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Friday, February 12, 2016

Private Banks And Public Banks

An Appeal to Government of India on Window Dressing

From time to time RBI and Government of India have asked and advised public sector banks to refrain from window dressing in deposits and advances. Still bank officials indulge in window dressing every quarter and this has been happening for decades. Window dressing is nothing but artificial inflating of business and reduction of stressed assets.

Bank officials inflate deposits in the last week of quarter or year and the same comes down in the first week of next quarter or year . Similarly they inflate figures of advances in the last week and get appreciation and awards from their bosses and from Ministers. This results in undue award to non performers and unjustified punishment to real performers.

Similarly on the front of bad assets and stressed assets, bankers hide bad assets by using the tools of rephrasing, restructuring and through evergreening of loan processes . Due to this timely action is not initiated against defaulters and during this time , defaulters disposes off the assets and then pray for compromise settlement or write off of the dues. In this way Recovery from defaulters is adversely affected.

Ultimately it is the government of India which has to suffer. It is taxpayers money which is infused in bank to protect them from falling due to mismanagement of bank officials or due to exploitation of banks by politicians. I add politicians because it is they who have been misusing banks for political advantages during each government in some way or the other. It is politicians who have damaged the banking culture.by their ill motivated advices and by suggesting writing off of loan for political gain.

Will you act against officials who have indulged in window dressing in the quarter ended June 15, September 2015 and December 2015  and against those officials who will do the same in  ensuing quarter March 2016 despite your instruction not to do so in the same month?

It is important to say here that GOI can make real plan based on real figures only and similarly bank can recover bad money only if they take timely action.

Lastly I may add here that banking is a service industry and one cannot judge the performance of any individual based on figures. There are several Branch Heads or Bank heads who achieve the targeted figure somehow or the other but the customers of the branch and bank are not happy with the service extended .It may be these achievers who have added major portion of bad assets in their bank. It is also an open secret that government deposits are is a saleable commodity which bankers compete with each other to purchase at the cost of bank's fund, i.e. by  spending on gifts debiting bank's expenditure  account. In bank , expenditure is not audited by CAG but by those officers who are master in using bank's account for illegal expenditures.

Here I would like to give an illustration tO substantiate my views. Suppose I am Branch Manager of a branch or Chief of a bank. I indulge in bribe based lending and achieve the advance well in advance. Then I use a little part of the ill earned money to buy deposits from government departments and public sector undertakings who have surplus funds and who can keep bulk deposits in my branch or in may bank, I can achieve and surpass even the target set for deposits. In this way I will be considered as good performer by my bosses, I will earn cash incentive and get quicker promotions. On the contrary those who have lagged behind the target or who have contributed lesser business by good means and by extending best services to customers may be rejected in cash incentives and in career.

But in the long run, advance made by me may become bad assets and cause huge loss to bank and force bank to arrange for larger capital. Customers may be dissatisfied with services extended from my branch because I focused on only few high value customers and neglected common men .Growth achieved may not be long lasting and stable. On the contrary , a person who did quality lending and who focused on retail business did the best for the health of the bank .His advances may remain standard healthy for years  and decades. Bank may earn consistent income from such quality lending . 

 Future of bank depends not on figures but on quality of service it extends. Good culture is more important than good figures a bank achieves. Respect and recognition of real good performers can only help in giving permanent growth and consistent profit to a  bank or a branch.


Similarly wrong lending to achieve the target may give some temporary relief to political masters for temporary period but in the long run even persons like Devi Lal , V P Singh, Janardhan Pujari or Chidambram  who promoted Loan Mela or Loan waivers used for  vote gain  were rejected in election by voters.


IN the same way bank officials who resort to evil means to achieve the target are trapped in corrupt dealing sooner or later or punished by almighty GOD in later part of life.

A Student who passed the examinations of his life by using unfair means may not necessarily get success in real life. A person may get job by using unfair means may be rejected by employer in short period. A bank may book inflated profit and book higher growth in business by using window dressing and by concealing stressed assets but sooner or the later the bank is exposed and subjected to hard medicine and surgical operation to survive or merged with some other bank . Unfair means in any sphere of life has bad outcome . There is no substitute to truth and real growth .


