Instead of pointing out the wrong intention behind all decisions taken by public banks he has held process of decision taking guilty for rise in bad debts or for poor performance of banks .Finance Minister has cleverly avoided the bitter truth that large scale corruption and inefficiency of officials working in banks, administrative offices, high power political positions, Reserve Bank, CBI, CVC, Anti-corruption bureaus and in department of audit and inspections are behind growing weakness of banks and growing volume of bad assets.
Finance Minister is perhaps not ready or do not find it wise to accept the bitter truth behind weakness of banks. Even a layman or common banker watching quality of lending, quality of write off of bad loans, quality of compromise settlement with defaulting borrowers, quality of recruitment in bank, quality of promotions and quality of transfers either from inside or from outside the bank will not hesitate in accepting that it is bad intention of decision takers at all levels including banks, administrative offices, political superior positions, legal set ups to deal with litigations related to bad debts which have contributed more in deteriorating health of public sector banks .
Loan sanctioned by a Branch Manager of a public bank within his delegated power is not at all victim of bureaucratic delay in decision but victim of evil forces building pressure on him from higher offices, from political masters and from local mafias which result in lending to unscrupulous persons and which motivates him to lend money for earning bribe .
It is illegal money earned by bad lending which helps him in keeping his bosses happy, in buying mental peace, in maintaining so called higher standards in society and in getting quicker promotions and in getting postings at desirable places. It is flattery and bribery which helps him in getting admiration and elevation in all meetings and in superseding many junior officers in career path.
It is bribery and flattery which help him in safeguarding himself from all types of actions and for his ill-motivated decisions taken in lending. A Branch Head or any officer in public bank is otherwise fully free to take his wise and honest decisions in sanction of a loan or on any issue if he or she is ready to face frequent transfers, rejections in promotions and humiliation in meetings attended by higher bosses conducted for fixing targets or review of targets.
A Branch Manager can take bold and beautiful decisions on lending and he can say No to bad proposals only if he is sure of getting full protection from police , politicians, local mafias and above all from his superiors for his honest and wise decisions. Fear of disturbances from local people and from internal super duper bosses normally compels a bank officer to indulge in bad quality lending. Similarly a Regional Head or Circle Head or a Zonal Head in public bank has enormous power to sanction high value loans and they are not subjected to any hindrance in taking good decisions but they are subjected to such a situation that they are constrained to take unwise, foolish and suicidal decisions on bad proposals of loans.
On the contrary , management of private banks have very safe and well regulated mechanism to control on sanction of any loan , on monitoring of loan and finally in ensuring regular repayment of loan as per schedule set by them while sanctioning a loan. Most of branches and majority of Branch Heads are not empowered to sanction loan and they have to depend on Loan Processing Branches which are manned by purely skilled and intelligent officers who are well acquainted with rules framed ,they know how to deal with and how to assess a loan proposal emanated from branches and they are fully accountable for recover of each instalment in due time.
Officers working in private bank cannot dream of lending to fake person, fake companies , ineligible persons and persons with weak credentials, doubtful integrity and doubtful creditworthiness. There may be defaults in private banks too, but the probability of it is lower .Officer indulging in bribe or found negligent in taking decisions are warned and finally kicked out. There is none to protect corrupt officer.
Yes it is true that private banks fail when the question of recovery from recalcitrant borrowers comes. They are equal victim of legal inefficiencies and administrative corruption. They try to take all safety and all precautions at the time of sanction so that cases of default becomes minimum and that of compulsion of legal action become negligible. They keep politicians away from all sanctioning processes. They are not afraid of torturous transfers. They get incentives and bonuses based on profit they earn for bank. They get promotions and cream posting based on their earning capacity and not based on recommendation of some VIPs as usually happens in public banks. Only tested persons are made branch head.
Private banks do not pay higher pay to all its staff. It is a myth that public bank do not perform because they are less paid compared to private banks. Average pay of staff in public bank is more or almost equal to that in public bank. Staff working in front counters in branches of private banks are paid even less than what a peon is paid in public bank. Marketing officers in private banks get pay and incentive largely based on business they mobilise unlike public banks where payment of salary do not depend on business but on scale such marketing officers recruited .
