Bank of India.
An executive director with a state run-bank said that the current regulations stipulated by RBI already cover information sharing among banks. "This was the basic purpose for which joint lending agreement (JLA) was initiated," he said.
PSBs, which had a net NPA of 2.12% in December 2012, have already in a representation to the finance ministry, sought to delete this clause citing increase in the provisioning amount that has to be made towards such accounts.
"We are aware of the issues that banks are facing. It is being discussed and if required we will remove the clause," said a finance ministry official who did not wish to be named. RBIguidelines on NPAs also state that if the borrower accounts turn NPA with one bank, it will have no affect on the borrower's account with another bank.
According to a report by BofA-ML, loan growth of Indian banks will fall to a 15-year low of less than 13% in the current fiscal. The latest data from RBI shows that in the last two weeks to June 14, credit growth has slipped by 0.39%.
Bankers have argued that adhering to a common NPA norm will further weaken the banks given that RBI has already come up with stringent guidelines in June 2013, increasing the provisioning on the newly restructured account by 300 bps to 5% from June.
"There are cases where a company has taken a loan for a particular project from one bank which has not taken off and hence the account has turned poor but the same company is keeping its other account standard with most banks," reasoned a senior official with Central Bank of India.
An executive director with a state run-bank said that the current regulations stipulated by RBI already cover information sharing among banks. "This was the basic purpose for which joint lending agreement (JLA) was initiated," he said.
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