Budget Proposes Ways To Kill Banks

Budget Proposal 2014 :--The Narendra Modi government will ask banks to open 200 million accounts in a year from this Independence Day.

The Sampoorn Vittiya Samaveshan Mission aims not just to open bank accounts but to provide people access to other financial services like insurance and pension.Rs 5,000: Instant overdraft for account holders completing a financial literacy programme

Some Important Links on the same issue are given below

As per provisions made in the budget and guidelines to be issued from Government of India ,Public sector banks  will have to open 20 crore accounts  and each account would be sanctioned an overdraft of Rs. 5000.00 without any discreet inquiry about credit history of the account holder cum borrower.

This way, it is quite clear that Public sector banks would end up lending Rs. 100000.00 crores (one lac crore ) to account holders and these forced borrowers will be without any credit history. Moreover, as the accounts of different PSBs are not linked, there is every possibility of account holders opening accounts in different banks and thus getting overdraft from that banks as well.

Its also reported that department of financial services has already budgeted for defaults. Government of India may subsidise banks to some extent but may not stop promotion of bad culture in lending. It will wondering in dreamland if banker or for that matter GOI expect recovery of such loans which will be considered by poor account openers as charity from GOI , not loan from bank.

 Against the above backdrop , it is my question why RBI and IBA do not come in defence of PSBs and protest against any such move which will ultimately result in creation of fresh NPAs for which all the onus will be passed on the bankers for no fault of theirs. Not only this, this year , GOI has tis year suggested a limit of Rs.5000 for all individuals , next year they may ask for increasing the overdraft limit from Rs.5000 to Rs.10000 or Rs.25000 and even more for political advantage. Poor villagers will take it a gift from GOI but banks will suffer the real loss and ultimately bank staff will suffer .

Banks are usually advised to disburse loans as Charity by organising Loan camps and when these loans become bad, same government suggest for waiver of loan or settle these bad loans by offering heavy discounts. All these acts contribute in not only escalation of bad debts but kills the repayment culture and promote bribery culture in bank staff . It is therefore desirable to name these banks as public sector Charity Bank.

Its not hidden from any one that bankers are not legally equipped to recover loans from those whose property is charged in favour of banks, the how come the banks would be able to recover an overdraft given without any credit history and security?

When Bank Management find it difficult to recover the recalcitrant borrowers and wilful defaulters even if they do possess prime and collateral security, how these poor bankers will be in a position to recover small defaulters of Rs.5000/ who have nothing to repay. Obviously such plan as mooted out in above paragraph will prove to be death bell for already ailing banks. GOI may extend some financial help this year or later, but the cannot modify the bad culture they have created and are thus creating in banks to add fuel to fire.

 Isn't it really ironical that bankers are being denied a respectable rise in salaries because of huge NPAs and simultaneously something dangerous is under process to create more NPAs?

It is politicians who build pressure for reckless and careless lending . And when the account goes bad, they do not hesitate in blaming bank officials. They build pressure for lending in agriculture and priority sector, infrastructure projects and some other time for some other projects. Banks in general are having huge volume of Non Performing Assets related to loans made for infra structure projects, to power companies, to electricity distribution companies etc ( bulk poison ) and for government sponsored schemes (slow poison
 
When bad assets increase, profitability falls and when profit falls there is erosion of capital. When this happens , government blames bankers and then GOI through IBA  shamelessly deny respectable wage hike to bank staff. It means politicians commit crime and bankers are punished for none of their fault.

How long Public sector banks s would be treated as political tool that too at the cost of  banks and bank staff?

 Why RBI is silent spectator of this mishappenings and ill-motivated proposals of the government?

Why IBA the forum of Chiefs f public sector bank  has become inactive and ineffective and why United Forum of Banks Union (UFBU) are playing in the hands of Ministers and IBA ?

If such brainless and dangerous proposals are put in force, the future of wage hike will further be jeopardised.

Are bank staff in general are also watching the situation with folded hands and praying GOD for their welfare?

Also read Following Links

Evil Culture in Banks

How to Cure Sick Banks

Are Bankers Afraid Of CBI and CVC


Banks To Open 20 crore New Accounts This Year


 

AIBEA Seeks Action Against Defaulters

AIBEA demands mechanism to deal with

 banking defaulters-Financial Express

The  All India Bank Employees Association (AIBEA) today urged the Centre to come out with an effective mechanism to deal with high volume defaulters, by making wilful default a criminal offence.
"The wilful default of bank loans should be made a criminal offence", AIBEA general secretary, C H Venkatachalam, told reporters here.
"Such defaulters should not be allowed to hold office of public interest or contest in elections", he said, adding that the banking regulator should publish the list of such defaulters, since over Rs 5.65 lakh crore of public funds were locked up as NPAs.