There are many marketing officers in public banks who are getting so much pay which seniors in private or public bank do not get . Business is not much important in public bank. Officer in all scales in public bank and all so called specialists or marketing officers have to learn the art of keeping higher bosses happy by hook or by crook . They need not bother for quality of work or quality of lending or for losses caused to bank due to their improper actions and ingenuine decisions. In private banks , all staff are bound to think for income for the bank, for growth of bank and not at all for pleasure of higher bosses to an extent which his counterpart in public banks is constrained to do.
Another false reason attributed by Mr. Jaitley for poor performance of public bank is that management of public bank cannot recruit talented staff directly from campus. I would like to mention here that more than ninety five percent of staff in private banks are picked up from local towns or on the basis of simple tests carried out in places where branches are situated. It is hardly a few staff who are picked up from campus. On the contrary public banks have been recruiting staff even in higher scales from campuses or from other public banks for decades.
In the name of merit , management of bank use to recruit officers from outside taking interviews by so called talented officials . An officer working for a bank for decades in scale I may not be promoted to scale II in promotion process , but an useless , weaker and inferior officer from another public bank with one or two year experience is directly recruited in scale II or scale III or scale IV in the name of merit. In this way , management of public bank become ready to pay two to three times higher pay to newly recruited weak officer compared to officers working in the same bank for years and decades .All this happens in public banks in the name of merit and merit only and this has been happening for last two to three decades.
It is only for last about two years that these banks could not recruit from campus due to Supreme Court Order. Clever FM should ask management of these public banks what benefits bank could earn by recruiting officers paying higher salary from outside in higher scales at the cost of existing experienced officers . I do not want to conclude at my own that FM has reached a wrong conclusion due to wrong inputs given to him by corrupt top bankers, but I can say that he should do more homework before saying that banks in public sector are weak in performance because they are facing constraints in recruitment from campuses.
I however agree with the views FM Mr Jaitley that in most of the socio-economic initiative the government has taken, whether Jan Dhan programme or social sector insurance schemes, it was the public sector banks that did a commendable job . It is true that these schemes affected the work quality of public banks to some extent. But it is not acceptable that these schemes resulted in bad quality of lending and rise in stressed assets in banks. These schemes are unavoidable task because public banks are to take care of social objectives also by dint of their nature of existence. These schemes may consume precious time of bank officers but cannot be held responsible for wrong and ill-motivated decisions taken by bad bankers and bad politicians. These schemes have undoubtedly forced banker to spend a great chunk of their valuable time in execution of various government schemes of the past and present government.
Due to such schemes, quantity of lending may be lesser but quality of lending should not get affected at any cost. After all pubic banks are meant to take care of national priorities . Banks were nationalised with a sole objective to serve priority sector and to develop core sector of the country . Profit was not the motive at the time of nationalisation of banks.
But it does not mean that bank officers or politicians will be allowed to loot public money and will not be punished even if ill-motivated decisions are taken in lending and banks have to incur losses or erosion in profits to the tune of crores and crore of rupees. Government will have to find out what portion of stressed asset is due to wrong persons and what due to wrong policies . Generalised conclusion taken by FM on performance done by public bank is totally untrue and unacceptable .
FM or government cannot prescribe proper medicines until they find out the real nature and correct reason behind sickness. I fail to understand why FM has taken Indradhanush i.e. seven steps to reform and transform public banks when they have been doing commendable job. I have no doubt in my mind that all steps taken by FM during Modi led government till date are not enough and not appropriate to cure sick public bank. They all will prove to be Failed and ineffective and also add fuel to fire.
However I may add here that employees working in public banks have huge potential to perform provided they are properly handled and properly awarded .All private banks of 21st century which are performing well have been able to perform by employees picked up from public bans only. They too recruit staff from unemployed youth born and educated in India only . Staff working in private banks are not from Mars planet or loan takers in private banks are not from Moon.
Why public banks employees fail in public bank and get success when they join private banks is a question which Mr. Jaitley should answer. Staff of public bank can perform well only if the atmosphere is conducive for performance and entire team is well devoted, honest and loyal to banks as their counterpart in private banks are. Fault lies in top management , in politicians running the government and not in policies or rules .
