Denial Of Loan Is Crime ?

Stop filing FIRs against bank managers for not sanctioning farm loans: Finance Ministry -
Economic Times 23rd July 2015

Click Here to read How BM suspended for not sanctioning Loan
MUMBAI: The Union finance ministry has written to the Maharashtra government, directing it to stop filing FIRs (first information report) against bank managers of nationalised banks who didn't sanction loans to farmers.

The finance ministry's letter terms the state government's move as "catastrophic", and warned that it could have "unintended consequences".

The letter, a copy of which is with ET, has been written by Hasmukh Adhia, Secretary in the Ministry of Finance, Department of Financial Services, on July 8 to Maharashtra chief secretary Swadheen Kshatriya.

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http://economictimes.indiatimes.com/articleshow/48183771.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

'Don't compel banks to give farm loans', Central govt tells Maharashtra - Midday

In an embarrassment to the ruling BJP-Shiv Sena combine in Maharashtra, the central government has written to the state asking it to desist from compelling banks to extend farm credit, official sources here said on Wednesday.

The letter, dated July 8, has been sent by union Finance Secretary Hasmukh Adhia to state chief secretary S. Kshatriya - barely a couple of days after Maharashtra Chief Minister Devendra Fadnavis warned that bank managers who do not extend farm credit would be prosecuted.


See more at: http://www.mid-day.com/articles/dont-compel-banks-to-give-farm-loans-central-govt-tells-maharashtra/16391198#sthash.OmtHONgZ.dpuf

 

Govt will have to act if banks refuse loans to eligible farmers: CM Devendra Fadnavis

 http://indianexpress.com/article/cities/mumbai/govt-will-have-to-act-if-banks-refuse-loans-to-eligible-farmers-cm-devendra-fadnavis/

My Observation are as follows

In the history of bank, I think it will be the first time that a Bank Manager is suspended only because he did not sanction a loan as per wishes of politician, and that too at the instance of a government official.

This incident is not a small one, it should be treated as alarm bell not only for bank officials but for survival of banks too. And this incident is not also unanticipated and unexpected. Government of Maharashtra has already issued warning in the last month that if bankers do not sanction crop loan , FIR will be lodged in police station against them. Trade Union leaders thought it better to keep mum and they did not react at all.

 In olden days Minister like Janardan Pujari used to build pressure on Banks to organise Loan Melas and disburse loan to farmers, traders and others as per sweet will of Block officials and district administration. Bank officials who remained behind target for loan under government scheme or who did not want to sanction loan as per will of politicians used to be transferred to different places and used to be punished in promotion processes.Transfer powers are used in banks as well as in government offices as weapon to kill an officer who do not follow top officials blindly. Trade Union leaders joined hands with corrupt top officials and allowed exploitation of their members .

As a result of this undue pressure on lending , bank officials willingly or unwillingly learnt to oblige politicians and government officials even at the cost of quality of loan . Because it was after all a question of safety of service with respect and do called dignity. Some of officials while working in cooperation with government officials also learnt how to earn bribe and commission in sanctioning of loans under government schemes. This is called  "To kill two birds in one stone". In villages, it is called as "Aam Ka Aam Ghutli Ka Dam' Bank officers thought it better to earn money for self by obliging top bosses .

Not only this , in second phase politicians like Devi Lal and VP Singh built pressure on banks to write off of loans. As a result , it became easier for corrupt bankers and corrupt government officials to sanction loan blindly to serve their dual but evil motive of earning bribe and achieving set targets. This is because , they became sure that even if they sanction loans to bad persons or fake persons, they or their colleagues in next few years will get an opportunity to write off such loans . IN this way , all proofs of bad lending will be finished for ever. Borrowers too are well aware of this culture. They know the art of taking loan from bank and then the art of  building  pressure through local leaders for writing off of loans.

Then came Minister like Chidambram who was not a small player but a big and giant player. He was well aware that political leaders of his party used to build pressure on bank officials to sanction loans to farmers, traders and industrialist. He was right in thinking that  he can earn vote bank by forcing bankers to sanction smaller loans to villagers and by writing off small loan he can further make his future brighter , He took a step forward by forcing banks to lend to big corporate houses in hundreds and thousands of crores of rupees so that not only  he himself can earn huge money as gift from these corporate houses , but his party can also get political fund from corporate houses as a award. He thought to become invincible and he had a dream that his party will win the heart of not only small borrowers but also corporate borrowers and thus his party too will also become  invincible in election.

