Ability Of Finance Ministers

Finance Minister Shri Arun Jaitley Reviews the Financial Performance of Public Sector Banks (PSBS); asks the CEOs of PSBs to clean-up their Balance Sheet at the Earliest ( News From PIB)

            The Union Finance Minister Shri Arun Jaitley said that the Public Sector Banks (PSBs) have made great contribution in rebuilding the economy of the country. However, the Finance Minister asked the bankers to get rid of their past scars of Non Performing Assets (NPAs) and clean-up their balance sheet at the earliest .The Finance Minister Shri Jaitley also assured them full support of his Government in this regard. He said that the Government will take necessary policy corrective measures wherever required. The Finance Minister Shri Jaitley was addressing the Chief Executive Officers (CEOs) of the Public Sector Banks (PSBs) here today while chairing the Quarterly Review Meeting of the PSBs.

The meeting was attended among others by the Minister of State for Finance, Shri Jayant Sinha, Deputy Governor, RBI Shri Kundra, Secretary (Financial Services) Ms Anjuli Chib Duggal, as well as Secretaries of various other Ministries of Government of India along with senior officers of the Ministry of Finance.

            Earlier Shri Anup Pujari, Secretary, Ministry of Micro, Small and Medium Enterprises (MSME) discussed issues related to MSME sector including financing by banks.  Secretary, Ministry of New and Renewable Energy (MNRE) briefed the meeting about the commitment of Banks to fund Renewable Energy Projects in the next five years and praised the efforts made by banks. SBI was awarded for outstanding achievement. Ms Nandita Chatterjee, Secretary, Ministry of Housing and Urban Poverty Alleviation (HUPA )articulated various issues related to enhancing credit flow to the urban poor and implementation of the Pradhan Mantri Awas Yojana. Secretary, Ministry of Food Processing Industries briefed the participants about the utilization of Special Fund of Rs. 2000 crore set-up to provide affordable credit to designated food parks (including mega food parks) and food processing units located therein. Secretary, Ministry of Textiles discussed the issue of implementation of the programme for Revival, Reform & Restructuring (RRR) package for the handloom sector and institutional credit to sericulture. Secretary, Ministry of Rural Development Shri Mahapatra discussed the SHG Credit Linkage Plan under different schemes of the department.

In addition to the above agenda, and a detailed discussion on various subjects, the following key issues were discussed:

Financial Performance

PSBs discussed various steps being taken to improve credit growth. The issue of passing on the benefit of rate cut was also discussed, with the PSBs noting that their base lending rates had been reduced consequent upon the rate reduction announced by the Reserve Bank. There was a detailed and free flowing discussion on ways to develop core competence and niche banking. The issue of asset quality was discussed in detail and banks described measures being taken to improve asset quality and profitability with special focus on non interest income. The institutional measures being taken to assist Banks in reducing NPAs were also discussed.

Agricultural credit

The meeting took stock of the sectoral profile of the total domestic credit flow of Rs.48.25 lakh crore upto September, 2015 and noted that 58% of the agricultural credit target for the year had been achieved. Finance Minister Shri Jaitley urged the banks to achieve the target of20% growth in disbursement and 15% growth in number of accounts and also attempt to even out regional disparity in such loans. The banks briefed the meeting about various efforts that they are taking in the sector.

Educational loan

Finance Minister Shri Arun Jaitley reviewed the progress made by banks in activating the Vidya Lakshmi Portal, which is a first-of-its-kind portal providing a single window facility for students to access information and apply for educational loans provided by Banks as well as Government scholarships. Banks were requested to enter early into the required agreement to take advantage of new credit guarantee scheme.

Housing Sector

While noting good growth at 18.69% in housing loans, PSBs were also strongly encouraged to achieve growth in priority sector housing loans, which are intrinsically secure loans and which are required to provide a stimulus to overall growth. All bankers reiterated their commitment to focus on these loans.

