Banking on a better tomorrow: Public sector banks scout for a survival kit- Financial Express 8th Jun 2015-
By: Shayan Ghosh
( Read my Observation below)
( Read my Observation below)
With private sector banks leading in fees, retail loans, savings and current accounts, public sector banks have a tough fight on their hands.
Click Here To Readh How PSBs are Losing Ground Like Telcom BSNL and Indian Airlines
My Observation:
Bad debts or stressed assets or None Performing Assets , all are more or less same and they are all responsible for continuous downfall in profit and shrinkage in profitability , erosion in capital and they all add injury to sickness of banks. There are many internal reasons which cause creation and accumulation of bad assets. There are external reasons like political exploitation and shortcomings of remedial measures through legal recourse and administrative hurdles in smooth and timely recovery of dues from defaulters. There may be adverse affects on repayment culture due to high interest rate or loan waiver culture announced by politicians for vote purposes. There may be many more other reasons in the eyes of regulators or from the point of view of Chiefs of banks.
Whatsoever may be the reason behind growing sickness in PSBs, it is dead sure that health of public sector banks has been consistently deteriorating despite claim of Government and RBI that health of bank is improving or likely to improve from next quarter.
Manmohan Singh, former Prime Minister used to say every now and then that price rise will be contained in forthcoming quarters or government banks will be strengthened by infusing additional capital to improve the health of public sector banks. But he undoubtedly failed to do any thing good for betterment of PSBs and to ensure that further deterioration does not take place. He along with all his Finance Ministers got success in passing his tenure as Prime Minister of India. PSBs continued to face one after other impediments in containing sickness due to stressed assets.
Deterioration may stop only if banks are able to stop at least addition of fresh slippages and are able to improve the quality of lending and are able to alter and modify the dirty intention of politicians behind change in policies and quality of human resource .
On the one hand present government is talking of cleanliness in bank , talking of full autonomy and absolute operational freedom to banks and promising non interference in internal affairs of public banks, on the other they are fuelling the fire by imposing one after other non-banking workloads to already declared sick banks and thus contributing fresh damage to asset quality. Banks may earn few crores in insurance activities or may earn blessings of Modi by devoting full energy in execution of social welfare programmes of the government, but they are likely to loss many more times of income by causing standard assets to turn substandard assts.
I however feel pleasure that at least Reserve Bank of India and present government has at least publicly understood the gravity of risk due to ever rising bad debts in bank's books and risk inherent in hiding bad debts. They have understood well the bad impact of culture of window dressing in business, evergreening of loans to contain slippages to NPA, restructuring of bad loans to hide bad loans , the culture of loan waiver schemes and finally the bad ways and means used to achieve imposed target by clever bankers.
Government of India and RBI has taken some steps during last one year to improve health of ailing banks. Capital infusion has been linked to performance of banks. Provisioning on restructured loans has been increased, Process of recruitment of top officials like ED and CMD is getting new direction to stop corruption. All these measure may have short term benefits , but they have potential to add new wounds on sick banks. For example if weak banks are not given help of capital infusion , they will have to keep their interest rate high and they will lose business in the hands of stronger banks. Weak bank will thus grow weakness and face the risk of closure due to Basle norms. Similarly delay in posting of ED and CMD of banks may cause addition of fresh problems. Posting of officers from private banks as Head of PSBs may have greater repercussion down the line in a bank.
I welcome new steps taken by RBI to contain bad debts and to empower banks to acquire 51 % equity of chronic defaulters. It will have a deterrent effect on defaulting companies. It will have a positive impact on companies which are doing well and which are loyal borrowers of banks. But mere becoming owner of 51% equity of a defaulting company , banks will not be able to recover the bad money to a great extent. It is to be kept in mind that Ratio of capital in books of a company is microscopically small. A company with equity of Rs.10 crore only can get the loan of hundreds and thousands of crore of rupees from banks. Similarly premium on equity in stock market will also extinguish as soon as the news of taking over of 50% stake by lending bank goes into market. Further , as soon as bank become owner of 50% equity of a company , it is duty bound to take care of company's health, formulate plan for growth , stop leakage of income and improve operational capacity which banks will not be able to dream of in near future.
