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
Showing posts with label non performing asset. Show all posts
Showing posts with label non performing asset. Show all posts
Sunday, July 13, 2014
Monday, July 7, 2014
Audit Of United Bank---What Happened
It is now detected and well established by Auditors that top officials of the bank used to switch off the button which automatically detect bad debts. Since long, apprehension from many corners have been expressed candidly that bank officials use to hide bad debts to book higher profit by making lesser provisions.
But unfortunately RBI and Ministry of Finance willfully remained silent spectators of all such evil acts so that people cannot point out accusing finger towards them and they continue to use the public applaud for shining banks.
Due to such indifference and killing silence, customers and investors along with bank staff are sufferer and there is none to compensate them .Customers of the banks are not getting loans and adequate services due to demoralized mindset now, Investor shareholders of UBI have suffered loss in share value and staffs of blacklisted bank are denied wage hike.
Auditors say that it is not clear who are behind this menace and this dirty act. Auditors are again managed to write the story of doubt which portrays a soft picture about continuing fraud so that top officials who are mastermind behind tapering of the system are exonerated by giving benefit of doubt.
Some questions arises in my mind which are as follows
First and foremost question is who used to control the technology and the system and are they booked to task?
Who are the officers entrusted to monitor the functioning of the system and how they failed to detect the technological fault for such a long period?
Were officers not tallying and matching the system generated bad debts from manually detected bad debts?
Whether branch Officials who were in direct touch with bad accounts did not point out the faulty outcome shown by the system?
Or top officials themselves managed the ill-motivated task at their end i.e. at central office?
Each bank and each branch of the bank used to run and were supposed to run parallel manual exercise for detecting and identifying bad debts to synchronize the mechanized system of detection of bad debts until machine starts giving correct result.
Why banks failed to do such exercise and who are responsible for such gross negligence?
Was it not a intentional conspiracy of seniors to conceal bad debts?
How the switch remained off for years and prudent officers could not sense it in time? It gives stinking smell of the dirty intention behind such foul game.
It is definitely not controlled by any junior or middle management officer. Without concurrence and guidance of top officials, junior or senior officers do not have courage to play with the well protected system.
Is it not true that top management of the bank willfully reduced NPA to present better balance sheet and then to ensure grand success of public issue which UBI had to bring in the market in the year 2010.
Will RBI call explanation of ED and CMD of last ten years and also the type of culture they inculcated in the bank and type of culture they inherited from their previous banks to assess the character, knowledge and greed for money and post?
Will RBI also peep into the performance of those banks where from they were elevated to the post of ED or CMD?
RBI has ordered scanning of new loan accounts disbursed by new CMD, But result of such audit may not tell truth of the past loans which has turned NPA this year .
RBI is trying to cover up the evils of past ED and CMDs who allowed and promoted bad culture for their vested interest?
If RBI punishes all responsible General Managers, EDs and CMDs of last ten years who failed to keep technology working without tapering ,who failed to ensure switch on of Infosys system and software and who committed irregularities either in sanction or in monitoring, the message will go to other banks too and thing may improve at least from now.
It is open secret that banks are still involved and indulged in bad lending and there is no doubt that bad loan will rise every quarters to come and in all public sector banks. I have no doubt that same position exists in all public sector banks as it is found to be in United bank during forensic audit . Every bank has kept switch off willingly and intentionally to keep NPA low. Only difference is that new lady CMD of UBI has not tried or failed to managed auditors in hiding NPA whereas other ED and CMDs are clever and smart to prevail upon auditors to get the certificate as per their sweet will.
Will RBI order conduct of forensic audit of SBI where volume of bad debts run in lac of crore of rupees.
If RBI can protect loss arising from such bad assets,I hope bank staff can be paid 100% wage hike without creating any fall in their future profit.
Second question is whether the top officials of United bank of India were and are so much ignorant about the health of high value loan accounts that they could not think it wise to test the correct working of their machines.
Whether it is not their duty to verify the correctness of the volume of bad debts?
A true banker knows very well the prominent loan accounts which are sick in quality or on the verge of going sick.
Rather it may be said without doubt that it is a well planned way of concealing bad debts and this dirty game has been persisting in almost all public sector banks since long. It is not a story of two or three years as claimed by clever and managed auditors, it used to be there even when machine or core banking solutions were not in place.
