Following is an appeal by Mr. T. R. Radhakrishnan published in lawyersclub website , submittd below for the benefit of bankers. Government has to try to differentiate between good borrowers and bad borrowers, good bankers and bad bankers, good lawyers and bad lawyers, good Chartered Accountants and bad Chartered accountants, good politics and bad politics , good politicians and bad politicians, good judges and bad judges, and so on.
Real transforamation and real reformation will take place only when government learn to award goodness and punish badness of a person, whosoever he or she may be.
Policies , rules, guidelines and various dictates used by various ministries and departmental heads go unheard and unfollowed when Human resource assigned to execute these tasks are dishonest, disloyal, untrustworthy, selfish, greedy, cheaters, flatterers , yesman and manipulators.
Our country is therefore best in making plans and policies but considered as worst in its execution. Government which will get success in reversing this trend and this evil culture will only be able to bring about real reformation and true transformation in the society.
Politicians, bankers, officers , advocates, judges , almost all are busy in preaching good sermons, in delivery of motivating lectures, in conducting various workshops, trainings, conferences and publishing of books on morals, but unfortunately very few of them are truely and honestly putting their own valuable ideas and ear-soothing moral stories in practices.
There is no synchronisation in mind , body and soul. Body of a person does not indicate what he thinks in mind and mind does not think what his soul teaches him to think. This is why , we find more preachers, more cheaters, more manipulators , more fraud committers than true and honest performers who believes and acts as per moral lesson taught to him or her or preached by him or her.
People in general act against what their conscience tells to do. People have lost their conscience in quest of money and power. Public servants who are supposed to serve common men and Indian citizen are busy more in serving their bosses in greed of quick money and quicker elevation in their career and less in serving people . Persons at the top posts love flatterers more, than people who abide by rules and who work honestly . Top officials and top politicians love not to real performers who follow guidelines for safety of their organisation but to those who blindly flatter them, gift them, garland them, earn bribe for them and keep red carpet always ready to welcome and worship them.
This is why, perhaps that all talented educated youth prefer going abroad for job than to serve their own motherland.
For last three to four decades , many efforts by various bankers have been taken to stop evil culture prevailing in banking system, suggestions have been made by various committees to stop evil culture in politics which exploits banking for vote banks and various acts have been framed and formulated to recover money from defaulters, training colleges have been set up in all banks to teach bank staff various methods for good lending and to take prventive steps for best moitoring and for keeping and maintaining good health of bank's assets.
But unfortunately outcome of all these efforts appear to be negligible and ineffective. Only because there is no honesty in persons who are supposed to execute them.
Bank staff are taught many lessons for safe lending and strict monitoring. They listen all and forget soon because they do not accept these theories from their core of heart
When a loan seeker approaches a bank officer for sanction of a loan, he or she forgets all principles of lending and find it better , convenient and beneficial to oblige Loan seeker if he gets some consideration in lieu of it. These considerations may be cash or in kind or a help in getting choice transfer or a favour in promotion.
Every bank has a merit oriented promotion and recruitment policy in force for last three decades, but in practice value is given by top officials not to merit but to flattery, bribery, caste and community and to recommendations received from top sitted persons , politicians and professionals.
Similarly a political person is taught several times not to press bankers for loan mela or for sanction of loan to a person of their choice or force bank to write off bad loans . But when a politician goes to field and delivers a lecture for mobilising votes during election campaign or when he gets power, he uses all unethical ways to force bankers to do injustice with bank, to favour his persons in loans etc. Code of conduct lies in papers only.
Similar is the position of lawyers, CAs, government officials, judicial officials, valuers, architects, contractors etc.
A doctor is taught hundreds of lessons for serving mankind . Doctors are considered God by those who are sick or who are wellwishers of patients. Still doctors use all unethical ways and means to cheat patients and to earn wealth through exploitation of helplessness of patients.
It is also because a person has to spend crores of rupees in undertaking medical course and getting a doctor's degree.
Similarly politicians use unethical ways to cheat voters so that they may recover multiple of amounts they spent in winning an election. All Kith and kin ,relatives and friends of powerful politicians get favour in all fields at the cost of more competent very person .
Similarly bank officers indulge in unethical practices to spend on higher bosses and to brighten their career. There is mad rush for wealth and power in all sphere of life. There is always a multi- member committee or board to select persons for higher post in transparent way and to give opportunities to best persons. But in practice, every member uses their power to give respect to choices of each member. There is a always a strong bonding , harmonic relationship and lovely unity among looters whereas on the contrary intelligent people are usually divided, whimsical and self centered.