In the name of recovery the banks sold the assets of wilful defaulters and cover up, he said. Instead they can be penalised and put behind bars and highlighted the need for an effecrive mechanism to deal with such defaulters.
Venkatachalam, here to attend the 8th State Conference of Canara Bank Employees Union, stressed the need for an early settlement of the wage talks and said that it remained inconclusive for over two years and the new government in place at the Centre, should resolve it soon.

Highlighting the demands, he said "we will press for early settlement of wages, stress the need to make wilful default of bank loans a criminal offence, publish the list of such corporate defaulters, emphasise the need to lend more to priority sectors like agriculture, education, small and medium businesses and rural development, open branches in unbanked areas, desist privatisation of public sector banks and bring all private banks into public sector fold, oppose bank merger".
"If the RBI or Government fail to pay heed to the demands, the AIBEA will give a call to its members to strike at a short notice", Venkatachalam said.
Link Financial Express


My Opinion And Observation on trend of Loan waiver, compromise, restructure to conceal Non Performing assets----
Since there is no full proof and time bound legal machinery which can ensure recovery of loan from defaulters and since there is pressure for lending, banker think it better to lend and let it become NPA and then go for either evergreening or writing off of loan or sacrificing some amount and then relending . In this way they achieve the target of lending as well as that of recovery and get earl elevation in career. 


But the trend gives alarming signals for existence and future of public sector banks. Some banks have given i.e. delegated huge volume of powers to Branch manager , majority of whom are neither well versed in principles and processing of loan sanction nor they do know how to monitor and safeguard the interest of the bank and nor they know the processes applicable for recovery of dues from defaulters. They think it better to adopt evergreening process to survive and to remain in good book s of their bosses . This is why volume of frauds and stressed assets in banks is going out of control day by day. None can stop until and unless the culture of banking is entirely changed and rejuvenated.


 Banks are taking suicidal steps to reduce load of stressed assets. They are offering heavy discounts to persons who repay the loan. They are ready to write off and sacrifice huge volume of loan to reduce volume of stressed and bad assets . They have given huge power to head of branches to sanction the loan and when loan goes bad , they can compromise with defaulters giving huge discounts. Obviously , banks are first distributing bank's fund as charity in  form of loan and then sacrifice bank loan either by write off or by giving huge discount. Their such steps will prove to be disaster in long run. They are digging grave for them. Culture of repayment will end and people will learn not to repay the dues and wait for loan waiver scheme. 

For last three decades politicians of the country used banks for their political advantage. They advocated loan waiver culture and built pressure on banks to grant loan waiver or came out with loan write off scheme in nexus with RBI and now management of banks are themselves indulged in such suicidal practice. 

Now only God can save these Public Sector banks.Top officials of PS banks are taking such suicidal steps to brighten their own career . But Who has given them right to sacrifice bank's money which is public property. Is there anyone who can stop it?

If you are a banker or an official to regulate and monitor banks  or an auditing or inspecting official or an investor in bank shares ,you should  read the article which appeared recently in Reuters,

There is an established practice in almost all coooperative banks to keep the loan account EVERGREEN. To Illustrate and to make it more clear :   say a bank  disburse a loan of  Rs10000 to a farmer and the account become overdue after a year or two , the same bank sanction a loan of Rs20000 or Rs.30000 which enable farmer to repay first loan and avail only extra loan . In the same way bank use to sanction inflated loan year after year which keeps the account always standard.

During the course  of time , public sector banks have also learnt the art of keeping  the loan account evergreen. They have many tools in their clever brain to keep assets of bank always standard .

First and foremost is the  restructuring or rephasing of loan on flimsy ground and second to give additional loan to repay overdue loan.

If even after such self deceptive acts ,banks fail to keep the account in standard category they feed wrong information in CBS system so that such accounts may not be identified as NON performing asset in the exercise of identification of the system driven NPA.

Then they try to prevail upon team of auditors to help them in hiding bad assets from the balance sheet.

Next better  option is to sell the bad loan to ASSET RECONSTRUCTION COMPANY known as ARCs at discounted rate without caring for loss bank has to suffer and ultimately investor has to suffer by such unhealthy actions.

Lastly they have option to write off the loan or sacrifice major portion of overdue loan which again adversely affects the bottomline of the bank and is indirectly a cheating treatment with investors and employees whose earnings depend on health of bank.

Bankers seldom make efforts to strike at the root cause of rising volume of bad assets.And neither owners of banks have got time to nip in the bud.

Prudent bankers who are apt in art of keeping assets evergreen and standard , who know the art of managing auditors and concerned officials at various offices may only become ED or CMD of a bank .One who preach sermons to others but do not follow, one who can deliver good speech , who can manage boss and keep him happy by hook or by crook may only get the chance in promotion.

