http://timesofindia.indiatimes.com/business/india-business/Vinod-Rai-becomes-first-chairman-of-Banks-Board-Bureau/articleshow/51179061.cms
Good News Of the Year 2016
Prime Minister Narendra Modi on Sunday approved the setting up of the Bank Board Bureau with former Comptroller and Auditor-General of India Vinod Rai as its first Chairman.
The Bureau is mandated to play a critical role in reforming the troubled public sector banks by recommending appointments to leadership positions and boards in those banks and advise them on ways to raise funds and how to go ahead with mergers and acquisitions.
“With a view to improve the governance of public sector banks, the government had decided to set up an autonomous Bank Board Bureau. The bureau will recommend for selection the heads of public sector banks and financial institutions and help banks in developing strategies and capital raising plans,” the government said in a release.
The bureau was announced last August as part of the seven-point Indradhanush plan to revamp these banks. It will constantly engage with the boards of all 22 public sector banks to formulate appropriate strategies for their growth and development.
Vinod Rai appointed Chairman of Banks Board Bureau February 28, 2016 PTI
Former CAG Vinod Rai was on Sunday appointed first Chairman of the Banks Board Bureau, which will advise the government on top-level appointments at public sector lenders and ways to address the bad loans problem among other issues.
Besides, ICICI Bank’s former Joint Managing Director H.N. Sinor, Bank of Baroda’s former CMD Anil K Khandelwal and rating agency CRISIL’s former chief Rupa Kudwa have been appointed members.
Mr. Rai was the Comptroller and Auditor General between January 2008 and May 2013, during which a number of CAG reports led to various scams including in the telecom and coal sectors coming to light.
The bureau will give recommendations on appointment of directors in public sector banks and advise on ways to raise funds and mergers and acquisitions to the lenders
There are 22 state-owned banks in India including SBI, IDBI Bank and Bhartiya Mahila Bank.
The BBB was earlier proposed by the government as a body of eminent professionals and officials, which will replace the Appointments Board for appointment of Whole-time Directors as well as non-Executive Chairman of PSBs.
They will also constantly engage with the Board of Directors of all the public sector banks to formulate appropriate strategies for their growth and development.
The bureau will search and select heads of public sector banks and help them develop differentiated strategies of capital raising plans to innovative financial methods and instruments.
It would also be responsible for selection of non-executive chairman and non-official directors on the boards.Besides, the body will also steer strategy discussion on consolidation based on the requirement.The government wants to encourage bank boards to restructure their business strategy and also suggest way forward for their consolidation and merger with other banks.
I submit below news and views which I submitted in the month of September 2014 which will let you know how Mr. Vinod Rai thinks about NPA in PUblic Sctor banks and how he reads Mr. Raghuram Rajan RBI Governor
Bad loans crisis: How Vinod Rai proves Raghuram Rajan wrong-Firstpost-September 2014
Former Comptroller and Auditor General of India (CAG), Vinod Rai, has hit the bull’s eye by stating that loan defaults by Vijay Mallya-promoted grounded carrier, Kingfisher airlines, and the scam surrounding Bhushan Steel, which bribed banks to get loans, are only tip of an iceberg.
Former Comptroller and Auditor General of India (CAG), Vinod Rai, has hit the bull’s eye by stating that loan defaults by Vijay Mallya-promoted grounded carrier, Kingfisher airlines, and the scam surrounding Bhushan Steel, which bribed banks to get loans, are only tip of an iceberg.
Kingfisher, which is now classified as a wilful defaulter, owes Rs 6,500 crore to a clutch of banks, while Bhushan Steel, which is fighting a trust deficit, owes Rs 40,000 crore to its lenders. To be sure, Bhushan Steel isn’t a bad loan to banks yet.
In his book titled 'The Dairy of the Nation's Conscience Keeper — Not Just An Accountant', Rai has said the problem of huge bad loans at public sector banks can be blamed on 'cronies' using connections to borrow money. Of the Rs 2.5 lakh crore bad loans in the banking system, over 90 percent belongs to state-run banks.
"This is the underlying reason for non-performing assets (NPAs) of public sector banks going up manifold . . . stories of Kingfisher Airlines and Bhushan Steel are only now emerging in trickles," Rai said.