Link to source
The Hon’ble Prime Minister of India and the Hon’ble Finance Minister of India,
Dear Sirs,
Some of the recent pronouncements with regard to non-performing asset have created concern among the honest and upright borrowers particularly coming under the category of SME with integrity whose accounts have become non-performing assets (NPA) because of the circumstances beyond their control. Banks do have their right to recover their dues from the borrowers. But every right is derived out of a duty first to be performed and that duty being the concern and care of the borrowers and prevention of account being classified as NPA.
Indian banking sector have undergone changes from time to time. It passed through social control during the early 60s and then to nationalization of some banks in the year 1969 and then came the reforms of 1990. Since then the Indian banking system has been trying to integrate their activities with the global development and market and this has brought out drastic changes and reforms to keep up with the global trend.
The introduction of prudential norms particularly changed the very approach of the banks towards asset classifications and income recognition. But the reforms also put a great pressure on their profitability, compatibility and competitiveness with the world banking trend and market demands which led to the enactment of Recovery of Debts Due To Banks And Financial Institutions Act, 1993 (RDDB & FI Act) and its later amendments. After having found the ineffectiveness of the RDDB & FI Act and to give more power to the banks and financial institutions, yet another more stringent enactment of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) came into existence and amendment were introduced subsequently.
But did the reforms and the subsequent enactment of the Acts produce the desired result?
Taking into account the quantum of recovery compared to total NPA and mounting incidents of NPA accounts, the result is pathetic and alarming. Now everyone connected with banking and finance look eagerly up to the recently passed Bankruptcy and Insolvency Act with great hopes and aspiration. A dispassionate and non prejudiced review of the past experience and the result achieved and an understanding of the present unpleasant financial situation prevailing in the banking and financial sector would indicate none too pleasant situation of the future. That is because what steps that were taken in the past and being pursued in the present and envisaged for the future are for treating the symptoms and not the disease. Hence, a reorientation in the approach to the existing problems is very much necessary to produce the desired results.
An unbiased review of the measures taken for the recovery of debt shows that there is an underlying conflict of interest between the bank and the borrower client. Since "a conflict of interest is a set of circumstances that creates a risk that professional judgment or actions regarding a primary interest will be unduly influenced by a secondary interest”, it is imperative to understand what is the primary interest for both the bank and the borrower.
There exists a trust deficit and mutual suspicion creating a divide between the bank and the borrower with regard to their perceptions about their respective roles in their contribution to the nation building activities and social obligations. The primary objective of commercial banks is to accept deposits from the public and to lend for productive purposes. When the banks accept the deposits from the public, they become the custodian of public fund and keep it under trust. The duty and responsibility of the banks start when they deploy the funds for progress and development of commerce and industry.
The prime duty of the borrower is to utilize the funds for the productive purposes for which the bank has lent the funds. Hence, it is apparent that the roles of the bank and the borrower are complimentary to each other and not contradictory. But in the process of lending and utilization of funds, there arise conflicts of interest from time to time which affect the respective cash flows on either side depending on the situation prevailing then which results in the creation of non-performing assets which leads to recovery process being initiated by the bank which the borrower resents.
The perceived knowledge about non-performing asset by the borrower and the bank alike and the modus-operandi of the recovery process adopted by the banks leads to further conflict and prolonged litigations. This is counterproductive to the objectives of lending and utilization of funds affecting severely the economic wealth and health of the nation. Thus it is the inevitable necessity that such deterioration in the economic wealth and health of the nation should be arrested.
Understanding the respective roles of the bank and the borrower which are complimentary to each other is the first step. KYC (Know Your Customer) norms are already implemented. There is vast difference between knowing the customer and understanding the customer and hence more importantly new UYC (Understand Your Customer) norms are to be formulated in line with Banking Codes and Standards adopted by banks as per the norms announced by Banking Codes and Standards Board of India. The next step is to understand and accept the harsh realities and unpleasant truth regarding the prevailing situations in their correct perspectives by the bank and the borrower which may lead to a change of norms in the classification of the account as NPA. The initial two aforesaid steps are very important because “Understanding is the first step to acceptance, and only with acceptance can there be recovery.”