Bank Employees service condition in India!
THE HINDU
Open Page
All in a day’s work
Updated: August 11, 2015 02:59 IST | Hema A. Krishna
Cultural lessons on India are often best learnt by observing how the service industry addresses the needs of customers.
I left for the United States in 1989 to pursue my doctoral studies. Since 2010, I have been visiting India every summer to spend time with my parents, and have been amazed by the rapid transformation of this nation over time.
During a recent visit, I accompanied my father to his bank branch on numerous occasions. The booming Indian economy coupled with the increase in the proportion of middle-income senior citizens who conduct their transactions in person, in the morning and afternoon hours of the day, have seriously strained the customer service function of the industry. What is remarkable is that even amid the chaos and confusion, all the customers’ needs are met. The U.S. may be seen as a role model in customer service in general, but the number of transactions in that country’s service industry as a whole pales in comparison to what we witness in India.
During a typical 30-minute visit to the branch in Coimbatore, I observed that 20 to 25 customers deposited or withdrew cash. This function was handled by three staff members with speed and accuracy.
Four customers (most of them senior citizens), opened, closed, or renewed their fixed deposits: evidently, they supplemented their monthly pension with the interest earned from fixed deposits. Many of them brought their spouses along, perhaps to ensure that another pair of eyes would check for the accuracy of the transactions. I also noticed two customers who visited their lockers to take out or deposit jewellery, or check whether their hoard was intact! India has the highest per capita consumption of gold, which is lavishly displayed during weddings and other social occasions. Two customers came in for foreign exchange transactions (to convert dollars to rupees). Both were arguing furiously with an employee seeking better exchange rates, even as the latter tried to explain that they had no control over the rates! Finally, there was one customer who came in for a housing loan. An employee told me it was just a normal day. These functions were all handled by a total of four staff members.
In contrast, in my U.S. bank, during a 30-minute span approximately 10 customers are likely to withdraw or deposit cash from the automated drive-through counter, and four to five are likely to enter the premises and have the service performed by one of the four cashiers. In my 22 years in Cincinnati, I am yet to see a customer open his or her locker. Nor have I seen any customer coming in for a foreign currency purchase. On rare occasions I have seen one or two customers meeting the staff (three employees excluding the cashiers) for advice on fixed deposits (CDs) or for a housing loan. The atmosphere is eerily quiet, and whenever I walk in the staff members are happy to see me — because there is someone to lift them from their boredom.
I have concluded that the employees in India who I watched have advanced degrees in multitasking and patience, since they were able to provide the service despite a number of constraints. I noticed that no customer was willing to wait. When one employee was busy attending to the needs of a customer, the latter did not think twice about interrupting other employees who were busy with their own customers.
Coffee was served to high-value customers. Thankfully, an errand boy took the order, saving the employee the trouble of running to the store next door to get the coffee! One employee was on vacation, and his/her official and personal calls were being addressed by the ones on duty. During the 30 minutes, I noticed that the employee who was handling my father’s transactions had to respond to four phone calls which were meant for the absent staff member. Each call lasted about two minutes and the conversation included sharing details of the absence, as we watched. Also, the branch manager popped in a number of times even as the employee was in the middle of a conversation with my father, for photocopying work. Since workplaces in India are quite hierarchical, she immediately rose from her seat to carry out his request.
The pattern I saw here is typical of a democratic transitional economy. Tier 2 cities such as Coimbatore are more likely to witness this style of functioning in Indian banks.
U.S. bank employees do not face any of these constraints, since customers are willing to wait for their turn (assuming there is a queue) and will never cross over to another staff member for advice. Also, there is a self-service coffee counter for customers.
My biggest takeaway from this experience was that despite the many interruptions and the huge volume of work handled in the branch, customers received very good service. My second takeaway was that a visit to a bank in India can be truly entertaining!
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The author is Professor of Strategy and Global Business, Williams College of Business, Xavier University, Cincinnatti.