I am however happy that present government is not dead as previous government was dead . Current government under the leadership of Mr. Narendra Modi has done a lot of positive work and actively engaged in doing more and more to improve the intrinsic value of PSBs. Hundreds of projects which were languishing in corridors of government departments in search of statutory clearances or licenses have now got green signal and they can now at least go for erection of plant , start operation or think of expansion of their project. Companies which took loan for setting up a plant were paying interest but not able to their expansion work .Companies will no longer face the risk of escalation in project cost if all departments under GOI start functioning well. I hope Mr. Modi will give a real boost to banks in near future.
Real transformation and real reformation in banks will take place only by striking at the root of Human Resource in banks, administrative and legal set up. GOI will have to stop promotion, transfers and recruitment based on flattery and bribery. They will have to give value to seniors and respect experienced officers. Motivation in rank and file in banks will only help bank management in containing risk and in curing disease for good and for ever. Banks were better managed during seventies and eighties compared to what they are doing in the name of merit , in the name of reformation and in the name of freedom.
RBI mulling proposal to give lenders 51% equity control in company that fails to repay -
Economic times 8th June 2016
MUMBAI: Banks and the banking regulator are running out of patience as sticky loans soar. Last week, senior officials of Reserve Bank of India and five large lenders met to discuss what could till now be the most dramatic step to deal with truant borrowers. On the anvil is a harsh new rule — christened "strategic debt conversion" — that will automatically give lenders 51% equity control in a company that fails to repay even after its debts are rejigged to give the management a second chance.
My Observation:
Bad debts or stressed assets or None Performing Assets , all are more or less same and they are all responsible for continuous downfall in profit and shrinkage in profitability , erosion in capital and they all add injury to sickness of banks. There are many internal reasons which cause creation and accumulation of bad assets. There are external reasons like political exploitation and shortcomings of remedial measures through legal recourse and administrative hurdles in smooth and timely recovery of dues from defaulters. There may be adverse affects on repayment culture due to high interest rate or loan waiver culture announced by politicians for vote purposes. There may be many more other reasons in the eyes of regulators or from the point of view of Chiefs of banks.
Whatsoever may be the reason behind growing sickness in PSBs, it is dead sure that health of public sector banks has been consistently deteriorating despite claim of Government and RBI that health of bank is improving or likely to improve from next quarter.
Manmohan Singh, former Prime Minister used to say every now and then that price rise will be contained in forthcoming quarters or government banks will be strengthened by infusing additional capital to improve the health of public sector banks. But he undoubtedly failed to do any thing good for betterment of PSBs and to ensure that further deterioration does not take place. He along with all his Finance Ministers got success in passing his tenure as Prime Minister of India. PSBs continued to face one after other impediments in containing sickness due to stressed assets.
Deterioration may stop only if banks are able to stop at least addition of fresh slippages and are able to improve the quality of lending and are able to alter and modify the dirty intention of politicians behind change in policies and quality of human resource .
On the one hand present government is talking of cleanliness in bank , talking of full autonomy and absolute operational freedom to banks and promising non interference in internal affairs of public banks, on the other they are fuelling the fire by imposing one after other non-banking workloads to already declared sick banks and thus contributing fresh damage to asset quality. Banks may earn few crores in insurance activities or may earn blessings of Modi by devoting full energy in execution of social welfare programmes of the government, but they are likely to loss many more times of income by causing standard assets to turn substandard assts.
I however feel pleasure that at least Reserve Bank of India and present government has at least publicly understood the gravity of risk due to ever rising bad debts in bank's books and risk inherent in hiding bad debts. They have understood well the bad impact of culture of window dressing in business, evergreening of loans to contain slippages to NPA, restructuring of bad loans to hide bad loans , the culture of loan waiver schemes and finally the bad ways and means used to achieve imposed target by clever bankers.
Government of India and RBI has taken some steps during last one year to improve health of ailing banks. Capital infusion has been linked to performance of banks. Provisioning on restructured loans has been increased, Process of recruitment of top officials like ED and CMD is getting new direction to stop corruption. All these measure may have short term benefits , but they have potential to add new wounds on sick banks. For example if weak banks are not given help of capital infusion , they will have to keep their interest rate high and they will lose business in the hands of stronger banks. Weak bank will thus grow weakness and face the risk of closure due to Basle norms. Similarly delay in posting of ED and CMD of banks may cause addition of fresh problems. Posting of officers from private banks as Head of PSBs may have greater repercussion down the line in a bank.