Effective communication is the key to understanding because the very purpose of communication is to understand and to be understood which will pave the way for an endearing and enduring relationship between the bank and its clients. But currently the emphasis is on technology, fiscal policies, system and procedures etc which are, no doubt, positive steps for making the banking and financial system robust and dynamic. But the fact is that technology innovation can bring only the marvels of technology but it cannot produce economic results. Economic results are produced only by knowledgeable and self actualized human resources and quality leadership and also that relationship can be built up only with human beings and not with machines or any policies. Unfortunately no such steps seem to being initiated to produce economic and financial results by building up healthy and strong understanding, endearing and enduring relationship between the bank / financial institution and the clients. Today the ‘relationship banking’ has given rise to ‘faceless baking’ using technology and there seems to be no ‘bonding’ but only ‘binding’ between the bank and the customer. This is the basic difference found in what is being done in the recovery of dues of banks and financial institutions and what should have been adopted for the recovery such dues.
What is advocated now is a total change in the attitude and approach to recovery of dues by the banks / financial institutions and the borrowers. Since attitude is the approach that banks and financial institution take to lend and recover the dues, the result depends upon their attitudes and similarly is the attitude and approach of borrowers with regard to utilization of funds received by way of loan and payment of dues. Hence, a new concept of “Conscience Cum Conscious Banking” and “Recovery with a Human Touch” is if understood properly and implemented diligently, would ease the recovery of debts with the mutual consent of bank and borrower and facilitate reduction of NPA to a great extent if not totally eliminating them.
The Concept of “Conscience Cum Conscious Banking”. (CCC Banking)
The dictionary meaning of conscience is “the part of you that judges how moral your actions are and makes you feel guilty about bad things that you have done or things you feel responsible for.” The legal meaning of conscience is “conscience: an internal sense of right and wrong. To respect differences between persons the law sometimes permits a conscience clause. Freedom of conscience is a human right.” (Collins Dictionary of Law © W.J. Stewart, 2006). The psychological definition of conscience states “Your conscience is what tells you whether an action is right or wrong. It is the reason you have guilt or remorse after doing something morally questionable, and the reason you feel relief or pride after telling the truth or giving to charity. It can also have an affect on decisions you are contemplating. If you just have a bad feeling about a possible action, your conscience may be telling you to choose otherwise. The sense of right and wrong is learned and deeply embedded, so someone with a very strict religious upbringing may have a more critical conscience than someone brought up with a looser moral compass.”
The dictionary meaning of ‘Conscious’ is “State of understanding and realisng something” and as per Wikipedia “Consciousness is the state or quality of awareness, or, of being aware of an external object or something within oneself. It has been defined as: sentience, awareness, subjectivity, the ability to experience or to feel, wakefulness, having a sense of selfhood, and the executive control system of the mind”
The concept may be considered more moralistic than practical. But more success can be achieved using a more moralistic approach than pursuing a ruthless way devoid of any justice, values and professional ethics. Every person has a conscience which is a very powerful part of the person. It helps him be aware of the world around him and it helps him have interaction with the world. With the conscience trained, the conscience empowers and helps every one. But, like all things in life, the conscience can have various degrees of training and capability.
The principal of “Conscience Cum Conscious Banking” is based on the fact that most people are honest and uphold integrity. The truth is that between the good and the bad, only the circumstances have to wedge in. Hence, as far as banking is concerned, the circumstances that trigger the creation of non-performing asset are to be identified and removed so that further deterioration of the secured assets does not take place. Further, a constant vigil without complacency and effective monitoring of credit would also ensure prevention of accounts’ becoming non-performing assets.
A “Conscience Cum Conscious Banking” will usher in an environment of goodwill and mutual respect among banks / financial institutions and the customers without the feeling of being abused, shamed and threatened. It also inculcate a sense of belonging among the executives, employees and the customers leading to understanding the respective roles and mutual obligations and contributions towards the health and wealth of economy and the society alike. Further they would hold themselves and each other accountable for adhering to some set of agreed-upon values and ethics and for working toward an agreed-upon vision. Deviations and errors would be considered as an opportunity for learning and growth, rather than an excuse for blame and punishment. This does not mean that there won’t be any problems. In an uncertain and volatile business environment nobody can predict precisely the future outcome. But with trust and mutual understanding based on the culture, values and ethics that they developed, timely actions will be initiated tide over the problems and to achieve the goals of mutual welfare keeping the national interest above all. A Conscience Cum Conscious Banking will create an everlasting relationship between the bank and the customer with mutual help and respect which will also enable “Recovery with Human Touch”.