Pradhan Mantri Mudra Yojana

The meeting dwelt at length on ways to increase the impact of the Pradhan Mantri Mudra Yojana. Finance Minister Shri Arun Jaitley urged the banks to accelerate disbursements as PSBs were expected to achieve a potential of at least Rs 70,000 crore during the current financial year. It was noted that the Indian Banks’ Association had put together a phased publicity plan, to ensure that eligible entrepreneurs were fully informed about PMMY, and thereby enabled to approach banks with their projects. While the banks increased publicity for the scheme, the demand side was being addressed by linking the skill development centers run by various Central and State Government departments, ITIs and SHGs with the banks’ financial literacy outreach. It was noted that the State-wise targets allocated by the banks needed to be reviewed, keeping in view not only the population size, but also the business potential of the state. The financial literacy outreach was being designed to cover both pre-loan familiarization training and post loan disbursal guidance regarding the credit process, repayments schedules and MSME related facilities.

At the end, Minister of State for Finance Shri Jayant Sinha distributed trophies and certificate to the winners in the category of best banks and best bank branch in order to recognise the best performers who made Pradhan Mantri Jan Dhan Yojana (PMJDY) a successful scheme.

During the meeting with Chiefs of Banks, our Finance Minister Mr. Arun Jaitley has discussed various points of importance and stressed on recovery of dues from defaulters to clean their balance sheet. The gross NPAs of public sector banks were at six per cent at the end of June, up from 5.2 per cent in March and there is no doubt that  gross NPA in the quarter ended September 2015 will further go above six percent.. Further ,according to RBI , stressed asset which  is total of gross NPA and standard restructured advances, as a percentage of gross advances moved up to 11.1 per cent as on March 2015 and it has crossed 12 percent in many banks as compared to 9.2 per cent two years ago. 

Public sector banks share a disproportionate burden of these stress. Bankers  highlighted six sectors that were facing maximum stress --iron and steel, textile, power, sugar, aluminium and construction.The Reserve Bank of India (RBI), in its financial stability report, has also cited five sub-sectors that were undergoing maximum stress, which are infrastructure, iron and steel, textiles, mining (including coal) and aviation.

Finance Minister said non-performing assets of Indian banks were at an ‘unacceptable’ level but the situation is expected to improve as the government and the central bank were taking steps to relieve stress in various sectors. He said that the health of the public sector banks was a key subject. The problem of NPA is undoubtedly to some extent  a carried over problem of the past but it continues to persist. And that problem relates to the unacceptable level of NPAs.

The meeting was attended by the Chiefs of the public sector banks as well as Secretaries from various ministries including micro, small and medium enterprises, agriculture, textiles, and rural development.The Finance Minister expressed hope that the reforms announced in the power sector will relieve the problems with the distribution companies. 

The government is also in the process of framing a bankruptcy code which is  aimed to tackle willful default and a draft paper was recently released.Regarding the issue of willful defaulters Finance Minister has  said that the lenders have the required powers and autonomy to deal with them.   And bankruptcy law, when passed, will increase the banks’ abilities to get failed creditors to exit. The government is planning to table the Bankruptcy Bill in the winter session of the Parliament.

In my opinion even if the bankruptcy law is passed , bank management will not be in a position to improve volume of recovery.There are many laws in our existing law books to deal with recovery of dues from defaulters, Banks may file certificate cases in district courts , they may file cases in Debt Recovery Tribunals (DRT) , they may file cases against High Courts and Supreme Court and they may use SERFAECI act to take possession of assets of defaulting companies to recover their dues. But unfortunately all these institutions and laws meant for helping banks in recovery  have proved ineffective . Ineffectiveness may be due to large scale corruption in the judiciary or due to lack of efficient manpower or lack of coordination among various organs of judiciary and administration or it may be due to in adequate manpower and inadequate infrastructure to deal with number of bank cases.

Lacs of cases filed by banks against small defaulters have been pending in various offices of Certificate Officers in various districts for years and decades. Because state government either keep these post vacant or give additional  charge to some other incompetent officers who do not have time and proper knowledge about bank loans to deal with gigantic number of such cases or inefficient and corrupt officers are given charge of such posts who bargain with defaulting borrowers for personal gain and cause huge loss to banks by delaying recovery  on flimsy ground for years together. 

Similarly DRTs all over the country  are not working properly and effectively. In may DRTs, they are not  having Presiding Officers for months and years or officers assigned this duty hold dual charge and unable to discharge duty sincerely and devotedly. There are many such officers in these DRTs who are so much corrupt and inefficient that cases are not decided for years or these officers give orders in favour of defaulting borrowers. 