I welcome new steps taken by RBI to contain bad debts and to empower banks to acquire 51 % equity of chronic defaulters. It will have a deterrent effect on defaulting companies. It will have a positive impact on companies which are doing well and which are loyal borrowers of banks. But mere becoming owner of 51% equity of a defaulting company , banks will not be able to recover the bad money to a great extent. It is to be kept in mind that Ratio of capital in books of a company is microscopically small. A company with equity of Rs.10 crore only can get the loan of hundreds and thousands of crore of rupees from banks. Similarly premium on equity in stock market will also extinguish as soon as the news of taking over of 50% stake by lending bank goes into market. Further , as soon as bank become owner of 50% equity of a company , it is duty bound to take care of company's health, formulate plan for growth , stop leakage of income and improve operational capacity which banks will not be able to dream of in near future.
I am however happy that present government is not dead as previous government was dead . Current government under the leadership of Mr. Narendra Modi has done a lot of positive work and actively engaged in doing more and more to improve the intrinsic value of PSBs. Hundreds of projects which were languishing in corridors of government departments in search of statutory clearances or licenses have now got green signal and they can now at least go for erection of plant , start operation or think of expansion of their project. Companies which took loan for setting up a plant were paying interest but not able to their expansion work .Companies will no longer face the risk of escalation in project cost if all departments under GOI start functioning well. I hope Mr. Modi will give a real boost to banks in near future.
Real transformation and real reformation in banks will take place only by striking at the root of Human Resource in banks, administrative and legal set up. GOI will have to stop promotion, transfers and recruitment based on flattery and bribery. They will have to give value to seniors and respect experienced officers. Motivation in rank and file in banks will only help bank management in containing risk and in curing disease for good and for ever. Banks were better managed during seventies and eighties compared to what they are doing in the name of merit , in the name of reformation and in the name of freedom.
RBI mulling proposal to give lenders 51% equity control in company that fails to repay -
Economic times 8th June 2016
MUMBAI: Banks and the banking regulator are running out of patience as sticky loans soar. Last week, senior officials of Reserve Bank of India and five large lenders met to discuss what could till now be the most dramatic step to deal with truant borrowers. On the anvil is a harsh new rule — christened "strategic debt conversion" — that will automatically give lenders 51% equity control in a company that fails to repay even after its debts are rejigged to give the management a second chance.
Read more at:
http://economictimes.indiatimes.com/articleshow/47578551.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
Msg from Gumparthi Venkata Subba Ramaiah
Dear Friends, FOR YOUR KIND ATTENTION
The first weekly response report is submitted to the AIBRF,AIBPARC,IBA ,UFBU & MOF for their Perusal and response:To day the first response is received from Shri.S.C.Jain,AIBRF,which is furnished below for your information. I personally thank all the members for their spontaneous response in very large numbers. I hope your continued support will be submitted in the next week end report before the proposed IBA-AIBRF meeting.
"sharbat jain
7:52 AM (45 minutes ago)
to me
The issue being examined by us for taking up at the appropriate level
s.c.jain
From: c <gvsramaiah@gmail.com>
Sent: Sun, 07 Jun 2015 18:41:59
To: "sharbat_123@rediffmail.com" <sharbat_123@rediffmail.com>, aibparc@gmail.com, ALL INDIA BANK OFFICERS Confederation <aiboc.sectt@gmail.com>, General Secretary <aiboa@vsnl.net>, bank officers <aiboa.hq@gmail.com>, webmaster@iba.org.in,fm@finance.nic.in, fmo@nic.in, fs@nic.in
Subject: Reduction in Pension for employees under 10th BPS
Respected Sirs,
This is to bring it to your kind notice that a group of Bank employees who are retiring on or after 01.11.2012 are getting badly affected by reduction in Pension. This has been agitating the minds of the employees. Never in the history of the Public Sector Banks in any Bipartite settlement such a thing has happened.
We request you to be sympathetic to the cause of the Retiring employees who have served sincerely for the growth and consolidation of Banks for the past 35 to 40 Years. This is the major group of the employees retiring in very large numbers who are recruited to the Banks';service immediately after their Nationalisation.Many of them have given their best part of their lives in serving the remote areas of the country on cross country transfers.Most of them have to /are retiring with very little number of promotions and hence their Salary had been low. With the present 10th BPS signed,it has dealt unrecoverable blow to their hope of living in peace during their retired lives.
