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Tuesday, April 29, 2014

Bank Executives Are Responsible for Rise In Bad Debts

PSU Banks Responsible for NPAs, Not Govt: FM--Outlook  16.12.2013
Blaming "tardy" state-run banks for high level of non-performing assets, Finance Minister P Chidambaram today said banks' boards and not the government should be held responsible for the situation.

"If the bank boards cannot perform their duty, blame should stop with the bank boards and not with the government," he said at a panel discussion at an event to commemorate NSE's 20th anniversary here.

He acknowledged that the government has a nominee director in every public sector bank, but pointed out the roles of the independent directors, full-time directors, chairmen and managing directors and senior bank management.

During his three stints in the finance ministry, running into eight years, he has never interfered with the working of a bank, Chidambaram said.

"NPAs are high because the recovery measures are soft. Bankers are being tardy and to some extent soft on recovery. We have failing companies and prosperous promoters," he said.

Gross NPAs of banks crossed 4 per cent as of the September quarter at Rs 2.37 trillion and are projected to cross 4.4 per cent or Rs 2.9 trillion by the end of the fiscal, according to a report by rating agency Icra. Most NPAs are being generated by the state-run banks. United Bank of India has an NPA level of over 7 per cent, while SBI has over 5 per cent NPAs.

The minister also said that the RBI and the government have taken serious note of the issue and asked banks to expedite recoveries aggressively. State Bank has set up a separate vertical to tackle NPAs, he noted.

Chidambaram also said it is not fair to compare NPAs in the current context with the levels of the past, as in 2004, when the numbers were lower.

On capital infusion in state-run banks, Chidambaram said the infusion will continue even as bad assets rise because of the rate at which the overall assets of the banks are growing.


In last few days RBI/ Government of India has ordered special audit of United Bank and Allahabad Bank

http://importantbankingnews2.blogspot.in/2013/12/rbi-curtails-loan-powers-of-united-bank.html

http://importantbankingnews2.blogspot.in/2013/12/rbi-will-conduct-special-audit-of.html

I would like to put forward few questions before officials of RBI and before Government of India specially Finance Minister who always speak good for the bank and who exploit banks for political gain and who are supposed to be watch dog for safety , security and health of bank and for protecting the interest of investors, customers and staff of the bank.

Is Only United Bank of India a bank which has added huge volume of Non Performing Assets?

What RBI has done to other banks like SBI or Uco or other banks which has accumulated NPA and impaired assets of more than 10%

What actions have been taken against EDs and CMDs of United Bank who contributed in rise of Bad debts, who failed to monitor properly, who sanctioned without due diligence, who took bribe and costly golden an diamond gifts from Branch heads and accumulated wealth disproportionate to their total income from behind the scene ?


What action has been taken against Ministers, directors and RBI officials who also contributed in piling up of bad debts and who totally ignored the health for their self interest?

What action has been taken against politicians who gave verbal orders to bank officials to sanction loan to corporate and who are now silently watching the development?


What action has been taken by RBI and Government of India to fix accountability on top official of bank who are either in service or retire or who have been elevated to the post f ED or CMD of other bank?

What action have been taken against those ministers and officials who recommended such an officer for the post of ED and CMD (by taking bribe or gift or under intoxication of flattery and yesmanism ) who caused enormous loss to bank, bank customers, bank staff and bank shareholders?


What action has been taken against defaulters who have huge wealth but who are not repaying bank's dues?

What actions have been taken against CAs , Advocates and valuers gave ill-motivated bad reports to banks either after taking bribe or in nexus with bankers or under pressure of some local netas?
Last but not the least ---What actions have been taken against court judges, DRT officials , certificate officers, revenue recovery officers etc who are willfully or under manpower constraints postponing and inordinately delaying decision on court cases lodged by banks?



In India committees are formed with a good intention to stop misuse of powers by individuals. Every company has a board of directors so that a group of intellectuals may contribute their knowledge and skills in best way to protect the organization. Cabinet of ministers is formed in Parliament and State Assemblies to support government and suggest best plan, best policies and best ways to execute the plan in the larger interest of India. Vigilance team is formed of three or five members so that one man cannot take biased decision. Indian Parliament is constituted of 542 members elected from different corners with different knowledge base so that best possible can be done for the country. And similarly committees are formed at all levels and in all offices to take wise decision on tenders, contracts, policies, amendment, on charges of corruption, on irregularities in financial matters of a company etc.