“Recovery with human touch” is the process of recovery without jeopardizing the interest of the bank and financial institution and the borrower. The basic rule is to fix the problems and find solutions. There are two types of problems namely the internal problems of the banks, financial institutions and the borrowers respectively as the case may be which are within their individual domain and the other problems are external over which none have any control. Thus it is very important to recognize the cause of the problems to find solutions.
“Recovery with human touch” is based on the following human behavioral principles:- “The greatest technology in the world hasn’t replaced the ultimate relationship building tool between a customer and a business: the human touch” and “Too often we under estimate the power of a touch, a smile, a kind word, a listening ear, an honest accomplishment, or the smallest act of caring, all of which have the potential to turn a life around” and more importantly the truth is that “Your situation is never permanent. It is what you make it. Life isn’t solid. It’s fluid. It changes”.
The “Recovery with human touch” method is based on the fact that it takes considerable time to build and it takes no time to destroy. Considering the roles of the banks and that of the borrower, any wrong step that the bank make either to lend or to recover would certainly affect the borrower and vice versa any erroneous path that the borrower takes would also affects the bank since their existence are interdependent and not independent. Any weakening of the banking system is detrimental to the economy of the nation and so also any adverse features inflicted on the entrepreneur organization would also affect the contribution to the welfare of the society and deprive the livelihood of the multitude of the employees and workers engaged by the enterprise and also other stake and share holders. Hence, the principle behind “Recovery with Human Touch” is that any recovery process being adopted should not jeopardize the existence of both the lender and the borrower aiming only to reconstruct and not to destroy. In the ultimate analysis, the veritable realization of the organizational objectives and individual aspirations for banks and enterprises depend upon the following principle: “In management, the first concern of the company is the happiness of the people connected with it. If the people do not feel happy and cannot be made happy, that company does not deserve to exist.”
There may exist a different situation where the borrower never has any problem but tend to become non-paying. They are the willful defaulters. Their case is to be treated differently and with a firm resolve. Therefore, it is imperative that there should be a definite distinction made between honest borrower with integrity and willful defaulter. This distinction should be made objectively and subjectively taking into account the human sensitivity. Expediency should not be a policy to declare a borrower as a willful defaulter who has a long association with the bank or financial institution who has been doing well but who becomes a defaulter due to circumstances beyond their control.
The broader steps that are envisaged under the “Recovery with Human Touch” are as follows.
1. To begin with declare a moratorium on all cases pending with DRT, DRAT and other Courts for a period of two years pertaining to recovery proceedings of amounts more than a threshold limit on an experimental basis for which the limit has to be fixed. The remaining cases are to be tried in the respective
Tribunals / Courts but without bias and prejudice.
Tribunals / Courts but without bias and prejudice.
2. Constitute an evaluation, assessment and appraisal committee in every state consisting of banking experts, representative from respective banks and financial institutions, representatives from respective industries and commerce whose case beyond the threshold is being evaluated in detail.
3. Evaluation should be done by identifying the internal factors of the bank / financial institution and defaulted enterprise and also external factors which caused the account being classified as NPA. The primary aim of such an exercise is not to fix responsibility and punish but to fixing the problems and finding solutions to take the account out of its NPA status.
4. Under the existing conditions there is a decision making paralysis due to fear psychosis of being held responsible and accountable for their actions prevailing among the executives of banks and financial institutions which is one of the reasons for the creation of non-performing assets because if the behaviour of the banks is governed by the attempt to escape risk, it will end up by taking the greatest and least risk of all, the risk of doing nothing. Hence, the executives should be allowed to take decisions boldly without fear or favour.
5. To Implement the plan of action faithfully and diligently necessary support and help can be brought from outside also. A knowledgeable authority exclusively for the purpose of monitoring the implementation of the plan of action and to take such steps which are necessary for the success of the plan is to be constituted. A reporting system is to be devised to inform the concerned bank / financial institution and the borrower regarding the observations made by the monitoring authority and corrective steps to be taken without any delay.
6. Rightly or wrongly the general perception of the borrowers out of experience is that the banks and financial institutions invoke legal proceedings without complying with the directives of RBI which is mandatory and many times by violating the provisions of the respective banking Acts with impunity and also violating the principles of natural justice. If any such incidents are found then such banks and financial institutions are to be pulled up and reprimanded and directed to fall in line with the instruction of RBI and complying with the provisions of the Acts and principles of natural justice.