The former CAG’s observation is painfully correct and critical for India’s banking system and, also raises the question on whether the Reserve Bank of India (RBI), the guardian of the Rs 86 lakh crore banking system, has got the whole problem right yet.
When the Syndicate Bank scam broke out in August, (with the Central Bureau of Investigation (CBI) arresting the bank’s chairman S K Jain for extending unlawful favours to private companies, including Bhushan Steel by accepting bribe) RBI governor Raghuram Rajan had refused to acknowledge that criminality is a major cause of bad loans in the banking system.
In the post monetary policy presser on 5 August, Rajan cautioned against highlighting criminality as the reason for all bad loans ills of the banking system.
"One should not extrapolate this (the arrest of Jain) to the entire public sector banking system and assume that all the problems in the public sector banking system are because of criminality rather than because of other factors," Rajan said.
The solution to a problem, it is often said, lies in identifying it first. The same can be cited as an explanation to part of the bad loan pile in the banking system, where a total of about Rs 8.5 lakh crore of loans are in the stressed assets category (bad and restructured loans combined). This is about 14 percent of the total loans given by banks.
Rajan is indeed correct in saying that "all the problems" are not because of criminality rather than other factors. A significant part of the bad loan problem could be attributed to the prolonged economic slowdown in Asia’s third largest economy. But a look at the bad loan scenario shows that a sizeable chunk of bad loans can be indeed attributed to the element of criminality.
As Firstbiz noted earlier, the real explanation lies in what defines criminality in a banking transaction.
If the definition of criminality involves diversion of funds borrowed from banks to a non-stated purpose, with or without the knowledge of the banker, then it makes a perfect script for bad loans in many cases.
Similarly, if a rich promoter is hesitant to pay back his banks even when he has the money, the promoter should well be treated as a criminal because he is fooling the banking system, which handles public money. Besides bad loans, as Rai correctly observed, "the amount that has gone into corporate debt restructuring is another story; it contains all the marquee names."
There has been rampant misuse of loan restructuring facility by corrupt, undeserving companies. In the recent years, there has been a sharp rise in the number of loan accounts that have been pushed to loan restructuring facility, under which banks offer relaxed repayment terms to a stressed borrower.
Loan recasts happen either through the corporate debt restructuring channel or on a bilateral, case-to-case basis between individual lenders and the borrower. Total loan amount recast at this stage is estimated about Rs 5 lakh crore to Rs 6 lakh crore both channels combined.
Even though loan recasts are intended to benefit a firm, which is in genuine stress, many times unworthy borrowers manage to avail this facility using political influence and connections through middlemen. Since these cases aren’t genuine, in most cases, they tend to slip into a stressed asset within no time, adding to the sticky loan pile.
For instance, if banks tag Mallya as a wilful defaulter, that means that he has defaulted not because of genuine reasons but by possible instances of fund diversion or other unlawful means. Remember, banks had restructured Kingfisher’s loans in 2010. In hindsight, a wilful defaulter didn’t deserve that gesture from banks.
In the recent years, banks have tightened rules for firms seeking loan recasts.
But, given that Indian banking system is dominated by state-run banks, which also happen to be more prone to political misuse, the checks and balances in place rarely work when it comes to stopping the unworthy borrowers from misusing the banking system.
Rai’s warning must be taken with the much needed importance by the regulator, so as to begin a corrective course. The earlier the central bank acknowledges the problem, the better.
Link First Post
Link First Post
My Opinion dated 15.09.2014:
I have been writing since long that the volume of bad loan is much more than what is declared in financial statements by public sector banks. Even Today , volume of NPA has not been fully declared by clever bankers and regulators provide umbrellas to manipulators only. Officers who want to work as per policy and as per set norms are considered as incapable and not tactful .
Reason behind rise in bad debts is not only economic recession in all the cases of stressed assets but there is case of bribery and flattery also which has contributed in rise in erosion of quality of credit disbursals and erosion or shortfall of assets underlying credit made by corrupt bankers. Exposure of S K Jain in Syndicate Bank episode has exposed corruption and existence of bribery and flattery in not only lending decisions but also in promotion processes taking place at all levels
Role of middlemen will be found in almost all branches and administrative offices of all public sector banks . As such case of Kingfisher or that of Bhusan Steel is only tip of the iceberg.
Prominent reason behind stressed assets is all pervasive corruption and rise in role of bribery and flattery in all processes related to recruitment, promotion and posting.