Similar is the fate of SERFACIE act which is facing huge hurdles in effective execution for the purpose of recovery of dues from defaulters. This is why process of recovery from defaulters is too slow to help banks in reducing burden of bad debts. Majority of high value borrowers against whom banks have  filed cases in DRT or enforced SERFACEI act for recovery have approached High Court to get stay and then got success in managing to defer the hearing for an indefinite period and thus put hurdles before banks in recovery of dues from willful defaulters. 

To add fuel to fire , government of various parties during last three decades have propagated and irrigated bad culture of compromise and writing off of bad loans. Politicians use banks for political advantage and hence they sometimes announce loan waiver schemes and some other time, they build pressure on bank management to reduce burden of bad debts by compromise settlement and thus banks are constrained to sacrifice a large chunk of bad loans to clean their balance sheet, willingly or unwillingly and rightly or wrongly . In course of such exercise, many bad borrowers get success in buying various bank officials and get their loan either fully written off or sacrificed large chunk of dues. In this way they together cause huge loss to bank by writing off of entire loan or by sacrificing major portion of bad loans.

Now FM Jaitley is telling bankers that they are free to devise their ways to recover the dues from defaulters. Such advice seems to me as totally nonsensical. When all hands and legs of bank officials are bound with iron chains, the utterance of freedom become a ridiculous word. Bankers are actually free to give loan to any Tom, Dick And Herry either at their own or under pressure of higher bosses, local musclemen or politicians. Bankers are free to write off bad loans of bad borrowers or sacrifice bank's good money to please bad borrowers. To add fuel to fire , banks are forced to undertake non-banking activities like insurance, stock trading,portfolio management etc. Due to this bankers though earn a few crore of rupees in commission but cause loss to hundreds of crores of loan given to bad borrowers. There is a proverb " Gau markar Juta Dan" which means in english as "Penny wise pound Foolish".

Bankers are free to recruit any person in any post and promote them at any time. But none of these freedom has served bank's interest and volume of bad debts has been consistently increasing year after year. Several Finance Ministers of past government and FM of present government have many times expressed their concern for rising bad debts in PS banks during last ten years and more. Every quarter Ministers and RBI officials promise to take appropriate action to stop rising trend in Non Performing assets and unfortunately volume of bad debts in banks have gone up and up every quarter. Because none of FMs and non of RBI officials ever took the matter seriously . They always thought it easier to infuse fresh capital in ailing banks than to cure their sickness. It is taxpayers money which is easily available and in their control and therefore the use it always to hid sickness of banks and to hide corruption of bank officials and politicians. Politicians in general use taxpayers money as charity to distribute to whom they like , strictly as per their whims and fancies only.

Last but not the least, during last decade , quality of lending has deteriorated year after year and this is why inspite of efforts for recovery taken by bankers during last few years has failed to contain rising figure of bad debts. And there is no doubt that the volume of bad debts in banks will continue to go up and up until bankers are able to ensure quality of fresh lending. It is pity that they recover Rs.100 and by that time Rs.200 or Rs.300 of standard loan turns bad. When loan goes bad , it is easy for bankers to say that it is due to economic recession or global recession. Neither Government of India nor top management ever tried to strike at the root cause of standard advance slipping into NPA. Obviously when they are unable to find out and discover the real nature of sickness, they cannot diagnose the patient properly.  

Health of PSBs will continue to deteriorate and big bosses will continue to make promises for taking care of it. In a country when leaders are unable to say spade a spade , we cannot dream of any transformation or any improvement from current mess in economy. We will have to learn and propagate a culture where guilty are punished without loss of time and performers are only elevated to higher level. We will have to end the culture of flattery and bribery . We will have to inculcate good habits in the childhood of all Indians. 

It means to say that each employees joining in the bank have to be taught the lesson of loyalty to the organisation they serve . We have to stop the practice of worshiping bosses and we will have to end our loyalty to our bosses , our seniors and ministers . This is possible only when power of recruitment and promotion is left with minimum quantity of discretion. It is better to give all an opportunity to serve their organisation and the  country in order of seniority and if he fails even after all persuasion , motivation and training to perform as per expectation of bank, such workers may be shown the exit door without any hesitation and without much delay. 