7. Most unfortunately it is found that most of the presiding officers of DRT and DRAT act as the recovery agents for banks and financial institutions. Even when clear evidences are produced against the banks and financial institutions for their wrong doings and even when higher courts’ citations are quoted during the course of legal proceedings, they are overlooked and orders are passed favoring the bank and financial institutions thereby denying justice and equity to the borrowers. Many are the cases when the borrowers and the guarantors have lost their livelihood and assets leading miserable lives devoid of human dignity. Such incidents are to be stopped to uphold equity, justice and principles of natural justice.
8. The pitiable effect of classification of account as NPA is that all avenues of raising funds by the borrower enterprise are closed and the resultant effect is that the workers and employees engaged by them are deprived of their livelihood and the pathetic plight of them and their families and dependants are not at all being taken into consideration which may lead to social unrest which goes against the government objective of wealth creation and employment generation. Such incidents also violate the fundamental rights and human rights of such deprived workers and employees. Chances of such depravation are to be eliminated ensuring human dignity and decent existence to those who are deprived of their employment and livelihood.
9. Of late it has become a practice for the banks and financial institutions to assign their debts to Asset Reconstruction Companies and Securitisation Companies which is another breeding ground for corruption and malpractices. Most of these companies are interested only in the real estate value aiding cartel of land mafia. In fact the banks and financial institutions shirk their duty and responsibility of rehabilitating the NPA to take it out of the purview of NPA. It only shows their inability to tackle the ticklish question of non-performing assets. Such transactions do not reduce the incidences of accounts becoming NPA but shifting them from one basket to another and does not solve the problem of recovery of non-performing assets. If the banks and financial institutions cannot deal with NPA, how can the Asset Reconstruction Companies and Securitisation Companies undertake managing non-performing assets? The assignment exercise is nothing but a sham and it will not produce the desired result destroying an otherwise potential industry.
10. The cases of housing loans, education loans and individual retail loans are to be treated in a different way and not at par with industrial or commercial loans because the circumstances and purposes are different.
The aforesaid steps form only a general approach to be taken in solving the crisis of non-performing asset. If the concept of “Conscience Cum Conscious Banking” is accepted along with the “Recovery with a human touch” then more studies and research can be undertaken to finally making it as an Act or a system and procedure to be announced by RBI and also a part of corporate and SME good governance and which should be made mandatory for the bank and financial institutions and also business enterprises to be adopted and implemented under a time bound programe..
It may be argued that already avenues are available to resolve the problems of NPA under SICA Act through BIFR, CDR and rehabilitation programme as announced by RBI, Joint Lenders Committee formed as per RBI directive etc. But experience has shown that nothing timely is happening and the results are meager and not producing any tangible result. But in the envisaged concept, the basic difference is that there is a factor of compensating the enterprise for the losses and damages incurred by them on account of the wrong doings of the banks / financial institutions if it is proved which can be construed as lenders’ liability.
The prevailing approach of generalizing the reasons for the creation of non-performing assets though valid and since each case is different from the other, individual evaluation and assessment has to be undertaken to find solutions to the particular case. In order to make the approach to solving the problems of NPA a successful reality, it is necessary to understand the knowledge realities of the bank and financial institutions and that of the enterprise and the people managing the business on both sides. Since economic results are achieved by the concerted, unified and co-operative efforts of human resources, it is essential and inevitable that the importance of building a team of knowledgeable and highly motivated work force is to be established for the veritable realization of objectives of banks, financial institutions and the enterprise. Educating the work force and the customer is yet another important task along with undertaking training programmes to update the knowledge and skill for the effective and efficient implementation of plans and programmes for achieving goals.
Experts and officials may consider whatever that are stated above may seem to be utopian, non-practical and based on moralistic approach which has no value in the present day attitude. But there are many ways of implementing the aforesaid programmes effectively within the ambit of the law and RBI directives based on the above mentioned concepts. A review of various happenings in the history of the world, be it political, scientific inventions, discovery contributing to progress and development of the humanities show that all such initiatives have started with a vision which was opposed and unaccepted by the people at large in the beginning and later when the mission fulfilled successfully were appreciated and adopted and accommodated by them. What were considered impossible is made possible. Hence, the aforesaid approach can also be tried and when implemented with the true spirit and with sincerity of purpose and with commitment can definitely produce the desired result.