In our country none is bothered of real health of the system, real health of the organisation and real welfare of common men ,but everyone is busy is dressing and decorating the outer appearance attractive .And this is the root cause that an institution or a country all of a sudden lands in unmanageable crisis.

 Link reuter

Banks Book Profit By Selling Bad Debts

It is really a mystery that  public sector banks are earning profit by selling their bad assets.A few banks have shown increased profit during last quarters just by selling their bad assets and that too at highly discounted rate.

 

Can anyone enlighten the hidden fact behind such story?

Second pertinent question is _______Is it morally religious to sell the asset at highly discounted rate? 

After all it is public money-------how bank is exonerated for lending to bad borrower, then for not recovering from bad borrowers and finally for selling the public property at half or lesser rate?

First corrupt officers earn in sanction of loan, then in exempting bad borrowers from punitive action and finally earning in sell such bad loan to ARCs called as Asset Reconstruction Companies.

Is there any mechanism to justify the value of selling such bad assets to ARCs?  

Is there any transparent auction process to stop corruption and finally loss to bank staff, investors,and public money.?

There are hardly two or three ARC functional in the country and hence there is all possibility of fixing the price while buying bad loan of any bank.Who will take care of such fraudulent game?

Given below is how bank and ARC play foul game with public money

Suppose a loan of Rs.500 crore given by a Bank ‘ B’ to a Company ‘C’ is treated as Non Performing Assets as on 31.03.2009. Bank stops charging interest on such NPA account as per RBI norms for income recognition. Let us suppose that bank has a prime security of say Rs.500 crores in form of goods, books debts  and plant and machinery and collateral security of say Rs.200 crores in form of landed property or some shares or LIC policies or some other plant and machinery.

Bank makes effort for recovery of loan but fail even after lapse of four years.

As on 31.03.2013 Books of bank accounts shows a debit balance of Rs.500 crore and interest accrued on this for four years is roughly Rs.250 crore. Altogether there bank has to recover Rs.750 crore from the company besides other expenses incurred in legal course of action and manpower lost in this process.

Bank decides to sell this loan to ARC at a discounted price of say  Rs.250 crore in lieu of bad loan and it is mutually agreed upon that the ARC will pay fifty percent of settled amount ( Rs.125 crore ) immediately and rest 50 percent (Rs.125 crore ) in next six years. If we take the net present value of entire recovery it will come to Rs.200 crores.

In books of account bank had to make provision of Rs.500 crores as on 31.03.2013 as because the account is treated as Bad and hence hundred percent provisions are needed. Here it is assumed that bad account is older than 3 years and hence 100% provision is done by the bank. Now in September 2013 the account is sold to ARC and hence bank decides to write off the said loan account from books of account.

In this way bank gets following benefits--

• Volume of NPA is reduced by Rs.500 crore and hence Gross NPA ratio comes down
• Bank get Rs.125 crore by ARC instantly which is treated as Non interest income by the bank and which helps bank in inflating profit.
• Share value of the bank in the market goes up
• But if we look at the above picture bank incurs a net loss of Rs.550 crore (Rs.750 -Rs.200 crores = Rs.550 crore) which is indirectly loss of public money which is bank’s nomenclature called as deposit received from public.

In this way bank claims that it has earned profit whereas it actually scarified Rs.550 crore to make it balance sheet attractive. Though bank gets success in manipulating and fraudulently presenting a rosy picture of the bank’s profitability, bank inculcate a wrong culture of making bad advances and then writing off the same or sacrificing a major portion of the same and thus causing huge loss to public and loss to staff who are unjustifiably denied respectful wage revision.

Here the million dollar question is “When ARC can recover the dues from such bad borrower, why not a state run bank can recover the same?”. After all ARC does not buy any bad loan for incurring a loss but to earn profit only. It is painful and astonishing that ARC gets success in getting favour from same state government and central government and same legal system which in turn help ARC in recovery of dues from recalcitrant and willful defaulter of the bank and which bank failed to recover.

It is worthwhile to mention here that due to casual, ill-motivated, biased and indifferent attitude of top officials of the bank, administrative officials of state machinery and biased and ill-motivated advices of politicians bank has to book loss on each high value bad loans whereas under the same environment is ARC which earn a profit of Rs.550 crore by selling the prime and collateral security of the borrower.

Lastly if taxpayers fail to or willfully avoid payment of Income tax or Service tax, will the government sell their dues to similarly branded ARCs?

Is it not shameful that government will all power invested in it find it impossible to recover the dues form big defaulters but get success in recovering the dues from person like Arvind Kejriwal or Ramdeo or any opponent of Congress Party?