In order to focus attention of the concerned Authorities and Participants for signing of the 10th BPS to Bank employees a Social survey is conducted on Social Media (Face Book). The resonse is overwhelming and members responded in large numbers spontaneously. We request you recognising the feelings and hopes of the employees in the ensuing meeting with Retired employees Associations /Unions necessary and suitable amendments may be made so that after a hard labour of service the employees will be allowed to retire peacefully and respectfully.
We reproduce the Text of the Post for the survey:
Gumparthi Venkata Subba Ramaiah
June 4 at 9:34am • Edited •
Retired Bank Employees ‘Leaders are supposed to meet the IBA in the THIRD WEEK of JUNE as per IBA-CHAIRMAN invitation.
The Retired employee’s leaders as usual like UFBU leaders have not come open and made clear their agenda / Demands for discussion. They have not sought any inputs from the members. It is strange that they maintain Stoic silence on issues currently agitating the minds of the Young retirees (on after 01.11.2012): Therefore we have come forward to set an agenda for the Retired leaders because the interests of the young retirees should not be sacrificed at the ALTAR, of doing JUSTICE to the Old Pensioners. We don’t believe in division of Pensioners into various categories. So every retired employee is a PENSIONER and the problems are common:
WE DEMAND:
1. NO Reduction in Pension(for retirees from 01.11.2012). Grade Pay/Spl.Pay must be reckoned to the PF and PENSION.
2. The additional Stagnation increment must be made applicable from 01.11.2012 without any discrimination.
OR
If the Spl.Pay or Grade Pay is not ranking for Pension, old rate of DA should be made applicable (As on date 50% instead of 33.33%).
3. PENSION UPDATION to all Pensioners coinciding with Wage revision.
4. The Wage revision must be converted into TRIPARTITE with the Retired employee’s representatives.
5. The Representatives of the Retired Employees on the Board of management of the Fund.
If you agree for the above demands to be placed before IBA please say “YES” if you believe otherwise say “NO”.
(Please share it on your Face Book Page for better and wider circulation. The result / your opinion (survey) will be sent to the leaders)
http://economictimes.indiatimes.com/articleshow/47578551.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
Msg from Gumparthi Venkata Subba Ramaiah
Dear Friends, FOR YOUR KIND ATTENTION
The first weekly response report is submitted to the AIBRF,AIBPARC,IBA ,UFBU & MOF for their Perusal and response:To day the first response is received from Shri.S.C.Jain,AIBRF,which is furnished below for your information. I personally thank all the members for their spontaneous response in very large numbers. I hope your continued support will be submitted in the next week end report before the proposed IBA-AIBRF meeting.
"sharbat jain
7:52 AM (45 minutes ago)
to me
The issue being examined by us for taking up at the appropriate level
s.c.jain
From: c <gvsramaiah@gmail.com>
Sent: Sun, 07 Jun 2015 18:41:59
To: "sharbat_123@rediffmail.com" <sharbat_123@rediffmail.com>, aibparc@gmail.com, ALL INDIA BANK OFFICERS Confederation <aiboc.sectt@gmail.com>, General Secretary <aiboa@vsnl.net>, bank officers <aiboa.hq@gmail.com>, webmaster@iba.org.in,fm@finance.nic.in, fmo@nic.in, fs@nic.in
Subject: Reduction in Pension for employees under 10th BPS
Respected Sirs,
This is to bring it to your kind notice that a group of Bank employees who are retiring on or after 01.11.2012 are getting badly affected by reduction in Pension. This has been agitating the minds of the employees. Never in the history of the Public Sector Banks in any Bipartite settlement such a thing has happened.
We request you to be sympathetic to the cause of the Retiring employees who have served sincerely for the growth and consolidation of Banks for the past 35 to 40 Years. This is the major group of the employees retiring in very large numbers who are recruited to the Banks';service immediately after their Nationalisation.Many of them have given their best part of their lives in serving the remote areas of the country on cross country transfers.Most of them have to /are retiring with very little number of promotions and hence their Salary had been low. With the present 10th BPS signed,it has dealt unrecoverable blow to their hope of living in peace during their retired lives.
In order to focus attention of the concerned Authorities and Participants for signing of the 10th BPS to Bank employees a Social survey is conducted on Social Media (Face Book). The resonse is overwhelming and members responded in large numbers spontaneously. We request you recognising the feelings and hopes of the employees in the ensuing meeting with Retired employees Associations /Unions necessary and suitable amendments may be made so that after a hard labour of service the employees will be allowed to retire peacefully and respectfully.