Unfair, unjustified’ step: bank unions-The Hindu Business Line-17th August 2015
August 17:
Bank unions are not happy with the government’s decision to induct two CEOs from the private sector at two top public sector banks. The government had announced on Friday that PS Jayakumar and Rakesh Sharma would be appointed MD & CEO of Bank of Baroda and Canara Bank, respectively. This was being done as part of a package of measures called ‘Indradhanush’ to revive the banking system.
CH Venkatachalam, General Secretary, All-India Bank Employees Association, has called the step “unfair, unwarranted and unjustified”. He said these banks were huge financial institutions with social and public welfare orientation. That culture doesn’t fit with what these private executives bring to the table.
He said that there was no need for such appointments when there were enough committed, dedicated executives within public sector banks. This sends a wrong signal that the government is committed to privatisation of banks.
The move to provide higher performance bonus for MDs and CEOs did not find favour with him, either. He asked, “Why should only the Chairman or CEO get such performance bonus? After all, it is team work. Why not extend that to every one?”
He wondered why the package of measures announced on Friday did not include a single mention of how the banks were to recover the money from defaulters.
Why the decision to allow private sector honchos to head 2 PSBs is bold but risky-By
August 17:
The Centre’s move to induct two CEOs from the private sector into two major public sector banks (PSBs) as part of its plan to revive government banks is a bold step with all its attendant risks. PS Jayakumar and Rakesh Sharma are being appointed to head two major public sector banks — Bank of Baroda and Canara Bank, respectively.
If the government had chosen to induct them into one of the smaller banks, it might have hardly created any ripples. The fact that they are being asked to head two of the largest banks in the government sector (with international operations and a number of subsidiaries) has raised some eyebrows.
Even those public sector bankers (General Managers and Executive Directors) who ascend to the top job in another bank find that the transition is not very easy.
They tell you that it takes anywhere from six months to a year to get a grip on what is going on in the new bank. Some CEOs have failed because they couldn’t get along in the new bank — although the upside, if you can call it that, is that the tenures hitherto have been mercifully short.
Immediate challenges
What are the immediate challenges that these new CEOs will face? First is the poor state of the economy, which is yet to show a clear sign of revival and, consequently, contributes to tepid growth in new loans and large accumulation of bad loans.
What are the immediate challenges that these new CEOs will face? First is the poor state of the economy, which is yet to show a clear sign of revival and, consequently, contributes to tepid growth in new loans and large accumulation of bad loans.
Second, they need to find the right people in middle management and build a future-ready cadre.
Third, they need to raise capital to fulfil regulatory requirements.
Fourth, they need to restore morale and, of course, breathe new life into these institutions that have remained headless for quite some time. This would be a handful for anyone.
Procedural hassles
What makes it more challenging, a retired top banker said, is the requirement of procedures taking precedence over results, which is ordained by the government on all PSBs. This cannot easily be understood and followed by an outsider, he said.
What makes it more challenging, a retired top banker said, is the requirement of procedures taking precedence over results, which is ordained by the government on all PSBs. This cannot easily be understood and followed by an outsider, he said.
For example, even for procurement of small things, a PSB has to go through a tendering process and give it to the lowest bidder. Should there be a deviation in procedure, even if it ultimately proves beneficial, the bank’s senior management will have to face vigilance queries.
Moreover, for all government schemes, PSBs are required to deliver results, Jan Dhan scheme being only the latest example. The challenges that await these two can well be imagined — and the learning curve will probably be steep.
There are some repercussions for those in the middle management at these banks because of the induction of outside talent at the top. For some, it may seem as though their career progression plans are prematurely closed.
Their morale, already a bit battered, may now suffer a bit more, at what is an implied rebuke of their operating style and competence for the top job.
This could well occasion some churn at those levels and may heighten the problem of the missing middle management that many public sector banks already grapple with.
The possible negative fallout of this experiment to get private sector CEOs may have been realised by the government and that is why it probably decided to do this as a limited experiment.
Financial Services Secretary Hasmukh Adhia said in an interview to this paper that the next round of appointments will be only from the current pool of Executive Directors in public sector banks.
Deserves fair trial
Despite the many downsides to this experiment, it marks a leap of faith by the government and deserves a fair trial.
Despite the many downsides to this experiment, it marks a leap of faith by the government and deserves a fair trial.