When CBS system technology was not in vague and manual working was done in bank to identify bad debts, top officials of banks used to say openly in meeting that none of branch head can declare any account as NPA until they are permitted by top officials on phone. Not only this , if any courageous officer dared defy the verbal guidelines of their bosses and used stick to RBI norms in identification of bad assets , they had to bear the brunt of top management . And without fail such sincere officers were rejected in promotion process and got the most critical remote transfer orders.
Further it is not only a singular case of making less provision to inflate profit of the bank, RBI is well aware how top officials of the banks used to make lesser provision or make no provision for pension and other terminal benefits to inflate profits.
When this fraud was detected, RBI officials or officials of Ministry of Finance who were from behind the scene working in collusion with top officials of the bank and who used to misguide in banker meeting and who were protecting dirty game of bad bankers, allowed banks to make provision for residual terminal benefits and pension and amortized the same in five years so that huge burden may not adversely y affect the balance sheet of a bank and tarnish the image of the bank. If bad news spreads in the market, the share value could fall sharply and the wealth of many stalwarts could vanish who had invested huge money in shares of the bank.
Obviously there is no doubt that the fraud which has been detected by auditors in United Bank of India was committed by top officials of the bank and it is the duty of regulating agencies and CBI to call for explanation from Head of the bank and that from General Managers and Executive Directors who were mastermind behind the dirty tricks. Further they should try to peep into the balance sheets of other public sector banks so that the greatest scam of the country could come on the floor and people of India may understand the risk ahead.
All guilty, persons, whosoever it may be, heavy weight or low weight officer, must be punished in the larger interest of the customers investors as also staff working in the bank. Management of United bank has cheated investors by hiding bad assets , by making lesser provision and by showing inflated profit. Even SEBI should look into this fraudulent game with investors played by UBI when they came out with public issue in the year 2010..
Exposure of UBI management will open the eyes of Finance Ministers and politicians who has damaged the fundamentals of the bank by adopting vote bank policies and by pressurizing top bankers verbally to go for all such acts which adversely affects the profitability of the bank.
Especially PC should be made to understand that if bank staffs are not well paid and if bank staffs are not awarded for honesty and sincerity, health of banks has to be bad.
If flattery is the only quality for promotion and respect, volume of fraud and bad debts in government bank will continue to rise and endanger the deposit of innocent common men who keep their hard earned money in government banks only considering them safer than private banks.
I therefore always say that as long as flattery and yesmanism is the culture in any bank or in any office good workers cannot survive respectfully and only bad officers will prosper and the bank has to suffer in its intrinsic value. Exposure may be delayed by clever team of corrupt officers.
Thursday, July 3, 2014
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.
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 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.
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-Ã -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.
Tuesday, July 1, 2014
Merger And Consolidation of Public Sector Banks
Central Government UPA has been building pressure on banks to make best efforts for merger and acquisition. But I am unable to understand the motive behind it in Indian perspective. Finance Minister has said that through consolidation, financial powers of banks will improve and they will not only be able to augment efficiency and help in GDP growth but also get success in competing with International big banks. Here the million dollar question arises whether Late Indira Gandhi had nationalized banks to compete with International banks, whether banks are meant to extend credit in thousands of crores to a few hundred merchants or manufacturers only?
Has government forgotten the social objective of banks completely?
Is it necessary for India to have bigger banks to extend credit to farmers and small traders who together constitutes 95% of population and without whose support even economic viability of large projects would be at stake?
It is important to mention here that there is sharp rise in loan portfolio or visible growth in advances of banks in general is not due to financing made by banks to small traders and farmers but only due to bulk financing made to big corporate houses, to
real estate developers and to infra structure developers.
Even in America where big banks are many, one out of every seven Americans starves and struggle for earning their bread and butter for at least survival. In India the position is worse than that in USA. In India nine out of every ten Indians are unable to earn sufficient money even for respectful living. Considerable large proportion of Indian population is suffering from mal-nutrition; they die of curable diseases in want of proper medical assistance and they remain unemployed in want of adequate opportunities.