We reproduce the Text of the Post for the survey:
Gumparthi Venkata Subba Ramaiah
June 4 at 9:34am • Edited •
Retired Bank Employees ‘Leaders are supposed to meet the IBA in the THIRD WEEK of JUNE as per IBA-CHAIRMAN invitation.
The Retired employee’s leaders as usual like UFBU leaders have not come open and made clear their agenda / Demands for discussion. They have not sought any inputs from the members. It is strange that they maintain Stoic silence on issues currently agitating the minds of the Young retirees (on after 01.11.2012): Therefore we have come forward to set an agenda for the Retired leaders because the interests of the young retirees should not be sacrificed at the ALTAR, of doing JUSTICE to the Old Pensioners. We don’t believe in division of Pensioners into various categories. So every retired employee is a PENSIONER and the problems are common:
WE DEMAND:
1. NO Reduction in Pension(for retirees from 01.11.2012). Grade Pay/Spl.Pay must be reckoned to the PF and PENSION.
2. The additional Stagnation increment must be made applicable from 01.11.2012 without any discrimination.
OR
If the Spl.Pay or Grade Pay is not ranking for Pension, old rate of DA should be made applicable (As on date 50% instead of 33.33%).
3. PENSION UPDATION to all Pensioners coinciding with Wage revision.
4. The Wage revision must be converted into TRIPARTITE with the Retired employee’s representatives.
5. The Representatives of the Retired Employees on the Board of management of the Fund.
If you agree for the above demands to be placed before IBA please say “YES” if you believe otherwise say “NO”.
(Please share it on your Face Book Page for better and wider circulation. The result / your opinion (survey) will be sent to the leaders)
Very correctly said Sir,the staff who has given their blood for banks for more than 35 years or more are the most sufferers of 10th BPS ,I am still under shock how our leaders have accepted the reduction in pension ,in my opinion it is the one & only settlement where senior comrades have been cheated.Even before the settlement was signed comrades had suspected that their retirement benefits will decrease even then our leaders on whom we trusted made the things worst for their comrades. Things will look more & more difficult after 7th Pay Commission when Govt Employee. will be getting sizeable increase that too without any strikes on lose pay. Really some thingh needs to be done for bank staff otherwise day is not far when the bankers will be least paid staff with highest responsibility.
ReplyDeleteVery correctly said Sir,the staff who has given their blood for banks for more than 35 years or more are the most sufferers of 10th BPS ,I am still under shock how our leaders have accepted the reduction in pension ,in my opinion it is the one & only settlement where senior comrades have been cheated.Even before the settlement was signed comrades had suspected that their retirement benefits will decrease even then our leaders on whom we trusted made the things worst for their comrades. Things will look more & more difficult after 7th Pay Commission when Govt Employee. will be getting sizeable increase that too without any strikes on lose pay. Really some thingh needs to be done for bank staff otherwise day is not far when the bankers will be least paid staff with highest responsibility.
ReplyDeleteVery correctly said Sir,the staff who has given their blood for banks for more than 35 years or more are the most sufferers of 10th BPS ,I am still under shock how our leaders have accepted the reduction in pension ,in my opinion it is the one & only settlement where senior comrades have been cheated.Even before the settlement was signed comrades had suspected that their retirement benefits will decrease even then our leaders on whom we trusted made the things worst for their comrades. Things will look more & more difficult after 7th Pay Commission when Govt Employee. will be getting sizeable increase that too without any strikes on lose pay. Really some thingh needs to be done for bank staff otherwise day is not far when the bankers will be least paid staff with highest responsibility.
ReplyDeleteVery correctly said Sir,the staff who has given their blood for banks for more than 35 years or more are the most sufferers of 10th BPS ,I am still under shock how our leaders have accepted the reduction in pension ,in my opinion it is the one & only settlement where senior comrades have been cheated.Even before the settlement was signed comrades had suspected that their retirement benefits will decrease even then our leaders on whom we trusted made the things worst for their comrades. Things will look more & more difficult after 7th Pay Commission when Govt Employee. will be getting sizeable increase that too without any strikes on lose pay. Really some thingh needs to be done for bank staff otherwise day is not far when the bankers will be least paid staff with highest responsibility.
ReplyDeletePost is too long all the information it contains are useful .......
ReplyDeleteStock future tips