Had the government run banks could entire dues from defaulters, profit of each bank could have been much more than what they booked in the past and they could have enhanced capacity to give higher wage hike to their staff and higher amount of bonus to staff to rejuvenate and to further boost up the morale of bank staff to work more vigorously for their bank

Selling Bad Debts Is Not Cure For Bank's Sickness

Sale of bad debt to ARCs boost bank results, but worries remain-LiveMint-

By Anup Roy & Ashwin Ramarathinam

Taking out problematic accounts help banks post healthy numbers, but analysts caution on fresh slippages ahead

Mumbai: On the face of it, the fiscal fourth-quarter earnings of Indian banks have indicated that the lenders have stopped deterioration in asset quality, as bad loans at most banks fell from the preceding three months, but analysts say the improvement has more to do with banks selling bad debt to asset reconstruction companies (ARCs).

The practice of selling bad debt to asset reconstruction companies and, thus, taking out the problematic accounts from lenders’ books, may have resulted in banks reporting healthier numbers, analysts said.

While they agree asset quality may not deteriorate dramatically from the present levels, they caution that fresh slippages, or good loans turning bad, and restructuring in banks are still high.

Bad debt in the 34 banks that reported their March-quarter earnings so far was at Rs.2.2 trillion, higher than the year-ago level of Rs.1.66 trillion but almost at the same level as it was in the three months ended 31 December. Between December and March, the banking system’s advances grew 5.75%, which means the share of bad debt in total advances fell. Gross bad debt ratio of the 34 banks that reported earnings was 4.32%, compared with 3.27% in the year ago, a Mint analysis of banks showed.

However, the sequential comparison could not be done for all these banks as barring a few, most don’t provide their December-quarter number for advances. For the analysis, the Reserve Bank of India’s (RBI’s) industry number could not be considered as those include foreign banks as well, segregated numbers for which are not readily available.

However, December-quarter numbers for the top 10 banks in terms of loan book, which include public lenders such as State Bank of India (SBI), Bank of Baroda, Punjab National Bank, Bank of India, and private lenders such as ICICI Bank Ltd, HDFC Bank Ltd and Axis Bank Ltd, are available. An analysis of their numbers shows gross bad debt as a percentage of total advances has indeed fallen.

In the March quarter, the gross bad debt ratio of these 10 banks was 3.77% against 3.43% in the year-ago period. However, in the December quarter, the gross bad debt ratio of these banks was at 4.03%.

For seven public sector banks in this list, aggregate gross non-performing assets (NPA) ratio was at 4.3% in the March quarter, compared with 3.84% in the year-ago period and 4.64% in the December quarter.

For the three private banks, which traditionally have much better control over their asset quality, the gross NPA ratios for the fiscal fourth quarter was 1.91%, compared with 1.97% in the year-ago quarter and 1.95% in the third quarter of 2013-14.

At a glance, the numbers may indicate that Indian banks’ March-quarter bad debt situation is better than the December quarter. But that would be a wrong conjecture, warn analysts.

One critical factor missing in these numbers is sale of assets to ARCs. While it is true that banks have always been selling assets to ARCs, the central bank especially nudged banks in the March quarter to sell bad assets to ARCs for better recovery of loans.

When a bank sells assets to ARCs, the bad assets are removed from the bank’s book and the security receipts issued by ARC are booked as investment.

When the ARC recovers the loan and pays the bank, the bank’s profitability increases.

“Unlike the bad debt numbers, write-offs are not that well tracked and even a large write-off from the books evades the eyes of the investors,” pointed out an analyst, adding that this is the first such year where banks have done such aggressive write-offs—finding an escape route in the Reserve Bank’s asset sale rules.

The analyst declined to be named.

In 2013-14, the sale of bad loans to asset restructuring companies jumped to Rs.27,000 crore in 2013-14 against Rs.8,000 crore in 2012-13, a recent Credit Suisse report estimated.

The reason for this aggressive sale of assets was because of the central bank’s provisioning rules, effective 1 April, that made provisions on restructured loans jump to 5% from the 2% earlier.

In a report dated 17 March, news agency Press Trust of India cited a senior SBI official as saying that in the March quarter, the bank planned to sellRs.5,000 crore of its bad assets to ARCs.

PTI cited SBI chairperson Arundhati Bhattacharya as saying that this would be for the “first time” that the bank would be selling NPAs to ARCs.

She did not specify how much the bank was planning to sell.

On Friday, SBI said it wrote off Rs.5,698 crore of bad debt. The bank did not specify how much of these were sold to ARCs, but analysts say most of the write-off must have gone as sales to ARCs.

The write-off was above the Rs.5,077 crore written off in the December quarter and almost equals what it had written off in the whole of 2012-13.