RBI or GOI cannot stop rise in volume of bad debts until they strike at the root cause of all bad accounts and make a case to case study to find out real culprit in all cases. There is deep rooted nexus between bankers and borrowers, bankers and politicians and borrowers and politicians.
Entire system is run by middlemen at all levels and in almost all branches.
I re-submit below a few suggestions which I submitted three-four years ago.
If bank management in any bank is really interested to reduce corruption they should start the process of purification from the top and demonstrate their strong will to serve the interest of honest and loyal workers. For this purpose
1. They should revisit the files of all EDs. General Managers and Deputy General Manager and all charge sheeted officers but now sitting at top posts and try to find out their misdeed which they executed during their past service of say ten years and why they were not punished and who are those officers who were made scapegoat to save top officers.
2. They should assess the status of all advances made by them during their posting at branches to know whether they are still standard or written off or treated as Non Performing Assets (NPA).it will make clear that only those officers who were expert in earning through bad lending are now sitted at top posts.
3. They should assess the status of all goods and services purchased through suppliers and contractors and ascertain whether higher amount were paid for them and whether quality was equivalent to what was expected for the amount paid.
4. They should find out the name of officers who have been transferred to other states and remote villages in the state because they were not yes-man of controlling regional head. They should find out the name of Deputy General Managers or AGMs or Regional head or Circle Head or Zonal Head who transferred the services of subordinates to remote and critical places even violating the existing transfer policy in the name of exigencies of bank’s services. They should punish such top executives and demonstrate that they are really supporter of good workers.
5. They should find out the name of officers who have not been considered for promotions even in twenty to thirty years and his juniors have been given one after other promotions. They should sanction seniority based promotion to all those who have been ignored and demonstrate their strong will to give justice to all. Of course those officers who do not work upto the justifiable expectation of the management should be given an opportunity to improve and then demoted for non performance. But in any case management can deprive any officer of his legitimate right to get an opportunity to get promotion in time and serve in a better way.
6. They should find out the reason why a few officers are frequently transferred from one corner to the other whereas many officers have been allowed to work in a particular area for twenty to thirty years in continuation.
7. They should find out the name of charge sheeted officers who have been promoted and also name of highly talented honest and good officers of unblemished good record of performance who have been willfully ignored by members of Interview panel in promotion process. They should find out why appeals of such aggrieved officers were not looked into seriously and acted upon. Guilty member of interview panel or HR department should be booked to task for their mischievous acts and simultaneously officers who have always been neglected should be elevated to higher grade or scale for which they deserve.
8. They should punish those executives who made bad advances and still promoted by higher bosses only because they shared their ill earned money with bosses. They should assess the growth in assets of such corrupt officials and confiscate the property if found really disproportionate to their annual income.
9. They should inquire why direct recruitment of inexperienced and incapable officers from campus at higher salary package in higher scale is preferred by top bankers ignoring existing talented and experienced good officers. Are top bankers not realizing bribe in cash in lieu of recruitment? Are existing officers in lower scales really incapable? Are inexperienced officers recruited in higher scale creating frustration and demotivation in already existing lot of officers? Are newly recruited inexperienced officers causing loss to banks due to their poor exposures in branches? Are CRE recruited for marketing retail loan successful and as per expectation of the bank? If there is something wrong in the system will anyone punish CEO and ED who executed such faulty policy of direct recruitment as CRE or Credit Manager which is bound to cause lifelong loss and which is bound to create negativity in existing workforce?
10. Will anyone take on oath and confirm that only non performers were transferred from one office or one branch to other? Or transfers and promotions are sold now a days?
I am therefore of strong view that policy of whistle blower will not be a success until management of bank demonstrate their good intention by their actions. When top officials are corrupt, of bad track record and whose image is not good one honest and really good worker at junior level cannot dream of leading a peaceful and respectful life with the help f his honesty or his performance.
Under such circumstances it is not incorrect to say “Dishonesty is the best policy”
However If there is a will there is a way. If some wants to ensure administrative honesty , he or she can do so after much sacrifice. Unfortunately such devoted persons in India are very rare.
It is therefore easy that everyone preaches the sermon but do not follow the same in practice. In our country honest people are rather afraid of going to even police station or knock the doors of judiciary because they know that Thana people or court people torture complainers and join hands with the person against whom charges are leveled. People of India know very well that CBI or other preventive departments who are supposed to act against corrupt person are in fact puppet in the hands of powerful ministers ruling the country or a state.
