It is the duty of RBI to ensure correctness of financial results announced by various banks including private banks to avoid repetition of stories like that of Satyam Computers. It is the duty of RBI to carry out random checking of bank financials and internal working from time to time to create good culture and to stop fraud and manipulation in banks. RBI officials used to audit in seventies and eighties but gradually they stopped this culture because they are also not adequately manned to cope with the work load needed to properly audit thousands of branches .It is therefore not surprising they too shake hands with clever bank officials and indirectly favour culture of manipulation. Even politicians do not like exposure of bad health of banks .They all are birds of same feather.
RBI is therefore bent upon avoiding owning the responsibility of fraudulent games played by CEOs of banks in hiding bad assets. RBI officials understand very well that huge volume of stressed assets in Public sector banks is concealed by bank officials in nexus with team of Chartered Accountants who certify the correctness of financial results, correctness of profit , provision and bad assets.
RBI also knows very well that volume of bad assets will continue to rise every quarter and no power on earth can stop it , can reduce the speed of assets turning bad until there is change of hearts and change in attitude of credit officials of banks, change in mindset of dirty politicians who are least bothered of quality of assets but more concerned about vote bank and lending and until there is change of heart of officials and magistrates sitting in various administrative offices, courts, police department, DRTc etc.
Here it would like to add here that it is the team of Charted Accountants who are supposed to be more intelligent and talented and who are the competent and legal bodies to certify the correctness of financials of all companies and banks, certify bad assets as standard assets in nexus with bank officials and in lieu of some costly gifts and red carpet welcome extended to them by bank officials..
It is CAs who guide banks how to conceal bad advances , how to lend money to bad borrowers, how to manipulate financials to inflate profit and reduce provisions against bad loans. It is team of CAs who guide business men how to evade tax and how to use black money in real estate or in business itself. It is team of CAs who sign on balance sheet of branches of banks blindly or in greed of some valuable gifts. It is team of CAs who sell their signature at every point of business , at every point of compliance and certification. Gift culture at all levels make the case of certification easy .
Bank officials have been in habit of concealing bad asses to please their bosses, A Branch Manager of a branch try to please his Regional Head,, a RH may try to please his Zonal Head and all try to keep the Chief of Bank in good mood and for this purpose they all have to conceal bad assets .If any officer or any team of CAs dare declaring bad assets as bad asset truly, their career is sure to be doomed. O the contrary officers and CAs who are clever in concealing bad debts are promoted and their career is brightened.
Every quarter bank Chiefs promise that the health of bank will improve from next quarter . They book good profit in one quarter and show drastic fall in profit in next quarter. This clever hide and seek game of figures has been continuing for last ten years and specially after from the period when bank became technology friendly .
The bitter truth is that neither RBI , nor bank officials, nor team of CAs and nor politicians want to say spade a spade . They all are so called positive-minded and it is their compulsion to show banks as healthy so that evil works are not exposed. It is their compulsion to conceal bad assets and to book more and more false profits and projects banks as prosperous so that investors and customers of banks do not lose trust on PS banks.
If a NPA of a bank rises, investors will avoid investing in share of such banks, business men will not like to park their fund in such banks and will not like to borrower money from such banks, RBI officials will have to face the awkward position before ministers, and finally politicians will have to face the anger of common men whose hard earned money will be at stake in case of bank going weak and finally sink.
It is therefore wrong to believe that bank board will be able to find out or detect the fraud game played by CAs and clever bank officials . After all , if they say bad assets as bad , it will tantamount to digging own grave. When protectors become looters, none can save us from disaster. When team of CAs can be bought , when bank officials are bought, when legal officials are bought ,when politicians are bought and when every good certificate of good health can be bought by every officer , RBI should not expect correctness of financials of any bank in particular and any company in general .
Similarly art of Tax evasion taught by CAs to business community help in creation of black money in the system in nexus with tax officials, Hence it will be wrong to blame business community or any individual for tax evasion or for buying a landed property at higher rate but registering at lower rate using black money. It is a well established culture in India and to stop the same is nothing but hard nut to crack . Even politicians cannot survive without black money , how others will stop playing with powers of black money. Culture of flattery will end as soon as culture of dishonesty is stopped. None will like it from core of their heart . All want others to be his or her yesman .
If RBI officials , to begin with ,make a through scrutiny of all accounts of all borrowers who have been enjoying credit facility of more than 100 or 50 crore , the bitter truth of bad debts will come to surface, provided however that bank officials are kept miles away from the place where scrutiny is taking place and provided talented team of CAs are not allowed to talk to any borrower and any bank officials during the period of audit and inspection and entire task is conducted before CCTV and financially expert team of media men.
If RBI does not have enough manpower even to make scrutiny of Rs.100 crore borrower, they may start the task with scrutiny of books of best five banks . If it is proved that banks considered as best performers are best only due to best manipulation and fraudulent placing of figures only , it will become crystal clear to all concerned that the crisis in public bank is more deep rooted , bad culture is imbibed in DNA of all concerned and to stop the culture of manipulation in PS banks is nothing but wondering in dreamland.
It is worthwhile to mention here that proposals of loans and advances of Rs.50 crore or Rs.100 crore and above are sanctioned by none other than bank boards . It is bank boards which are supposed to monitor the health of high value loans . How it is then possible for such bank boards to doubt financials certified by CAs ? It is just like asking a thief to investigate the act of stealing and punish the culprit. There is invariably an unity among dishonest and corrupt officials . They all try to save each other in their mutual self interest. It may be kept in mind that each bank board is manned by RBI directors also.
If a Branch Head says that loan sanctioned by his predecessor is bad due to bad lending or bribe led lending, he will have to face the same precarious situation when his successor joins his branch after his transfer. As such each officer thinks it better and safe to hide bad loans by hook or by crook to save his colleague from punitive action and to avoid rejection in promotion processes. This culture is well established at all levels of management.
RBI says bank boards to do detailed scrutiny of financial results-Business Standard-15.05.2015
In the first bi-monthly monetary policy statement of 2015-16, RBI had proposed to do away with the Calendar of Reviews and replace it with the seven critical themes. These include business strategy, financial reports and their integrity, risk, compliance, customer protection, financial inclusion and human resources.
RBI said it has been observed that the Calendar of Reviews uses considerable board time and, as a result, the board might not be in a position to give focused attention to matters of strategic and financial importance. The committee had also recommended that discussions in the boards need to be upgraded and greater focus should be given to strategic issues.
According to RBI, business strategy would include development of new products; competitiveness of individual businesses; business reviews in relation to targets. Risks would include policies concerning credit, operational, market, liquidity risks; assessing the independence of the risk function.
Compliance would include regulatory requirements; adherence to the RBI and Securities and Exchange Board of India norms; observations from the annual financial inspection by RBI, among others.
Customer protection would look at mis-selling, particularly third-party products; laying down the appropriateness of products to different customer segments; understanding the broad trends among others. Financial inclusion would look into review of priority sector lending; payments for the disadvantaged; deposit mobilisation from weaker sections; support to microfinance institutions; and other issues.
The theme human resources would look at appointments and approvals of directors, perks and perquisites for employees, incentive schemes for employees, promotion policies for employees, training and skill development of employees.