In addition, SBI also reported fresh slippages of Rs.7,947 crore during the quarter, while it restructured Rs.8,090 crore of loans, more than double of its earlier guidance of Rs.3,700 crore.

The situation was the same in almost all public-sector banks in the fiscal fourth quarter. Except for a handful of public banks, including Bank of Baroda, most banks had high slippages on a sequential basis.

Slippages in Bank of Baroda was Rs.1,300 crore, compared with Rs.15,500 crore in the December quarter.

Slippages for Bank of India was at Rs.3,610 crore, more than double its December quarter level of Rs.1,747 crore.

For Punjab National Bank, the slippages in the quarter increased sharply toRs.2,385 crore against Rs.450 crore in the third quarter.

“If you see the slippages number, there is no way to say that PSU (public sector unit) banks are seeing an improvement in their asset quality. The opposite is not far from the truth,” said an analyst with a foreign brokerage house who also did not want to be named.

The heads of banks are not confident that the worst is behind.

The heads of SBI, Bank of Baroda, Bank of India, Punjab National Bank and some private banks have said as long as the economy doesn’t recover, there is no way the bad debt problem could be sorted out

Link LiveMint

Ex-servicemen To Finance Minister

Under Secretary (Welfare)
Ministry Of Finance
Department of Financial services (welfare)
Govt. of India
New Delhi.

Letter No. PER/ 01/2014 14 June 2014

Dear Sir,

Subject: Discrimination of pay fixation of Ex Servicemen - Re-employed in PSU banks

Reference is made to your office letter No. File No. 4/3/2012-SCT (B) /Welfare letter dated 30 December 2013, addressed to the Chairman of Indian Banks Association (IBA) and also the new guidelines issued by IBA for fixation of pay of Ex-servicemen (ESM) re- employed in Public Sector Banks (PSBs) after 01.01.2006.

2. It is observed that the IBA has not only misinterpreted and violated the established Government policies and existing guidelines issued by different departments of Government of India, but also violated instructions issued by your office vide the ibid letter. I am listing certain points for your kind consideration and urge your good office to review your consent given to IBA as IBA has instructed the banks to implement the new guidelines and also to review the pay fixation already done in case of Ex Servicemen re-employed PSU Banks. 

 a) Pay fixation of Ex Servicemen is a privilege extended only to Personnel Below Officer Rank (PBORs) re-employed in Group ‘C’ and ‘D’ posts in PSUs. The subject matter is governed by Govt of India, Min of PP&G (Dept of personnel and Trg) OM No. 2/1/86/Est Pt – II dated 31 Jul 1986. Department Personnel and Trg O.M. No. 3/19/2009-Estt (Pay II) dated 05 April, 2010 was issued to clarify and amend few aspects mentioned in the earlier O.M. No.3/1/85-Estt (Pay II) dated 31 July, 1986 wherein the basic pay in the revised pay structure is mentioned as pay in the pay band plus grade pay attached to the post. The original O.M. No.3/1/85-Estt (Pay II) dated 31 July, 1986, clearly states that last drawn pay of ESM is a combination of many components of pay including Basic Pay, Pay (including deferred pay), Good Service/Good Conduct pay, Air Proficiency pay, Badge pay, War Service increments Classification pay and Deferred pay. The Sixth Central Pay Commission has revised the Basic pay structure of PBORs in Defence Forces as a combination of Pay in band, Grade pay, Military Service Pay, X Group pay, Good Conduct Badge pay and Classification pay. 

 b) The total pay in the revised pay structure as per VI CPC should be considered as pay in the pay band plus the grade pay attached to it along with MSP, X Pay, GCB pay, Classification Pay if any for Personnel below Officer Ranks (PBORs). For Officers, the Pay is pay in Pay Band plus Grade Pay attached to the post along with MSP and Non Practicing Allowance, if any. IBA in its letter has presumed that once these components are not mentioned in the definition of pre retirement pay they need not be protected. This contradicts the earlier procedure of re fixation of pay followed in PSBs. Earlier along with Pay (including deferred pay), Good Service Conduct Pay, Badge Pay, Classification Pay, Qualification Pay formed pre retirement pay. In the revised pay structure the concept of Basic Pay was replaced by running pay bands along with the introduction of grade pay. Rest of the components like classification pay, Badge Pay continued to be paid along with the introduction of new components like X Pay and MSP.

 c) Regarding Military Service Pay (MSP): As per THE GAZETTE OF INDIA : EXTRAORDINARY , MINISTRY OF DEFENCE, RESOLUTION, New Delhi, dated 30th August, 2008 ( page 22) clearly states “the MSP shall count as pay for all purposes except for counting annual increments”. 