Stressed assets or Non Performing Assets in Banks are like tumour in body of a person. If  the Doctor considers it as insignificant in early stage or do not diagnose it , it my grow and if the same is not removed by medicine or by surgical operation in initial stage it may turn into cancerous disease and cause huge loss leading to ultimate death of the patient. Similarly a person in intoxication of wine acts like lion and start driving his car in high speed and without control. If the power attained by wine is  considered as good it may result in fatal accident. In the same way growth attained by window dressing is unreal power and unreal growth and result in accident in future.


It has become a habit of bankers to hide their evil works and bad assets by writing off the debts, by compromising with bad borrowers , by selling the NPA to ARCs or by restructuring the bad debts. But in long run , all these steps will prove disastrous.


It has become the habit of bankers to make excuse of economic slowdown or global recession whenever media or regulating agencies ask them questions on causes of unabated rise in bad debts. It should be kept in mind that under same economic atmosphere, private banks are growing by leaps and bounds. And if private banks start falling , no one on earth will be able to save people of India who placed their hard earned money in these banks. It is common men who are paid less interest on their deposits kept in these banks because of loss these banks incur in writing off bad debts or in sacrificing interest on bad debts in compromise settlements.


RBI  will have to answer why interest income and profits of private banks is continuously rising and that of PSU banks is falling quarter after quarter . And this phenomenon is not new , not for a few quarters only, but has been persisting for decades. Window dressing keeps RBI and GOI in dark.


Most painful consequence of bad management and corruption at all levels is that poor pensioners and  poor common men who save their hard money in banks for safety , survival and growth are paid less interest on their savings.

Crores of depositors have to suffer due to wrongdoings of a few hundreds rich borrowers and careless and corrupt officials . Not only this , perilous consequences of  low interest regime is that people of India invest in land and gold and try to avoid banks. Due to this investment and liquidity of bank is adversely affected . This results in erosion of lending capacity of bankers. This causes poor GDP and finally discomfort to common men again.

I am very happy that our Prime Minister Sri Narendra Modi has dispensed with system of interview in case of recruitment of class C and D employees. As a matter of fact, I would like to request our PM to dispense with all types of interviews which are taken for promotion of an officer from one scale to higher scale or from one cadre to higher cadre.

In case of recruitment, need of interview may appear necessary to some extent for recruitment of a candidate in officer cadre or in clerical cadre to check personality, communication skill, managerial skill, knowledge level and innovative and creative ideas which a candidate possesses before becoming a clerk or an officer . But once he or she is recruited as clerk or as an officer , say in bank, there is no need of taking interview for promoting him or her to higher level .


 Once an officer joins a bank , it becomes duty of bank management to prepare him for different role and post him in different departments as per his skill and potential. Bank can provide training to officers as per need. 

Best sales man is a person who can sell comb to a bald person. Similarly a good leader is a person who can influence all his subordinates and keep them all engaged  as per their potential to give maximum output with minimum manpower.  Only a bad carpenter quarrels with his tools. A school or college is considered good when it can convert a bad student to become a good student. 

In no case , any officer should be subjected to fraudulent process of interview which in fully arbitrary and based on whims of interview takers.

It is because the assessing officer gets several opportunity to assess the potential and performance of a candidate appearing or promotion during the course of his or her serving the organisation for several years and decades. An Interview panel cannot check the potential of an officer or a clerk in two or three minutes of interview when he or she could not be tested and attested in his service for years and decades.

It is an undeniable bitter truth that system of interview gives ample opportunity to top officials to use his whims and fancies to select or reject a candidate in promotion process . Normally marks allotted to interview parameter are so much that they can nullify the high marks obtained by a candidate in other parameters like Annual Performance Appraisal Reports (AAPR) or Educational qualification or experience. Normally majority of candidates appearing for promotion from one scale to higher scale in a bank has got equal base of marks which comes after adding marks of other parameters. This is why importance of marks obtained in Interview become more significant and prominent.