It is easy to frame attractive and good policies but difficult to execute the same until people holding the responsible and powerful post and people sitting in the top offices have the strong will to put the desired policy into action.
I am therefore not astonished that policy of whistle blower announced by government of India and introduced by bank management did not yield any response and did not precipitate any fruits of recognition from field level workers.
If any policy fails to produces desired result it also cast aspersions on the will and intention of policy makers. It is therefore justified to say that rulers of the bank as also that of the country are really originators of corrupt practices and policies to reduce corruption and improve vigilance awareness are framed for framing purpose.
There is a proverb in Hindi “Hanthi ke dant khne ke kuch aur hote hai aur dikhane ke kuch aur “
Central government announced policy of protection to whistle blowers to improve vigilance administration long back. It is remarkable to say here that whistle blowers are those working staff who secretly report to CVC about the corrupt practice such as bribe based lending or commission based contractual work or purchase of goods and services of his higher authority or his colleague. According to this policy Central Vigilance Commission (CVC) is authorized to receive written complaints for disclosure of any allegation of corruption, misuse of office, abuse of power and recommend appropriate action.
Every Public Sector undertakings including banks also announced similar policy advising staff not to be silent spectator of corrupt practice in the office or branch they work. Inspite of such policy announcement and subsequent reminding circulars for the same there is no actual response from staff working all over India. It is an open secret that cancer of corruption is all pervasive and widely rampant in all offices and branches.Still honest staff thinks it wise to be silent spectator of all unhealthy and unjustifiable actions of powerful persons inspite of the fact that bank management tried to convince whistleblowers by saying that staff can submit such complaints of allegation of corruption in writing in a sealed cover directly to CVC without any fear of repercussion. Bank management has also announced incentive scheme for such whistle blower to make it an effective tool to prevent corrupt activities going on in Public Sector Banks..
Corruption as a matter of fact includes not only giving bribe or commission. Even bribe giving or taking is very much secret and it is shared by many persons in the system. Corruption has got wide dimension. It leaves no evidence behind it until a plan is trapped to catch the culprit red handed.
Higher management in a bank of office or powerful officers in general can indulge in various other types of corrupt practice which induce and inculcate unhealthy practices in offices and branches they control. Whimsical posting, whimsical promotions of yes-man and flatterers superseding so many talented workers and arbitrary transfer by higher authorities are carried out without any hindrances from any corner. Higher authorities can do so by using powers of discretion given to them in promotion policy by way of interview and in transfer policy by showing exigencies of bank’s work or by declaring a good worker as Non Performer.. ‘
Any officer who creates impediments in the path of corrupt bosses in earning bribe and commission or in getting golden gifts or in getting red carpet welcome in five star hotels from his yes men serving in branches and offices under him is very easily removed .
Any worker specially an officer who is a considered would- be whistle blower, a prospective complainer of evil works of executives, he or she may be transferred to such a critical place that his or her family life and social life becomes hell.
Bank management has power to make an officer as Branch Manager (apparently incentive but practically a punishment) and post him to such a remote place that he cannot visualize even peaceful living of his or her family.
Such honest and talented officers are transferred from one corner to other extremely far located other corner even violating normal transfer policy. Such honest officers will not be sanctioned leave when they desire. Even slightest mistakes of such honest and prospective whistle blowers are viewed seriously by corrupt team of officers in controlling offices and they are rebuked , humiliated before a gathering and what not until they feel isolated, frustrated and attain a position of depression.
On the contrary officers who are yes-man and flatterers of corrupt bosses, who earn bribe and share with bosses, who extend five star welcome to bosses, who on the excuse of inauguration or a function call the bosses and offer costly gifts are given choice posting , quickest promotion and given whatsoever they desire.
Actions of almost all executives demonstrates that they like those officers who earn money and gifts through lending or purchase of goods and service and honestly share with bosses called as executives. Rather such corrupt team of executives award junior level corrupt officers not only by giving them cream posting and unusual and abnormal promotion but also praising them before the mass gathering.
Obviously policy of incentives for whistle blowers introduced by corrupt team of executives sitting in top posts becomes a laughing stock for ground level honest officers.
