Why PS Banks Are Sick Of bad Assets?

Thursday, February 27, 2014

Bank Spoiler Finance Minister

“Sau Chuhe Mar Kar Billi Haz Ko Chali”

FM Mr. PC has called a meeting of CMDs of public sector banks on 5th of March to discuss fixing responsibility of non -performing or corrupt CMD or ED or senior bankers.

Volume of Non Performing Assets in public sector banks did not grow overnight. Volume of NPA and bad assets has grown over a decade and purely due to political exploitation of bank and total mismanagement of bank. It is not only thousands of crores but it is at least ten lac of crore of rupees which are locked in bad debts or stressed assets in banks.

Entire government along with RBI remained silent spectator of Draupdi Chirharan (loot of banks ) and rather enjoyed it by forcing CMD and EDs of bank to sanction loans to friends and relatives of ministers and to waive off loan or compromise  with loan defaulters who are in good book of politicians associated with his party. 

It is none other than PC who immediately after taking charge of Finance Ministry removed Mr. D. K. Mittal , finance Secretary who was trying to cure sick bank to some extent. He lost no occasion to put blame on previous RBI governor Mr. G Subbarao and now trying his best to do same for Mr. Rajan current RBI Governor for his fault and for all the lapses and fault of his government.He does not hesitate to throw out any officer or any CMD if anyone of them fail to bow down before his whims and caprices.

 I do not understand whether Mr. PC is cracking jokes on CMDs of banks or he has called a meeting of CMDs to fix responsibility on those who did not share ill earned money honestly with PC and other minister colleagues. It is not difficult but impossible to distinguish the difference between PC and team of CMDs and EDs who have been appointed by none other than PC and his yes-men.People of India view PC or FM or CMD and EDs of banks or that of PSUs in same stream.

When  a police inspector gets the post of Thana in-charge of a cream police station after payment of handsome money, it is but natural that he tries to recover many times of it when he comes to power at creamy post.When transfers and promotions of top officials take place on consideration of money , the same bad culture is spread in all vulnerable posts down the line.Similar may be the situation in public sector banks.

Now when the UPA government is likely to go and when days of FM are numbered, he is trying to pretend as if he is messiah of banks and he is one and only one person who is really bothered of safety of banks. He is not bothered of wage revision of bank staff who have been crying for wage revision for last fifteen months without any outcome.When the question of respectable hike in wages of bank staff arises, he says entire profit of bank cannot be spent on wage hike.

He and his government was sleeping for last ten years and now on the verge of their exit from power, they pose like film actors as if they are concerned for rise in stressed assets in Banks and that for falling profits of the banks.

For almost a decade they damaged economics of telecom sector, mining, administration and damaged entire manufacturing sector including infrastructure , power,power distribution, airlines and what not by mismanagement.Economic condition of the country has reached pathetic position due to misrule of UPA government. Corporate houses and social activists including many economists started talking of policy paralysis and economic slowdown. Even PM, FM and key ministers started crying of sickness of economy. They reduced fuel subsidy and allowed price rise to go beyond control.

However I will like to say without hesitation that clever ministers like MMS or PC used to shed Crocodile Tears on pathetic financial situation of the country .  Because on the eve of election the same ministers are distributing all freebies and giving all concession on fuel and MANREGA which in their view had caused sickness in Indian economy.They did not act against corrupt leaders involved in 2G or CWG or coal scam or any other scandalous misappropriation of government fund.

It appears ridiculous after igniting the country to fire , same government is now  planning to come out with ordinance to combat menace of corruption. They managed passing of Lokpal Bill and whistle blower bill in the last session of the Parliament and they will now bring ordinance for residual bills when their days in government are few.It appears as if they are digging grave for new government.

UPA government wasted ten years time in criticizing BJP and all other opponents of the UPA government by using secular card or quota card or tried to win the hearts of common men by using loan waiver or subsidy weapons. They did not and could not assess the intensity of public anger against rampant corruption and willfully suppressed the movement against corruption and black money led by Team Ramdeo and Team Anna and then by Mr. Kejriwal and his party called as Aam Admi Party.