It is therefore an open secret , that as soon as process of interview starts in banks for promoting officers from one scale to officer  , officers who and candidate for the process and who are inefficient or corrupt start searching powerful higher officers or other VIPS. It is weak and inefficient officers only  who apply various powerful sources to influence members of interview panel. Many candidates offers gifts in cash or in kind to interview panel members if it is needed . If CBI is entrusted the duty to investigate result of interview or tape phones of all executives, it will become crystal clear that Interview process has been used by top executives to make or  mar career of officers totally in arbitrary and whimsical manner.

In this way bad officers are selected and good officers are rejected. Bad officers have therefore grown in number at all level and it is they who promotes and irrigates the culture of flattery and bribery. And it is undoubtedly a fact that the key reason for poor health of banks is bad working culture . It is due to culture of flattery and bribery promoted by top officers that quality is adversely affected at all levels.. Officers think it safe and profitable to serve their bosses than to their organisation. This happens in all government offices. It is also a fact that majority of officers who reach at top position are product of evil culture and they continue to water it and nourish this Yesman Culture.

Similarly system of annual appraisal in banks is absolutely ineffective and does not reflect true potential and actual quality of an officer. Mostly these reports are biased and written or submitted in very casual manner . Majority of officers get marks 80 and above out of 100. It is ironical and ridiculous too that even officers who write appraisal reports or review them are not talented enough to understand its impact and its connection with ground reality. Perception of higher bosses decides the fate of an officer. Performance of an officer become futile in practice. Bosses normally write APAR depending upon their preferences and perceptions about a candidate. 



Some of bosses like purely flattery , some of them like late sitting , some like growth in business, some prefer profit and some of them have some other inclinations before allotting marks to a subordinate in his AAPR.

In an atmosphere where flattery to bosses is more important for making of bright career in a bank, Bank officers do not take care of quality of service or quality of lending when they sanction loans but they definitely take care of higher bosses or politicians who help them in earning illegal money and who help them in getting quick promotion. Officers who aspire to get promotion prefer worshipping bosses than safeguarding asses of the bank.

For last three decades , PSU banks have merit oriented promotion policy in force to promote officers from one scale to other , but in practice only and mostly officers who are true flatterers , who are hard core yesman to bosses, who earn bribe and share with bosses are selected for promotion. This has resulted in unabated erosion in quality of service and quality of bank's assets .

Some banks prefer recruiting officers from campus to give favour to their kith and kin and to friends and relatives. These directly recruited officers in higher scale at the cost of officers of long experienced senior officers  give rise to frustration to seniors .
This has resulted in continuous deterioration of quality of service, quality of lending and quality of assets inn PSU banks.

To add fuel to fire, politicians use banks for vote bank . Administrative officers and legal officers work  normally to support defaulting borrowers. This is why lacs of cases filed by banks against various courts and DRTs remain undecided for years and decades .And even decrees passed by courts remain unexecuted because of corruption laden administrative and legal machineries.

I therefore suggest our Prime Minister Mr. Modi  to immediately dispense with interview system and introduce seniority based promotion at all levels . Those who work hard may be awarded with other incentives and those who do not perform may be punished by causing them financial loss or posting them at insignificant places. It is essential to stop punishing experienced officers in the name of merit .

It is the duty of bank management to promote all and give them an opportunity to serve the bank. It is not at all wise to give option to candidate to apply or not to apply for promotion. I may add here without hesitation that majority of good officers do not apply for promotion only because they know that only officers who are in good book of bosses will be promoted. Proximity of top bosses play vital role in promotion than real performance in field level.

It is possible only in banks that some employees do not get promotion even in three decades or four decades of serviced and on the other hand some of them get three to five promotion in 10 to 15 years. Good officers are in stagnation and officers without much experience on banking have reached top level. This fatal discrimination with seniors is one of main reasons for poor health of banks.






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