d) Regarding X Group Pay (X Pay) : (Vide Service Instructions - (a) For Service Officers : SAI-2/S/2008, SNI – 2/S/2008, SAFI -2/S/2008 (b) For PBOR : SAI – 1/S/2008, SNI – 1/S/2008, SAFI – 1/S/2008). For reference as per SPECIAL AIR FORCE INSTRUCTIONS No. 1/s/2008 dated 27th October 2008 (Corrigendum) states that for X Pay as – “ It will be counted as Pay for all purposes including for calculation of annual increments”.

e) IBA in its annexure quotes MoD letter No. 1/69/2008/D (Pay/Service) dated 24th July, 2009 for the purpose of definition of pre retirement pay. It says pre retirement pay for those who retired on or after 01.01.2006 means the pay in the pay band plus grade pay but inclusive of Non-Practicing Allowance (NPA) if any, last drawn before retirement. This definition relates to officers pay component like NPA (Accorded to Medical Officers) but ignores the pay components like X Pay, Classification Pay and Good Conduct Badge Pay etc. accorded to the Personnel Below Officer Ranks (PBORs). Hence in its letter IBA excludes all other components of pay like classification pay, GCB, MSP and X Pay from re fixation on the pretext of not being mentioned in the definition of pre retirement pay as per MoD letter No. 1/69/2008/D(Pat/Service) dated 24th July, 2009. The components like Classification Pay and GCB were being protected since years and discontinuing it in ambiguous pretext is illogical.

 f) IBA through its letter dated 16.03.1992 reckons Special Allowance for fixation of Pay during re-employment in the bank on the grounds that Special Allowance is accorded for DA and is considered for calculation of pension benefits in the Banks. The same criteria should be applicable to all the other pre retirement Pay Components also. Military Service Pay, X Group Pay, as well as GCB pay and Classification pay are vital components of pay structure that was introduced to maintain categorical difference among the personnel of defence forces by the Sixth CPC. Dearness Allowance as well as pension benefits of PBORs are determined on the basis of total of these pay components which constitute the last drawn pay. While denying these components of Last drawn pay of ESM for re fixation of Pay and on the other hand, considering Special allowance on the re employed scale itself is a clear indication of double standards and contradiction to natural justice.

g) To justify excluding MSP from re-fixation, IBA in its annexure 2.1(ii) says that the benefit of MSP is accorded to the Ex servicemen in pension and Ex servicemen are allowed to draw entire pension. Whereas these factors mentioned cannot be considered for excluding MSP from re-fixation of pay as DoPT letter No. 3/19/2009-Estt (Pay II) dated 05.04.2010 through 4(b) i, 4(c),

 4(d)i clarifies that Ex servicemen can avail the benefit of the entire pension and pension equivalent of retirement benefits. and also the O.M. dated 08.11.2010 also clarifies about MSP as “Hence, in respect of all those Defence officers/Personnel whose pension contains an element of MSP, that need not be deducted from the pay fixed on re-employment”. If we apply this silly logical conclusion given by IBA for excluding MSP, then Pay in band and Grade pay which are part of the pension also may be excluded.

 3. Hence, you can see that the IBA had referred to inappropriate and insufficient data and grossly misinterpreted and violated many existing Government policies and guidelines. Your letter dated 30th December 2013 clearly instructs IBA also to clarify the date of implementation of these guidelines, prospective or retrospective and the mode of tackling effect of financial implications, which IBA did not adhered to.

4. Most of the PSU banks complete the pay fixation of Ex Servicemen re-employed after six months of joining and their pay is fixed at a stage just above the Last drawn pay by them in Defence forces, which is the correct method to do. But now IBA has asked to review the pay fixation done so as per their new guidelines, which will result in removing the major part of the pay so fixed and the very purpose of re fixation for the purpose of protection of Last drawn pay by an Ex Servicemen will be impaired. Deduction of the pay already paid for the last three or four years would also result in huge financial loss to individuals and imbalance their financial stability which in turn may cause huge embarrassment to the new Government which is “determined to do everything to repay the debt of our brave and selfless soldiers”.

5. My Case - My basic pay in Indian Air Force was Rs 10670 and total emoluments was Rs 17287 including MSP as on 31.12.2006 as per IV CPC. The basic pay fixed by bank was Rs Rs 11100 including MSP & Spl Allowance of Rs 500 and total emoluments was Rs Rs 18557 as on 30.11.2011 an increase of Rs 1270. The bank ignored the inflation raise from the year 2006 to 2011. If MSP withdrawn I would be earning an amount of Rs 15854 a reduction of Approx 8.5% of pay when compared to IAF pay. This condition is faced by many Ex-Servicemen and bank completely ignored in projecting our case. The copies are attached.