Bank management has such weapons in their hand they can punish whistle blowers in many ways which will look like promotion and up gradation in post but in fact they which will slowly kill ego of whistle blowers or honest workers , attack on his respectability and disturb his peaceful living.
Particularly in banks, it is very much common that junior officers are made Branch Manager, Chief Managers or promoted to higher scale and seniors are forced to work under him. Scale II officers are made Branch Manager of scale III or scale IV branches whereas scale IV are made to work in scale II or scale II branches .
Flatterers are kept posted in home town or metros or big towns or at place of his choice for years together on some plea or the other and they are given quickest jump in career superseding a lot of other hard workers whereas prospective whistle blowers are posted in far remote villages for year and years and always rejected in promotion processes.
There is in fact no scope of justice for such aggrieved officers because controlling offices are full of flatterers and yes-men Not only this, such aggrieved and victimized officer cannot seek and expect justice from court of law because in our country even court cases are not decided in twenty to thirty years.
To add fuel to fire bank management can spend lacs and crores of rupees on valued advocates for winning the case filed by aggrieved worker or at least postponing the decision on cases of corruption raised by juniors whereas a poor officer who is victimized and who is met with injustice cannot afford a simple advocate to plead for his case for one or two decades. There are many such instances when honest officers are willfully harassed by his seniors. There are many instances when junior but honest officers complains against senior to top offices but such complaint are either not attended or attended after so much delay that actual culprit is retired, expired or leave the bank. There are many such instances where actual culprit s awarded with promotions whereas other juniors working around him is made scapegoat.
Such type of flattery culture and an environment which induces corruption is prevalent not only in banks but also in other offices of the government.
Chief Minister of state gets success in earning wealth worth hundreds of crores of rupees only through IAS officers working under him. As soon as Chief Minister of a state assumes his office his first and foremost task is to remove officers and worker from his office who may create problem in earning money and replace them with team of blind supporters of corrupt practices initiated or promoted by him.
Mr. A. Raja, ex- telecom minister could succeed in arbitrary decision and cause loss of lacs of crores of rupees to Indian government only with the help of team of flatterers or one can say with the support of a gang of looters and with the blessings of his colleagues in the cabinet.
Mr. Kalamadi could succeed in spending Rs.70000 crores of rupees despite the fact that initial budget for Commonwealth Games was not even seven hundred crores. Now even various inquiries set by the government will not result in trapping of actual culprit because such culprit has so many Godfathers. During the course of time all evidences will be eliminated, witnesses will be removed from the path or motivated to say in tune with what the ministers speak. Moreover goods and services purchased at many times higher rate than prevailing rate can no more be produced for verification. Tenders allotted to corrupt contractors at much higher rate can no longer be reversed or questioned after the task is already completed. Obviously entire exercise of searching the culprit will prove futile as usually happens in the country.
After 24 years of investigation in Bofors scam and after spending hundreds of crores of rupees government of India discarded the exercise and Rajiv Gandhi was exonerated using political power.
Mr. Ashok Chauhan CM of Maharashtra was not alone is misuse of power in allotting flats to kith and kins of MPs and MLA of the state in Adarsh Society.
Mr. Raja allowed sale of 2G spectrum on 2002 rates whereas Mr. Kalamadi purchased goods and services at cost hundred times of it was budgeted in 2002.This is called tactful and cleaver manipulation of office decisions. This is the punch of corruption prevailing in the country.
Every where there is talk of corruption in the system but no remedy is visible to anyone. There are very few dare devil persons like Subramanium Swamy who raises the voice against the system but ultimately such person are also cornered and punished by the corrupt system.
This is why policy of whistle blowers gets no response from any corner of the country. Scams after scam are exposed, but government never try to catch and punish the master mind behind the same and neither try to understand the actual fault of the system and frame such policy which can nip the actual culprit in the bud and punish the actual guilty in time . Unfortunately such culprits are generally top ranked officers and ministers in the government to whom perpetrators of corruption do not want to be punished.
TRUTH ALONE TRIUMPHS. REPORTERS WITHOUT BORDERS SHOULD BE BRAVE TO BRING THE TRUTH FOR DELIVERING JUSTICE IN TIME. UFBU MUST CONCENTRTE TO TRAIN THE 2ND LINE AS PER THE NEEDS OF THESE CHANGING CHALLENGES.
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