Public sector banks’ bad debts hit 9-year high-The Hindu Business Line-13.05.2014
( See my views below)
Finance Minister to meet bank chiefs today
NEW DELHI, MAY 12:
Bad debts of public sector banks have surged to a nine-year high, with the corporate sector accounting for the biggest increase. This will be one of the key challenges before the new government.
Indeed, the current favourite to form the new government, the Bharatiya Janata Party, had in its manifesto expressed concerns over the bad debt situation. It promised “necessary steps to reduce non-performing assets (NPAs) in the banking sector” if it comes to power.
According to provisional data complied for 19 public sector banks by the Finance Ministry for the last meeting between Finance Minister P Chidambaram and public sector bank chiefs scheduled for Tuesday, the gross NPAs as a ratio of gross advances have reached 4.44 per cent against 3.84 per cent in 2012-13. Though less than 5.07 per cent as on December 2013, the gross NPAs are still at their highest level since 2004-05 when they touched 5.5 per cent.
Reasons for rise
The agenda paper cites various reasons such as sluggish domestic growth in the recent past, the slow world economic recovery, and continuing uncertainty in the global market for the rise in bad debts. Global uncertainty led to lower exports of various products such as textiles, engineering goods, leather and gems.
The paper cited the ban on mining projects and the delay in clearances that affected the power and iron and steel sector for the rising indebtedness of corporates. It said volatility in raw material prices and shortage in availability of power impacted operations in sectors such as textiles and iron & steel.
The infrastructure sector too suffered due to the delay in collection of receivables, causing a strain on various projects. The paper also pointed to aggressive lending by banks in the past as one of the reasons for their rising bad debts.
Though banks reported bad debts in all buckets, corporates loans were the worst hit, affecting the overall position. The paper said that 14 banks registered fresh slippages of 100 per cent or more. State Bank of Travancore led the tally with 281.8 per cent increase, followed by United Bank of India (270.1 per cent), Corporation Bank (173.6 per cent), Dena Bank (166.6 per cent) and State Bank of Patiala (165.6 per cent). However, Canara Bank managed to lower its bad debts in the last fiscal. Similarly, Vijaya Bank and Dena Bank reported bad debts of less than 3 per cent of their total advances.
Apart from regular monitoring, a few measures have been proposed to improve the bad debts situation. The paper suggested that the issue of delay in disposal of applications by district magistrates for taking possession of assets under the Sarfesi Act be taken up with Chief Secretaries of State governments. Similarly, it advised that the data base of credit information companies, based on the declaration of wilful defaulters by banks, be updated on a real time basis and not at the end of the quarter.
As of now , Bad debts in public sector is at 9 year high but the fact is that it will tough 50 years high if all bad debts are honestly declared by gang of corrupt officials sitting at top of each bank . Since regulators of banking sector, government of India and RBI all have complete faith on certificates given by bankers and Team of ?Chartered Accountants , they are still positive about bank's future as they are about BSNL, Indian Airlines, Indian Railways and all other PSUs.
When majority of officials in any office or any organisations are corrupt and product of bribery and flattery , bitter truth of the system never comes out. As soon as misdeeds of any officer comes to light, a gang of corrupt officials come together , apply their mind and try their best to protect such officer from punishment. But when persons like Khemka exposes the truth , entire system help in kicking out such officer or sidelining such officer from mainstream. This culture has damaged the fundamental properties of performers in Indian administrative system including public sector banks.
Banks are managed by manipulators. CEO who is best speaker and good manipulator of data win the heart of minister, RBI and GOI. Similar is the position of junior officers who are promoted only when they flatter the toe the line dictated by their immediate bosses.
Our country runs on the basis of certificates. Growth is measured by false and concocted datas and hence entire planning process remains defective and ineffective.As long as bankers are not ready to accept the bitter truth of the volume of bad debts , they can dream of and they cannot plan of making any improvement.
I have been writing on health of banks for many years , but so called positive bankers ignore it and willfully follow the wrong path to get immediate promotions and good posting.Health of public sector banks has been deteriorating for last two decades but the reality started coming to light only when CBS was introduced in these banks. On the contrary private banks accept the truth and act as per reality of environment , they act for the welfare of their organisation , not for the welfare of ministers and bosses as happens in public sector banks.
Unfortunately , the habit of concealing bad debts still rules the bankers. Mindset of bankers to win the heart of ministers by window dressing in deposits,advances and NPA has not changed till date. This is why in last fortnight most of banks exhibit unprecedented growth in business and fall in stressed assets.
For last ten years UPA has been harping on bad health of banks but did nothing to stop deterioration in health only for political gain and self interest. Let us hope for better in next government
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