6. So taking into consideration of the facts stated above, we urge you to instruct the IBA to withdraw their circular immediately and also to issue a new order to include all the components of last drawn pay by Ex servicemen while fixing their pay on re-employment in PSU banks, which will be a big relief to thousands of Ex servicemen who had sacrificed the best years of their lives in safeguarding our Motherland. I am hoping for a fast and positive action on this sensitive issue.

Thanking you Sir,

Yours faithfully,

Narayanan Ravikumar

Copy to:(Physical Copy Follows)

1) The Secretary
Ministry Of Finance
Department of Financial services (welfare)
Govt. of India
New Delhi.

2) The Secretary (ESW)
Dept of Ex servicemen welfare
5-A, South Block. New Delhi-110011.
Ministry of Defence, Govt of India

3) The Joint Secretary (ESW),
Dept of Ex servicemen welfare
99-A, South Block. New Delhi-110011.
Ministry of Defence, Govt of India

4) The Secretary
Dept. of Personnel & Training
Ministry of Personnel, public grievances and pensions
Govt of India, New Delhi-110011

Know About Nayak Panel Report

My Comments are as follows on Nayak Panel report on bank reforms ( Gist of report is submitted below)

In my view Nayak panel has done nothing or suggested no such good idea which may help in the improvement of health of Public Sector banks. Panel has not fixed responsibility of erring officials and erring ministers. What they have suggested is nothing but old wine in new bottle. This is purely an attempt to hide the past mistakes of top bankers and regulators and set up a new governance committee, new board for selection of top management etc. 

It has now become clear to RBI and Government of India that they have damaged the fundamentals of public sector banks and time is ripe now for public revolt against regulators. One crystal clear point which emanates from panel report is that RBI and GOI failed to do their duty in last two decades and it is their sheer negligence which has resulted in current critical sickness of PS banks. They remained silent spectators when CEOs of banks were looting banks in the name of credit growth. They remained deaf and dumb when corrupt bankers were humiliating senior officers and workers of banks in the name of merit oriented policy for promotions, transfers and recruitment. They maintained complete silent when politicians were exploiting banks in the name of revival of economy. They were sleeping when legal set up for recovery failed to recover money from defaulters even after lapse of two or three decades.

I am of strong view that health of PS banks have gone from bad to worse during last two decades only due to bad Human resource policy and due to worst execution of good policies. If one peeps into performance and appraisal reports of all officers of last two decades , it will become crystal clear that good officers have always been neglected in all promotion processes and bad officers who were master in flattery and bribery got one after other elevation. And now gang of bad officers is ruling the banks with unity. They unitedly protect bad officers and sideline really good officers similar to case of Mr. Khemka in Harayana .

As long as workers of any organization do not feel satisfaction after doing devoted duty, there is no chance of bank improving their health whatsoever may be the finding and suggestions of Nayak Panel. It is only in PS banks that 20 year or 30 years experienced good officers are rejected and brand new officers in higher scale are recruited directly to please top bosses and politicians. Juniors are ruling seniors  not because they are more intelligent and talented ( barring some exceptions) but because they used money and powerful bosses for getting quicker promotions and got success in getting new job in higher scales.

It is this dirty game of top bankers that health of banks have deteriorated during last  two decades whereas private banks have improved their health under similar and fully same external situations like global recession or natural calamities, or interest rate freedom or recruitment freedom or government policies or legal set up etc.

Officers of PS banks work to please and protect the self interest of their bosses whereas officers in private banks work for betterment and for protection of their organization.

Anger of investors, bank customers, bank staff and that of all concerned against government is on rise due to relentless rise in stressed assets and due to government failure in containing the same and in recovery of bad loan from defaulters. Before it becomes violent, government as usual set up a panel for suggesting alternate ways and switch over the responsibility of failure to another set of body and get rid of punitive action for their past mistakes. And panel is also manned by such persons who can submit reports as per whims and fancies of the officials who are behind all stories of scams, frauds, bad debts and all types of irregularities.

It is the habit of Government; first they exploit the government organization and government fund for self interest and then change the name of the scheme and name of regulators or merge the maligned schemed to some other schemes. In the past many small banks , big banks , rural bank or cooperative banks or chit funds have failed and then merged with some stronger entity to avoid the consequences of public anger against mismanagement and large scale fraudulent activities perpetuated by the management of the failed bank.

As long as officials and the persons who hold the key post in any organization are bad and ill-motivated, no power on earth can stop misuse and pilferage of government money and no power can ensure good health of any public sector undertaking or any department. When top officials in banks are bad, assets created by them will definitely be bad and no power on earth can stop rise in bad assets of these banks. Nothing is to change if rules for constitution of bank’s board are altered or stake of government is diluted to below 50% in PS banks.