Here it will not be incorrect to say that only a goldsmith can identify and certify purity of gold. Similarly only honest and good officers sitting in Interview panel can choose meritorious officers. Gang of thieves forming part of  Interview panels set for promotion of officers from one level to higher level cannot choose meritorious officers . This is the root cause why only yesmaen are picked up for promotion and recruitment in banking industry and this has been happening since 1991 when bank management were given power to choose officers of their choice on merit basis.

Bad Debts of PSB are at Unacceptable Level

Banks Free to Deal With Defaulters Says Jaitley

Corruption case: Court jails PSU bank official, three others-Hindustan Times 24.11.2015

A senior official of Union Bank of India and three others have been sentenced to varying jail terms of two to four years for cheating and causing a loss of Rs 1.5 crore to the bank by a Delhi court, which said plunder of public exchequer cannot be permitted at any cost.

The court said any attempt to cause wrongful loss to the public exchequer has to be dealt with sternly as public money was not for looting.

“A clear message is to be sent to the society that plunder of public exchequer cannot be permitted at any cost as the said money belongs to people of the country and is meant for development of the nation and any attempt to cause wrongful loss to public exchequer has to be dealt with sternly,” Special CBI Judge Harish Dudani said.

The court awarded four years jail term to the bank’s former branch manager M C Aggarwal and Chetan Sharma, the proprietor of Delhi-based M/S Royal Sales Corporation. It also sentenced convicts Vipin Sharma and Pawan Kumar Aggarwal, proprietors of two more private firms, to two years in jail.

The four convicts were held guilty for various offences including cheating, cheating by impersonation, using forged documents as genuine and criminal conspiracy under the IPC.

Read full news in following link

http://www.hindustantimes.com/delhi/corruption-case-court-jails-psu-bank-official-three-pvt-persons/story-D0MB1RWe7VDQRNiXWq8qmJ.html

It is reported in newspaper that rickshaw-pullers, hawkers and slum dwellers have been  made directors in many companies which had opened accounts in Bank of Baroda branches and have commited forex scam amounting to thousands of crores of rupees in Bank of Baroda scam. 

A  person who sells vegetables on his cart in North Delhi has been made director of a company. Last year, he became the director of a company overnight without even knowing it and his remuneration was Rs 10,000 per month. He is not the only one who became a pseudo entrepreneur but there are 59 like him, living in slums, like rickshaw pullers, vendors, drivers, household workers, who were approached by black money hoarders and made the Directors of 59 companies in the Bank of Baroda Rs 6,172 crore money laundering scandal. 

The CBI and ED are probing  the said biggest trade based money laundering. This is now  referred to as banking-hawala scandal. CBI  is also surprised that low-income citizens were used by the exporters/importers to send their ill-gotten money to the foreign countries. It all started in May last year. 

The businessmen  behind the transfers to Hong Kong and Dubai, after conniving with the Bank of Baroda officials  approached these slum-dwellers with a lucrative offer. The drivers, vendors etc were asked to just provide their voter ID cards for which they were offered Rs 10-15,000 per month. The amount was irresistible for people with poor background and they had to just give their document.

On the basis of voter IDs, their PAN cards were  prepared by the accused persons and then current accounts were opened in the BoB branch in the name of fake companies. Some names in these companies - Directors and partners - were almost same and companies were shown registered at fake addresses. Similarly, shell companies were opened in Hong Kong through their contacts. Once the accounts were opened, the process of transferring money through dummy companies belonging to exporters/importers began.

 As part of the modus operandi, the exporters, in order to get extra money from the duty drawback, overvalued the exports. In a release last month, ED stated that "for such overvaluation, such exporters require foreign exchange in the foreign country equivalent to overvaluatio. Similarly, the importers, who are importing the items where the custom duty is high, undervalue the imports in order to save the custom duty, and they require availability of foreign exchange in the foreign country to pay the difference. The imports of dry fruits, pulses and rice were shown to be done in these 59 companies having accounts in BoB but no imports had been done actually. 

It is  found that Rs 6,172 crore was deposited in these 59 accounts between August 2014 till August this year mostly in the form of forex remittances and transfer through other banks. The suspects used another set of persons in the transfers. It is  said that 'entry operators' found in Old Delhi area, mostly Chandni Chowk, were approached by exporters/importers to transfer cash in these 59 current accounts.