The fact that the two gentlemen in question have refused market-related compensation and has decided to take it up purely as a professional challenge, fetches them some brownie points and will add some heft when they try to boost staff morale.
Certainly, the bank staff will have one less issue to gossip about, and the two have started on the right note — emphasising their commitment rather than their price.
Problem Of Stressed Assets Is Bigger -By Danendra Jain
Now the million dollar question is whether banks can sustain such large and continuous loss of money in bad debts and in write offs. There is limit for everything. Year after year banks are sacrificing huge money in writing off loans and in compromise settlement with defaulting borrowers. Load of bad debts is rising every quarters. Banks have learnt how to hide bad debts by using various tools of rephrase, restructure or evergreening of loans. Bank officials who do not hide bad loans are taken to task and those who are master in manipulations are awarded. Not only bad loans but rising fraud cases in banks are likely to pose a greater challenge to survival of banks.
Not only this , even government does not want banks to disclose all bad debts in one go because it will expose politicians who misused and mismanaged banks .They do not want to close the source which help them in gaining political and financial powers. When banks face capital crisis , Government infuse capital to save them from exposure. After all , it is not the private property of politicians which is lost but it is public money which is ultimately lost and it is public who have to bear the burden of taxes. But the question is how loan this huge loss of public money will continue and how long Government will help banks.
It is important to point out here that the same government stopped subsidy on fuel like petrol, diesel or LPG in phased manner only because it could not sustain the increasing load on subsidy on public exchequer. Government justify the stopping or curtailing of fuel or fertiliser subsidy saying that it hampers growth and it leads to pilferage of subsidy . They says that the amount of such subsidy is largely taken away by middlemen, babus, officers and upper class .
Click Below given link to read more
http://importantbankingnews2.blogspot.com/2015/08/problem-of-stressed-assets-is-bigger.html
Problem Of Stressed Assets Is Bigger -By Danendra Jain
Now the million dollar question is whether banks can sustain such large and continuous loss of money in bad debts and in write offs. There is limit for everything. Year after year banks are sacrificing huge money in writing off loans and in compromise settlement with defaulting borrowers. Load of bad debts is rising every quarters. Banks have learnt how to hide bad debts by using various tools of rephrase, restructure or evergreening of loans. Bank officials who do not hide bad loans are taken to task and those who are master in manipulations are awarded. Not only bad loans but rising fraud cases in banks are likely to pose a greater challenge to survival of banks.
Not only this , even government does not want banks to disclose all bad debts in one go because it will expose politicians who misused and mismanaged banks .They do not want to close the source which help them in gaining political and financial powers. When banks face capital crisis , Government infuse capital to save them from exposure. After all , it is not the private property of politicians which is lost but it is public money which is ultimately lost and it is public who have to bear the burden of taxes. But the question is how loan this huge loss of public money will continue and how long Government will help banks.
It is important to point out here that the same government stopped subsidy on fuel like petrol, diesel or LPG in phased manner only because it could not sustain the increasing load on subsidy on public exchequer. Government justify the stopping or curtailing of fuel or fertiliser subsidy saying that it hampers growth and it leads to pilferage of subsidy . They says that the amount of such subsidy is largely taken away by middlemen, babus, officers and upper class .
Click Below given link to read more
http://importantbankingnews2.blogspot.com/2015/08/problem-of-stressed-assets-is-bigger.html
New Key Performance Indicators For Public Sector Banks-By Rajesh Goyal
(Source:allbankingsolutions.com)
On 14th August 2015, GoI has announced Indradhanush - a framework for bring reforms in the pubic sector banks. One of the interesting and crucial points in this framework is the changes suggested as per key performance indicatros for public sector banks. We will discuss below the same. Let us first under the changes.
The present system for the measurement of bank’s performance was a system called Statement of Intent or popularly SoI. Under SoI, the banks used to come up with their annual target figures based on certain criteria decided by Ministry of Finance. These annual targets proposed by banks were then discussed between the Ministry and banks and final targets were decided. The experience indicated that this whole exercise took very long and sometimes the targets for banks used to be finalized only towards the end of the year . Now the new frame work has made sweeping changes in the same.