Lastly what is lacking in the financial sector and the entrepreneurial field is lack of leadership to carry out effective and successful implementation of plans and programmes. Leadership is lifting an employee’s and workers’ vision to high sights, the raising of their performance to a higher standard, the building of their personalities beyond their normal limitations. Empowering people is an enthralling quality of a true leader. The quality of leadership is the ability to recognize a problem before it becomes an emergency and lies in guiding others to success by ensuring that everyone is performing at their best, doing the work they are pledged to do and doing it well. “Experience is not what happens to a man. It is what a man does with what happens to him." Besides, "The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands in times of challenge and controversy.”
The success mantra is:
“Winners are too busy to be sad,
Too positive to be doubtful,
Too optimistic to be fearful,
And too determined to be defeated.”
And let the clarion call of Swami Vivekananda be followed, “ARISE, AWAKE AND STOP NOT TILL THE GOAL IS REACHED”. JAI HIND.
Sincerely Yours,
T.R. Radhakrishnan
(The author invites comments and opinions from readers. He can be contacted either through his email or mobile) )
(The author has advanced the concept of Conscience Cum Conscious Banking and Recovery with a Human Touch out his experience as an e x-banker and then as a facilitator for DRT cases.)
Rajan speaks Truth on Bank NPA
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Rajan speaks Truth on Bank NPA
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RBI Governor Raghuram Rajan delivered a speech on "Resolving Stress in the Banking Sytstem" at Bangaluru during an interactive meeting with industry and trade.
The government and the RBI are helping our public sector bankers in this difficult time though it is a critical task. Rajan says in the last three years, RBI have paid all the surplus to the government . As such , the proposal of RBI providing capital to banks refects conflicts of interest. He says "This seems a non-transparent way of proceeding"
Govts are sometimes reluctant to infuse bank capital as there are so many more pressing demands for funds However, Rajan says that it is better that government capital be infused quickly in banks.
Rajan says easier monetary policy is no answer to serious distress. He does not endorse the widespread belief in this regard..
Those who diverted money, banks/investigative agencies should send the message that alternatives to repayment can be harsh. We should send message that no one can get away. Glad that the PMO is pushing prosecution of large frauds. Rajan says RBI has set up fraud monitoring cell to coordinate early reporting of fraud cases to investigative agencies He further says bank investors, after initially getting alarmed by the size of the disclosures, have bid up PSB bank shares.
RBI will shortly license a number of new Asset Reconstruction Companies (ARCs) We have coordinated with SEBI to increase penalties for wilful defaulters" .
It is important that banks do not use the new flexible schemes for promoters who habitually misuse the system" "Indebted promoters are being forced to sell assets to repay lenders," .
Rajan says there is still room for upward valuation PSU bank shares if they can improve the prospects of recovery. Process for recovery, despite laws like SARFAESI, is prolonged and costly, especially when banks face well-connected promoters.
Over-borrowed promoters often propose increase in scale so that bank’s outstanding debt and new loans all become serviceable.But if the project is unviable, doubling its size does not make it any more viable. Rajan advises banks not to throw good money after bad money because there is an unreliable promise that debt will become serviceable'
At the same time Rajan has advised banks to censure completion of projects that are viable, even if it requires additional funds infusion.
Rajan says that private banks' interest rate are equal or higher than PSU banks. Yet private banks' credit growth does not seem to have suffered. Need of the hour is to get government banks back into lending to industry and infrastructure , else credit and growth will suffer as economy picks up.He also added that private sector banks cannot substitute fully for the slowdown in public sector bank credit.
Government banks were shrinking exposure to infrastructure/industry from early 2014 because of high past NPAs. It is not that due to high interest rate credit growth has come down. It is remarkable to note that slowdown in credit growth is only in public sector banks not in private sector though RBI prescribed rates applies equally to private and PSUbanks. . Obviously credit growth slowed down mainly because of stress and not because of high interest rate.
The government is said to be considering a mega merger of 26 banks, which will create six big lenders.The proposal envisages major banks like State Bank of India, Punjab National Bank, Canara Bank, Union Bank, Bank of Baroda and Bank of India leading the merger.
As a part of the proposal, Syndicate Bank, IOB and UCO Bank will be merged with Canara bank. Central Bank and Dena Bank may be merged with Union Bank, Other banks like Andhra Bank, Bank of Maharashtra, Vijaya Bank will be merged with Bank of India.
However, the management of Bank of India that HR integration will be the biggest challenge during the merger. No bank was free of bad loans and the merger will not help in any way. Merger may help in increasing size of a bank , but cannot help in reduction of NPA or improvement of quality of lending and monitoring of assets
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