Here I would like to say that process of account opening as narrated above is not surprising and new in public sector banks. It happens in almost all public sector banks  . Officers working in these banks are given target for opening accounts and clever officers apply their mind to open either fictitious accounts or without carrying out due diligence, they open the account of any Tom, dick and Herry whoever comes to bank to open account.

Bank Officers are more concerned about their career , their closeness with their bosses, their promotion, their greed for gifts which  usually distributed by clever businessmen to get their work done hassle free and in brief for their personal wealth and position. 

Bank Officers  are least bothered about the quality of work they do. Window dressing has become the established culture at all levels and in all PSU banks. Bankers are well versed in inflating deposit figure at the end of quarter by window dressing , they know the art of inflating credit portfolio without actual lending, they are expert in booking even recovery in bad accounts without actual receipts of cash from defaulters and similarly they are expert in opening accounts without completing set norms. 

Even ministers, RBI and other agencies want achievement of target and growth in figure by hook or by crook. None of them focus on quality , all focus on quantity. Value of Non Performing Assets in PSU banks is many more times what comes in public domain and what is declared in their annual balance sheet. Even Auditors, inspectors, RBI officials , Chartered Accountants and all concerned authorities are bought or forced to sign certificates of good health . It is open secret and everyone from top to bottom knows it but can do nothing. This is well established culture.

It is now Bank of Baroda which is exposed, many more banks were exposed in past by Cobra post and  all bank will be exposed in future too. Since none of  actual culprits have been  punished in the past and since only such manipulators are elevated to higher post, the culture of manipulations have got strong roots at all levels and it is not easy to change it . 

If bank management and Government of India really want real reform , they will have to focus on quality and change the habit of forcing targets on juniors. They will have to punish guilty offices, guilty politicians, guilty promoters of the companies, guilty CAs, guilty persons who provide fake certificates , thing will start moving in right direction. They will have to ensure hundred percent compliance of rules and guidelines as it is done in developed countries like USA and UK. Country cannot book real growth only by fraudulently inflating figures 

Once they start focusing on quality, real performers will come on the forefront and they will get elevation instead of flatterers and manipulators as hitherto. And sooner , the number of real performers will start increasing and there is no doubt that volume and quantity will also get boost up as it is happening in private banks.

If there is a will, there is a way.

Read full news in Times of India 

http://timesofindia.indiatimes.com/business/india-business/Rickshaw-pullers-hawkers-made-directors-in-Bank-of-Baroda-scam/articleshow/49887027.cms

My Observation on Bank of Baroda Forex Scam: ------

Bank of Baroda is in news for last few days due to alleged forex scam valued Rs.6000 crore. It is reported that thousands of transactions took place from one branch of BOB and huge fund amounting to about Rs.6000 crore were remitted to Hong Kong in the name of  various companies as advance payment for so called import. Bank is charged with allowing money laundering .Though huge cash and inter bank transactions have taken place through hundreds of fake or genuine companies within a period of one year  ,  it appears to me, bank is not likely to suffer any substantial  financial loss.

The said Bank simply in greed of business allowed transaction without making adequate due diligence. Bank officials working in such branches normally become victim of precious gifts distributed by such ill-motivated rich customers. Ill-motivated business men know the art of motivating bank officials and politicians. There is no doubt in it that such a large value of transaction must awaken the sleep of top officials of the bank also and for such negligence some of top officials may also be punished.

But the real question is why and how RBI, Government of India  and Custom department could not smell the stink when such huge volume of foreign exchange was going out of the country through banking channels. Why RBI failed to notice huge cash and inter bank transfer of funds taking place from one bank to other. It is reported that  only 10 percent of entire transaction was in cash and rest was through fund transfers from 32 other banks. None of 32 banks could notice the irregularity going on in banks. It shows how the system in bank has rotten and how false picture is depicted by top officials to please their bosses in RBI and GOI.

There is a system of reporting of suspected transaction to head office of the bank and then to RBI along with a report on all cash transactions exceeding Rs.10.00 lac in a day.  Why so many banks failed to notice the ongoing fraud. After all, it is precious Indian money going abroad without any valid reason. If transactions in hundreds of crores go unnoticed in banks, how banks can curb lacs of such irregular transactions taking place in each bank each day. It is to be assessed whether banks are making mockery of entire KC norms and anti-money laundering Act. or is it due to political pressure.

It is also  true that the matter though belated ,came to light only when some officials of the same bank reported to RBI for investigation .