For last nine years and more UPA government and team of ministers left no stone unturned to accumulate wealth by abusing and misusing power and now preaching sermons to entire India. It is banks which helped the UPA led government for last ten years in fulfilling the ill motivated task of MANREGA or Financial Inclusion or credit growth or in extending lacs of crores of rupees in the name of stimulus package to corporate sector. It is banks which sacrificed crores of rupees in loan waiver or in compromise with defaulters and all at the pressure of FM and PM 

It is dirty politicians who injected poison in the blood of bankers and it is they who caused damage to not only banks but also BSNL, Indian Airlines and many PSus. It is none other than CMD and EDs of public sector bank who propagated the bad culture of politicians in their banks and is is they who performed unholy tasks of politicians by crushing bank staff and by damaging the interest of bank shareholders and common men customers of banks.

It is therefore astonishing that FM in his last meeting with CMDs of bank scheduled on 5^th of March will preach sermon to them on how to stop loot and how to fix responsibility on looters. 

Perhaps ,Birds of same feather will gather together to discuss their success story of corruption and thank each other on farewell to PC.

Accountability of top management in focus at finance minister, bank chiefs’ meet -Economic Times 27.02.2014

MUMBAI: The finance ministry has drawn up a rather unusual agenda for chiefs of large commercial banks for their next meeting. Rajiv Takru, secretary, financial services department, has asked bank chairmen to come prepared to discuss wage negotiation, leave travel concession and delegation of power and responsibility of top management of banks. 

Finance minister P Chidambaram will meet bank CMDs - possibly his last, since poll dates will be announced next month - on March 5 to review  bank's performance, followed by Takru's meeting. 

"The ministry may be aiming to make the top management accountable and responsible for their actions following the episode of a Kolkata-based bank," said a bank chief who did not wish to be named. He, however, clarified that state owned banks no longer enjoy the kind of autonomy they used to in the past. "It looks like the government wants to control banks while making the management accountable," he added. 

Monday, June 24, 2013

It Is Only In Public Sector Banks

It is only in banks that promotion process considers the cases of only those officers who apply for it. If good officers do not apply for promotion, banks will depend on bad officers who apply for promotion and who have Godfather behind them to take care of their cases in interview.

This is why I am tempted to say that banks will have to learn promote those who really work in order of seniority and will have to kick out or give VRS to those who do not perform even after serving the bank for two or three decades. I am unable to visualize a situation where an officer who has served a bank for three year of four years or say ten years may be more brilliant and efficient and found to be fit for the post of executive in scale IV r scale V or scale VI than a person who has served the bank for two to three decades with best appraisal reports every year.  

It is possible only in government banks that officers with 20 years of best appraisal reports are not promoted whereas officers of two to three years service and that too with bad appraisal reports are promoted.

It is possible only in banks that an officer promoted to the rank of General Manager but not found fit for the post is given the charge of Publicity, or KYC or ATM or something like that.

It is possible in banks only that officers who have not worked in branches are made Regional Head or Zonal Head. Officers expert in agricultural financing are posted in urban areas and officers who are expert in marketing are made officers for handling banking routine operation and officers expert in credit growth or in business growth are posted in remote rural areas. Officers expert in domestic business are posted at overseas branches or foreign exchange branches and expert in foreign exchange business are posted in agriculture potential branches.

It is possible in banks only that officers who has acquired plenty of banking degrees to get promotion but who is not fit and who is not interested for taking wise decision on problems faced by branches.

It is possible only in banks that an officer promoted to the rank of General manager but not found fit for the post is given the charge of Publicity, or KYC or ATM or something like that .It is possible only in PS Banks that officers not found successful in running branches or who have not at all worked in branches are made Regional Head to monitor working  of branches and to plan growth of branches.

It is possible in banks that officer promoted to scale III or scale IV are posted at scale I or scale II branches and are advised to work as clerk in branches or as telephone operator in Administrative offices.

It is possible in public sector banks only that important works are handled by officers who are rejected in promotion processes and non-significant works are handled by promoted senior officers.

It is possible in banks only, that officers who do not know about credit processing rules are made branch head and who do not know about recovery processes are made recovery officers.

It is in banks only that Hindi belt officers are posted in southern states and south people are posted in North or in east without taking care of his ability to deal with the situation he is supposed to face. And handle wisely and effectively.

It happens so only in banks because top ranked officials mostly act on their whims and merit oriented policies have been turned into demerit oriented so that they can perpetuate reign of self satisfaction at the risk of organizational safety.