This is why they , corrupt bankers in nexus with corrupt team of politicians and regulating officials either write off the bad loans or keep bad loan evergreen by fresh lending or restructure bad loans or sell the bad loans to ARC to clean the balance sheet. All efforts are to conceal evil works and bad assets .This is a usual phenomenon in banks and in all government offices dealing with finance and money. When a bank become weak or goes beyond control, it is merged with some other stronger banks. 

It is the Habit of the government not to cure the root cause of the disease but to make lame excuses for failures or to put carpet on the malady or carry out little surgical operation to befool innocent masses.

And finally flattery and bribery culture is the root cause behind all mismanagement and all scam stories . Weak and ineffective judiciary adds fuel to fire.

All you wanted to know about Nayak panel's PSU banks report (source MoneyControl)

An RBI-constituted committee led by PJ Nayak Tuesday submitted its recommendations to improve the governance structure of state-owned banks and also to help private sector banks attract more capital.

An RBI-constituted committee led by PJ Nayak Tuesday submitted its recommendations to improve the governance structure of state-owned banks and also to help private sector banks attract more capital.

 Following are the key commendations of the panel: 

*Given poor asset quality and low productivity, either privatize PSU banks or transform governance structure to make them efficient.

 *Reduce government stake in PSU banks to less than 50 percent  

 *Remove dual structure of both Finance Ministry and RBI regulating PSU banks. Give all regulatory authority to RBI   

*Improve quality of PSU bank board discussions; focus on key areas like business strategy, financial reports, risk, and compliance.  

 *The government should transfer its stake in PSU banks to a holding company termed Bank Investment Company   

*Government should reduce its stake in BIC to under 50 percent and appoint a professional management for BIC 

  *For better accountability, BIC should be governed by The Companies Act 2013, and not the Bank Nationalisation Acts of 1970 and 1980  

 *Ownership functions to be transferred by BIC to the bank boards. Appointments of directors, CEO to be the responsibility of bank boards.  

 *Have uniform bank licensing regime across all broad-based banks, and niche licenses for banks with more narrowly defined businesses   

*Allow mutual funds , pension funds, PE funds to hold 20 percent in private sector banks, without having to take RBI approval   

*Allow promoter investors to hold up to 25 percent in private sector banks, against the 15 percent ceiling currently  

 *Ensure a minimum five-year tenure for bank Chairmen and a minimum three year tenure for Executive Directors

 *Private equity funds, including sovereign wealth funds, be permitted to take a controlling stake of upto 40 per cent in distressed banks 

*Allow voting rights in proportion to the stake held Link Money ControlRBI, not FinMin, should oversee PSU bank regulations: Panel The government periodically issues instructions to public sector banks, which have to do with regulations, as well meeting social objectives.

The PJ Nayak-led panel on governance of bank boards has recommended that public sector banks should be answerable only to the RBI, and not to both RBI and the Finance Ministry as is the case now. This would provide a level playing field for state-owned banks vis-à-vis their private sector counterparts, the panel said. "All regulatory functions of the Government need to be moved forthwith to RBI, freeing the public sector banks of dual regulation,” the committee said in its report. 

The government periodically issues instructions to public sector banks, which have to do with regulations, as well meeting social objectives.   In July 2012, the government had written to the CEOs of all scheduled commercial banks, public sector financial institutions and public sector insurance companies ‘may consider’ uniform card rates for bulk deposits for different maturities at least up to one year, so as to create a ‘level playing field’ for all banks. 

The circular warned that failure to do so would be treated as a violation of the government’s instruction. "The circular acts at cross-purposes with the regulatory regime of deregulated interest rates which RBI has established. 

In effect the government becomes a second regulator, with little sensitivity to whether its directives are consistent with RBI regulation,” the report said.

 Last October, the Finance Ministry had asked public sector banks to offer cheaper loans for customers wanting to buy automobiles and consumer durables, in an effort to boost demand in the economy.

 But even more damaging was the interference by the Finance Ministry in 2008 when it asked PSU banks to waive off Rs 76,000 crore worth of outstanding loans to farmers. "Any directions issued which are applicable to a subset of banks (PSU banks in this case) do damage to that subset, however laudable the objectives. 

Those banks not part of the subset (private sector banks in this case) are under no obligation to participate; if they do so the participation is voluntary, while for the subset it is coercive,” the committee said in its report.

 The panel said that for the government to issue other instructions in pursuance of development objectives solely to public sector banks was discriminatory and anti-competitive. "If the tasks are indeed laudable, they should be laid down for implementation by all banks. The straightforward way of doing so is to route it through RBI,” the report said.

Link Money Control