But unfortunately India is sick of flattery and yesman culture. Due to this most o f the members of committee think it better to remain silent spectator and sign blindly on all proposals and endorse all decisions taken by the head of committee or by High Command. In political party, members of the party do not apply their mind in most of the cases and they simply say YES to all line of action what their High Command proposes. 

In Parliament too, most of decisions are taken by a few ministers and cabinet blindly say YES to all decisions. Majority of bills are passed in Parliament not by discussion or debate by voice vote and in all such cases members of ruling party are supposed to support the bill and that of opposition are supposed to protest the passing of the bill. In the recent past at the instance of Rahul Gandhi , ordinance approved by cabinet and sent to President of India was taken back just to please the High command of the party. 

Similarly in banks, most of the high value loans are passed by Board of Directors or Management Committee constituted by directors, ministers and representatives of the government. Two years ago RBI directly all banks to constitute Credit Approval committee (CAC) or Loan Approval Committee (LAC) even at all Administrative offices so that all credit proposals are process and passed after thorough scrutiny by a team of talented persons go through it and assess the pros and cons of the proposal from all angles of consideration.

 But in practice it is again the whims  of the Regional Head or Zonal Head which prevails and other members of the Committee blindly sign and think it safe not to say anything which may invite anger of the boss or which may result in critical transfer or his rejection in promotion process. Obviously it is flattery culture or the fear psychosis or yesman culture which has damaged the fundamentals of all banks and similarly all public sector undertakings.

 In case any members try to put forward shortcomings , deficiencies risk of any proposal , he is removed from the committee and substituted by unskilled officer so that hurdle in smooth passing of bad proposals are removed. In the same a MP or MLA is made Minister or removed from Ministry  as he or she is found to be yesman or boss or is found to be straight forward in keeping the matter in true form without fear of his or her boss.

Even audit teams or investigating committees or CAG or CBI or CVC or CVO fail to exercise their duties freely in fear of repercussion from top officials if they dare move against the line of action which the boss dictates in normal course of business.CVO or CVC or directors of CBI or even  judges are selected as per his or her proximity with powerful persons of when he or she is recommended by some VIP, Merit of the person never matters much in selection of  persons for creamy post.

As such it is totally unacceptable when Finance Minister put entire blame on bankers for rise in bad loans. Finance Minister Mr. P Chidmabram is totally wrong to say that rise in bad debts is due to the fact bankers in having Cozy relation with corporate.FM is telling a complete lie when he says that bankers and corporate have entered into a Cozy relationship.

It is rather FM in particular and politicians in general who have responsible for bad culture prevalent in public sector banks and public sector undertakings as a whole.  ‘Yes Sir’ culture is the root of all maladies rampant in the system. The habit of extending red carpet welcome to bosses and ministers and spending lac and crores of rupees for show Business or to please ministers has damaged the work culture badly. It is the culture of promoting flatterer at the cost of honest performer which has ruined the country .I do not want to name any minister , but I do not have hesitation in saying that politicians or officials who enjoy power in the country are worshipped like GOD and this culture has badly damaged the mindset of real workers.

After all it is Finance Minister and his team who selects a bank officer for the post of Executive Director or Managing Director of a bank. It is officials of RBI and Ministry of Finance who are supposed to act as watchdog on functioning of banks and on activities of executives of banks. It is their duty to stop corruption and break the said cozy relationship between bankers and corporate in the interest of the nation. But unfortunately it is officials of RBI or ministers who teach and who promote bad culture.

If a constable is given cream posting by Inspector taking huge sum in bribe, it is certain that the constable will indulge in corruption to earn more and more. If a teacher is recruited or a CVO  or ED and CMD or banks are appointed only when he or she is ready to spend lacs of rupees directly or indirectly on bosses ( who are empowered to select), it is hundred percent certain that such executives and officials will promote only corrupt culture. 

It is therefore need of the hour to strike at the root of all corruption. Process of reformation and transformation will start only when people stop flattery and yesmanism and public servants are in a position to serve without any fear of repercussion. Supreme Court in the recent past instructed GOI to stop whimsical transfers and promotions and adopt transparent policy for such decisions. Court ordered to have a fixed tenure transfer policy and have a system wherein aggrieved person can lodge the complain without any fear of bosses.

Million dollar question is who will bell the cat and when?


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