Keeping apart the said alleged scam of BOB, I would like to know what has happened to another Rs.350 crore bill discounting fraud detected in the same Bank of Baroda a fortnight ago which may cause a loss of Rs350 crore and more to bank.

Bills worth Rs 350 crore were discounted but the payment has not come. The concerned person has been reportedly suspended and an inquiry has been initiated .

Bill discounting is a transaction under which a firm sells its accounts receivable at a discounted value to banks or a factoring company. Selling of account receivable at a discounted value helps a company to meet its working capital requirement without resorting to borrowing. In such transactions, a fraud can take place when there is mala fide intention of buyer and seller, and the transaction is not honoured. 

I would like to know  how such huge value bills are  discounted and allowed to remain unpaid and unnoticed for such a long period. Banking system faced a similar problem a couple of years back when a large diamond exporter went on exporting to his sister concerns and relatives in Dubai and the (export) bills were discounted by banks in India. No money came to the banks, whose exposure to this company was pegged at ₹4,000 crore.
Some questions in this regard need to be answered.

• How one after other bills are discounted even after occurrence of default in payment?
• How head office of the bank remained silent on frequent defaults and how auditors failed to notice the irregularities perpetuated in the branch?
• Why the report pertaining to bill discounting were only filed and not properly monitored.?
• Was any credit report and due diligence report was carried out and kept in record on buyers and seller of products for which bill was raised and discounted by the bank?
• Why branch officials were not aware of real nature and volume of business of the company who pretended to buy goods and who appeared to be seller?
• Why and how branch officials got promotion out of turn and was there an nexus of such branch officials with top officials of the bank?
• Why one after other fraud takes place and RBI or the concerned bank always fail to nip in the bud and fail to  punish the erring officials and if punished , why they do not publish the name of such fraudulent offices to alert others?
• RBI use to carry out audit from time to time. Statutory Auditors use to certify closing statement of branches every quarter or half yearly or annually depending on volume of business of  a branch. And these auditors are mandatorily required to make their comment on high value transaction, on bill discounted, on overdue bills, on temporary faculties or overdraft allowed by Branch Head . How they failed to notice such irregularities in the branch and if they mentioned irregularities in their audit report, why audit department failed to take cognizance of it and why did they fail to take corrective step? 
• Is it not a fact that  these auditors are normally  influenced by Branch Head and ill-motivated customers who please them by giving  costly gifts and dinners?
• Concurrent audit use to take place in high value branches. Why did these auditors not mention the irregularities  or fail to notice such high value irregularities?
• Internal audit use to take place in each bank. Does these auditors also work usually under influence of some rich clients or the other or that of branch officials ?
• And so on-------------These basic facts needs to be ascertained to know the root cause of the rotten system . It is not enough to issue guidelines ever now and then and then go for deep slumber.

In some cases, there are genuine reasons like product defect and financial crunch but in recent past many frauds have also surfaced leading to rise in bad loans of the bank. It should also be looked into who were those senior and top officials in the bank during last five years who failed to notice the bad culture or who promoted or initiated the bad culture of discounting of fake or fabricated bills.

Here it is important to point out that he government had appointed Sri S S Mundra, as Chairman and Managing director of Bank of Baroda (BoB), a deputy governor of the Reserve Bank of India (RBI) In August 2014. Mundra took charge as chairman and managing director of BoB in January 2013 said to be the second strongest bank . Prior to his elevation, he was the executive director of Union Bank of India. All so called strong banks in the eyes of RBI and GOI are getting exposed slowly and gradually and still regulators and GOI not appear to be that much serious as they should be in view of gigantic nature of bank fraud and bank credit and its growing volume and day by day increasing intensity.

It is also to be seen whether Mr. Mundra failed in his role as CMD of Bank of Baroda to inculcate good culture or he was promoter and initiator of bad culture of bill discounting in above alleged fraud or forex remittance scam exposed in last few days. Because such huge volume of transaction invariably occurs with concurrence of head of the bank and such huge valued transactions are invariably submitted to table of CMD in every bank. 

If accusing finger goes towards Mr. Mundra also , then it should also be investigated who were Ministers who had recommended for elevation of Mr. Mundra from the post of ED Union Bank to CMD of BOB and then from CMD to Dy Governor of RBI.