In this way , Mr. Minister created ground for final collapse of public sector banks. He used to keep all CMDs and EDs in his grip . He knew how to earn money by selling the post of CMD and EDs. He was least bothered of health of banks. He rather helped private banks to prosper and grow by leaps and bounds. He promoted the culture of selling of Government fund . Private banks could offer black money or illegal money to buy thousands of crores of rupees in form of deposits for their banks whereas top officials remained behind in this mad rush for deposits. Actually officials of PSBs are satisfied with undue promotion they used to get from ministers and also patronage they used to get from ministers when their evil works and corruption in lending got exposed .

As a consequence , bad loan started rising in almost all banks. Then ministers of old government used to guide bankers how to hide bad loans or how to rephase and restructure bad loan   to reduce bad loan ratio. IN this way , officers in banks learnt to inflate profits by concealing bad loans through manipulation and by reducing provisions.

Ministers used to tell  bankers that they should compromise with bad borrowers and sacrifice bank's good money for bad borrowers . To add fuel to fire , Congress Government sacrificed Rs.75000 crore by preaching write off of bank loan in the year 2008 so that victory in election of 2009 could be guaranteed.

Now the government has changed. Now Technology called as Core Banking Solution (CBS) has already been introduced in all banks. Now it has become a little bit difficult for bankers , not impossible to hide bad loans. As such banks are now planning how to hide bad loans and how much to declare bad loan in a particular quarter or year so that their old sins are not exposed overnight.

Anyway , whatever may be the historic reasons behind accumulation of bad loans in the books of banks , it is now open secret that NPA ratio and ratio of stressed assets in Public sector banks has gone beyond control . Government is constrained to provide additional capital to these banks for survival and for compliance with Basel norms.

In modern era, government has taken a jumping step forward to gain political advantage though in the name of growth and  giving a boost to credit growth. They are aspiring   to win the heart of farmers, industrialists and all. They have directly putting pressure on banks for sanctioning of loan or to face the punishment like suspension. IN this way it has become clear now that bank officials has to prepare themselves to sanction loan strictly as per whims and fancies of government officials or to remain ready for facing the punitive suspension and humiliation in public domain.

If bank unions chose to function as brothers of top officials and are busy in flattery and bribery like top officials, common bankers should be ready to face the music of ministers, politicians and local government officials . it is no more easy for them to safeguard their service and to protect their respect in society. So far as future and health of banks is concerned , it is sure to move from bad to worse and government will continue to infuse capital to save banks from disaster.

Officers who are clever , will sail their boat in the direction of current of the river and those who will go against the current will either sink or leave the bank. Let us see what happens. But the incident of aforesaid suspension will trigger a new disturbance in banking, it is sure. Here it is not a question whether the act of suspension is justified or not, it s a question of freedom of officers in taking prudent and wise decision while sanctioning a loan.

It is not a question whether the loan amount is small or big. It is a question of culture of lending which is being imbibed in bankers by clever politicians and then denying wage hike telling the burden of bad loans and lesser profitability as reason. When bankers can succumb to pressure for small loans, they freely sanction bigger value loans too without taking into account the risk factor but only considering the whims and fancies of politicians. They thus add to the basket of bad loans without any fear and repercussion.

Some clever officers of bank and politicians argue that  small loans are small piece of total bad assets of banks and banks are supposed to fulfil social welfare motive. Ok It is true . But when top 200 borrowers are said to be constituting 99 percent of bad loans, they say that loan to big corporates are necessary to fulfil national objective for  creating enough infrastructure and for adequate growth in GDP.


When media talk of recovery from bad borrowers who are high profile business houses or take punitive action against erring bank officials and politicians, they argue that such action will be a disincentive to bank officials and it will cause erosion in credit growth and force bank officials to stop sanctioning loans.



It means only evil ways are ways for success. It is better to say that success cannot be achieved by honest and good ways and means.



There is obviously no way to aspire for good lending and recovery from bad borrowers and bad bankers. If Small loan turn bad, it is in large numbers with small values and causes a slow poison to kill bank. When big loans like that of Kingfishers and Zoom Developers go bad, it is like Potassium Cyanide for banks and bank staff.

After all bankers are also human being and when survival is at stake, they think ,as their counterpart in government offices and department think, it better to swim and sink in the direction of river . When protections like Trade Union Leaders become role player of management, it will be unwise for any practical bankers to stick to principles of banking or to follow strictly the rules and laws of lending.