It is only public sector banks which are mostly used by majority of  politicians for political gain and not for the real welfare of  the bank nor its customers or investors or bank staff 

It is the first time that the  Secretary ,Department of Financial Services (DFS)  , Ministry of Finance (MOF) have openly admitted that Volume of Non Performing Assets (NPA) or bad debts in banks appearing before media is not the creation of last six months or a year. They are mainly those NPAs which were not disclosed willfully by clever bankers. Those clever bankers are now holding top posts such as Executive Director or CMD of a bank or the other.They concealed all bad debts to avoid provisions and to inflate profit to get the award from DFS and MOF.

It will not be an exaggeration to say that only clever bank officials who are master in window dressing could get quick promotion during last ten years and more taking advantage of reformatory policies of the government. These clever executives got a series of monetary incentives from government as well as from bad borrowers who got hassle free loan and free money from bank without any brake. Loan account of these bad borrowers were treated as Good and standard till the government ordered banks to identify bad borrowers by using technology  of CBS. And I do not hesitate in saying that ill-motivated works of all clever bank officials were indirectly getting support from DFS and MOF. Now the officials of RBI as well as that of MOF are shedding Crocodile Tears.

I am surprised that still Top ranked officials have not accepted the bitter truth that major part of present NPA is due to bad decisions taken by ill-motivated officials of the bank in  nexus with powerful politicians and powerful bureaucrats .And most painful is that clever officials are continuing their dirty work even now on some plea or the other. They are still not disclosing entire bad accounts as NPA. Critical loan accounts are not disclosed by using tools of rephasing or restructuring or by tapering with the system and by taking certificate from greedy Chartered Accountants who are sellers of their signature. 

Secretary DFS is still unaware how this trend of bad financing and concealment of bad advances continuing in most of public sector banks. It is remarkable to say here that rise in bad debts can stop only if competent, skilled, honest and devoted officers are promoted to higher level. It s unfortunate that officers who have got almost negligible knowledge in credit processing and in assessment of credit worthiness of the loan seeker are getting promotion quickly due to their closeness with higher bosses and it is they who are getting the post of Branch Head or Regional Head or Zonal Head . As a consequence advances sanctioned by these inexperienced and dishonest officials become bad in a year or two. For two to three years these bad loans are concealed by bad officials to avoid punishment and finally these accounts are declared NPA at opportune time and that too, giving wrong reasons. This bad culture is behind all mess banks are trapped in.

Officers getting promotion in two to three years are head of the branch where 20 to 30 years better staff are working under him.It is unimaginable that banks will grow in healthy manner under the leadership of such inexperienced and dishonest officers whose career is decided not on the basis of their merit but on the basis of flattery and bribery. This vital point is not yet taken seriously by any higher officials, any minister and any secretary DFS .

Until banks are able to take care of good, honest and really performing officers and until they learn to give weightage and full respect to seniority , one should not dream of any basic reformation in bank and should not expect in any fall in bad assets. During last twenty years , though Human resource policy of the bank and promotion policies of every bank have been made merit oriented , in fact the execution of these policies is totally fraudulent and dependent on whims of the top officials who are more interested in personal gain than the growth of the organization they serve. Officers who are not even acquainted with various processes and policies of the bank are head of branches ,regions and zones and those officers who know more are working as humiliated subordinates under them. 

Only God can save these banks from corrupt officials. Secretary may preach sermons and issue guidelines and orders but until they are followed up in true spirit , it is very difficult to change the trend of rise in and debts and indifferent attitude of really good officials who are not at all taking part in promotion process because they know that without Godfather they cannot succeed.

To add fuel to fire, banks are unable to recover the money from willful defaulters due to various legal constraints, which clever Secretary DFS has not admitted as one of the main reason for poor recovery and for rise in bad debts in banks. Though Secretary has admitted that there are several willful defaulters where promoters are wealthy but not repaying dues of banks, he has failed to tighten the legal system and administrative machinery under their control who have created more hurdles in disposals of cases filed under DRT or SARFACIA or in the offices of Certificate officer or DM. It is greedy officials in government offices, DRT, courts who in collusion with bad borrowers postpone decisions on cases filed by banks against bad borrowers for years and decades.

GOI has data on all such litigations pending in various courts, but they do not like to act sincerely to expedite the disposal of cases to recover the money from bad borrowers who are categorized as willful defaulters.

I agree that natural calamities, global recession or some genuine failure of project which results in loan account going bad are beyond the control of Secretary DFS or MOF , but I am certain that if they at least control the controllable reasons behind bad debts there will be drastic improvement in health of Public sector banks and they will be able to put brake on rising debts. At least DFS and MOF can take lesson from private banks which are performing better than PSB under same economic situations and under same global environment.