Mundra has been preaching sermons after exposure of Rs.6000 crore forex scam. We should know his reality too. When he joined as CMD of BOB in the year 2013 he had  indicated that its restructured loan book stood at Rs 22,617 crore for the year ended March 2013. And as long as he was CMD of the bank , NPA was not allowed to go up , may be , by using tool of restructuring and ever greening of bad advances. When he left BOB , NPA of the bank went up sharply.

In the first quarter ended June, BoB saw its asset quality worsening with GNPAs at 4.13 per cent as against 3.11 per cent a year ago. Net NPA level declined to 2.07 per cent from 1.58 per cent. Fresh slippages in the quarter stood at Rs 1,685 crore from Rs 1,881 crore a year ago. It restructured Rs 147 crore worth of accounts in the period.

As such reality of top officials has also to be peeped into. As long as top officials are ill-motivated  in any bank, none of juniors will have the courage to dream of sticking rules and going against the will of Super Bosses.

Real diagnosis lies in striking at root cause of the sickness of the bank and not surgically removing a part of the body i,e, by making a few junior officers as scapegoat for each big scam and allowing top officers a safe exit or quick promotion despite their indirect involvement in each high value scam or high value NPA or high value write off.

 Bank of Baroda Detects Rs 350 Crore Bill

Discounting Irregularity: Report-NDTV

06.10.2015

State-owned Bank of Baroda has detected Rs 350 crore bill discounting irregularity and initiated an investigation into it.

"Yes, bills worth Rs 350 crore were discounted but the payment has not come. The concerned person has been suspended," said a senior official of BoB. 

Read Full News On Alleged Fraud of Rs.350 Crore in BOB

Also Read My Previous Blog On Rs.6000 crore alleged forex scam

 RBI to tighten bill discounting norms-Hindu Business Line

06.10.2015

With increasing cases of fraud coming to light, especially in the gems & jewellery and textiles sectors, the RBI is likely to tighten guidelines relating to bill discounting for banks.

The restrictions could include setting tighter limits on clients’ counterparty exposure and prescribing third-party verification of clients’ buyers.

The trigger for revisiting the bill discounting guidelines could be the ₹350-crore fraud reportedly committed by one of Bank of Baroda’s clients in Ahmedabad.

Based on references about bill discounting frauds from banks, the CBI, over the past few years, has registered cases against senior public sector bank (PSB) officials and other individuals for entering into criminal conspiracy and fraudulently discounting false and forged bills drawn on ‘buyers’ based in the country or overseas.

A senior PSB official said the bills need to be properly linked to the chain of inventory and invoices; otherwise it is a case of “accommodating” the customer.

“Mostly what happens is that the customer’s client (buyer) on whom the bills are drawn may be his own sister/related concern, but not on record. So, the customer keeps ‘supplying’ goods and getting the bills discounted. Possibly, no goods are supplied.

“That is why the banks normally do not undertake this (bill discounting) transaction unless it is a reputed client. If somebody needs to be accommodated, this is one of the ways in which the customer influences the bank to accommodate him,” explained the banker.

The official further observed that the banking system faced a similar problem a couple of years back when a large diamond exporter went on exporting to his sister concerns and relatives in Dubai and the (export) bills were discounted by banks in India.

No money came to the banks, whose exposure to this company was pegged at ₹4,000 crore.

Contingent liability

When it comes to accounting, bill discounting is a contingent liability for the customer.

Normally what happens is that when a banker does ratio analysis, the contingent liability is not really taken as a part of the customer’s finance.

“So, this is also one way they try to fudge and present better accounts and better financials for the company.

"Sometimes a gullible bankers are taken for a ride,” said a PSB official, adding that though there are established norms for bill discounting, they are often given the go by.

Checks and counterchecks

Where bill discounting is done, checks and counterchecks are routinely made.

When a bank takes an exposure on a particular customer, who is supplying goods to 10-15 buyers, there is a prescription that the exposure to each buyer should not exceed a particular limit. Thus, certain risk management practices are in place.

The discounting facility should be given only to “good” customers and not just anybody, said the PSB official.

“Today, power has been delegated at the lower levels in banks. So, there are cases where they (officials) start accommodating the party…

“Once you are in the trap of the customer he exploits you. He will threaten not to pay unless discounted,” the banker said.

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