The new framework of Key Performance Indicators (KPIs) have been divided broadly into two parts :
(i) The total marks to be allotted for quantifiable measurable criteria are 80.
(ii) The remaining 20 marks are reserved for measurement of qualitative criteria which includes strategic initiatives taken to improve asset quality, efforts made to conserve capital, HR initiatives and improvement in external credit rating. The qualitative performance would be assessed based on a presentation to be made by banks to a committee chaired by Secretary, Department of Financial Services.
These changes will also impact the Branch heads and other field functionaries including circle / regional / zonal heads of the banks, as now focus will shift from the targets on increase in deposits and credits to other performance parameters. As bank incumbents have to meet the new set of targets, the lower functionaries across the bank too will be given targets based on what bank now targets to achieve.
The full details of these are presented below :-
| A. QUANTATIVE PARAMETERS: | |||
| Parameter | Maximum marks | Improvement required to get full marks compared to previous year | |
| Efficiency of capital use | 25 | ||
| a | Return on Assets | 10 | 20 bps |
| b | Return on Equity | 5 | 300 bps |
| c | NIM (Domestic) | 5 | 10 bps |
| d | Cost (Overhead) as % of total income* | 2.5 | 250 bps (reduction) |
| e | Cost (Expenses / provision for employees) as % of total income* | 2.5 | 100 bps (reduction) |
| *Total income = Net Interest Income + Total other Income. | |||
| Growth/Diversification of business / processes | 25 | ||
| a | Fee Based Income as % of total income** | 7.5 | 200 bps |
| b | Increase in Retail Credit as % of total credit | 7.5 | 300 bps |
| c | Increase in number of Transactions through alternate channels as % total transactions | 5 | 500 bps |
| d | Saving Bank : Improvement in share in total deposit | 5 | 100 bps |
| **Total income = Interest earned + Total other Income | |||
| NPA Management | 15 | ||
| a | Impaired Assets as % of gross advances | 10 | 100 bps (reduction) |
| b | Increase in Cash Recovery as % of opening gross Non-Performing Assets | 5 | 1000 bps |
| Financial Inclusion | 15 | ||
| a | Zero Balance in total PMJDY accounts opened by the Banks | 2 | Less than 20% |
| b | For PMJDY Accounts : % of active Rupay Card vis-Ã -vis total Rupay Card issued by the Banks | 2 | Above 10% |
| c | % of eligible PMJDY Accounts, as per IBA guidelines, disbursed overdraft facility by the Banks | 2 | Above 20% |
| d | AADHAR seeding of Bank Accounts | 2 | Above 75% |
| e | Share in enrolment in 3 Social Security Schemes vis-Ã -vis Bank’s share in Deposits (as compared to total of PSBs) | 2 | Share in Social Security Schemes equal to or greater than Deposit share. |
| f | Achievement of targets set under Pradhan Mantri Mudra Yojna | 2 | Above 75% |
| g | Growth in Housing Loans under Priority Sector as compared to growth in gross Bank credit | 2 | Increase of 5% in total loans |
| h | Growth in disbursement of Education Loans (as compared to disbursement in previous financial year) | 1 | Above 20% |
| Total | 80 | ||
| The improvement achieved below maximum level will be evaluated on proportionate basis of achievement. Marks obtained in fraction will be rounded off to nearest unit. For Financial Inclusion, score below maximum will be evaluated as per specified matrix. | |||
| B. QUALITATIVE PARAMETERS: | |||
| Parameter | Maximum marks | Benchmarking | |
| A | Improvement in external credit rating | 5 | Improvement in external rating. |
| B | Strategic initiative taken to improve asset quality | 5 | Innovative initiatives taken by management to improve asset quality. |
| C | Efforts made to conserve capital | 5 | Efforts other than capital infusion. |
| D | HR initiatives (skill development and talent management) | 5 | Innovative initiatives and rate of attrition. |
| Total | 20 | ||
| Evaluation of Qualitative Parameters will be finalised by a Committee chaired by Secretary (FS). | |||
| GRAND TOTAL | 100 | ||
Neither govt nor ps banks in a position to accept reality.....banking has become only number game....
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