This is India where even federal structure of the country is at stake due to largely growing unemployment and where person like Raj Thakre has been trying hard to disallow Non-marathi to seek employment in Maharashtra and Shiv Raj Chouhan CM says he would not employment to Biharis and North Indian in the state of MP. Besides in majority of villages, small towns and cities there is no proper sanitation facilities, acute scarcity of water and electricity, crisis for medical treatment and what not. This is why I reiterate that Indian environment is different from other developed nations and hence need unique treatment.
It is worthwhile to add here that USA government have realized after fall of big banks and financial Institution during last year that management of big banks is very difficult compared to smaller ones. Still there are about 8000 smaller banks functioning in USA to serve common men. It is also true that 125 banks became bankrupt or closed their shutters during the current year in USA.
If we talk of India we have less than 30 public sector banks and they are said to be in better health position. They are well scattered in every nook and corner of the country to serve Indians in general. They have to be encouraged to extend maximum help to small borrowers. They cannot extend any better help to poor person after merger of banks. Then what is the need of merger and acquisition? Why is government bent upon merger Need of the hour is to make them able to cater to the needs of common men.
Even if government feels the necessity of having large banks with huge capital to compete with foreign banks, they can choose to have one or two like SBI or PNB (after merger of SBI with associate banks I think capital size of SBI will be comparable with their foreign counterparts and similarly after merger of PNB with some suitable bank), At least other banks should be left untouched to serve common men and forget big projects, bulk financing, corporate borrowers completely and concentrate only on small and mid size borrowers i.e. credit upto ten lacs.
Even if we leave aside the social objective, it is not commercially proposition to build pressure (frequent request by FM or RBI is enough to build pressure) on banks to go for merger and acquisition especially when government have granted economic freedom to individual banks in the era of economic reformation , liberalization and globalization When need will arise banks will themselves strive hard to grow bigger to survive. As of now banks in India are said to be safer than foreign banks. Even government has admitted it repeatedly.
Inspite of all, if government still consider it better to go for merger , I would like to suggest our Finance Minister to merge all PSBs including SBI and make them one entity like Income Tax department and other departments of Government of India so that there be no unwarranted interest rate war, no case of multiple financing, no case of take over at the cost of bank’s interest and no unhealthy competition as prevalent in banking industry. There will be unified effort to recover the money from recalcitrant borrowers. Banks will be able to check money laundering in a better way .People will not get opportunity to park their black money in different branches of different banks.
Need of the hour is to strengthen the existing structure of banks, make them more and more efficient and enthusiastic. Government should make efforts for repayment of loan and for this purpose make water tight laws to ensure cent percent recovery of loan from willful defaulters so that proportion of dead money in bank’s balance sheet comes down and they can afford and generate will to make finance to common men. Present scenario is that branch manager of every bank’s branch is afraid of extending credit to small borrowers in fear of account going bad and lastly added to Non Performing Asset.
Exposure of United Bank
It is now detected and well established by Auditors that top officials of the bank used to switch off the button which automatically detect bad debts. Since long, apprehension from many corners have been expressed candidly that bank officials use to hide bad debts to book higher profit by making lesser provisions.
But unfortunately RBI and Ministry of Finance willfully remained silent spectators of all such evil acts so that people cannot point out accusing finger towards them and they continue to use the public applaud for shining banks.
Due to such indifference and killing silence, customers and investors along with bank staff are sufferer and there is none to compensate them .Customers of the banks are not getting loans and adequate services due to demoralized mindset now, Investor shareholders of UBI have suffered loss in share value and staffs of blacklisted bank are denied wage hike.
Auditors say that it is not clear who are behind this menace and this dirty act. Auditors are again managed to write the story of doubt which portrays a soft picture about continuing fraud so that top officials who are mastermind behind tapering of the system are exonerated by giving benefit of doubt.
Some questions arises in my mind which are as follows
First and foremost question is who used to control the technology and the system and are they booked to task?
Who are the officers entrusted to monitor the functioning of the system and how they failed to detect the technological fault for such a long period?
Were officers not tallying and matching the system generated bad debts from manually detected bad debts?
Whether branch Officials who were in direct touch with bad accounts did not point out the faulty outcome shown by the system?
Or top officials themselves managed the ill-motivated task at their end i.e. at central office?
Each bank and each branch of the bank used to run and were supposed to run parallel manual exercise for detecting and identifying bad debts to synchronize the mechanized system of detection of bad debts until machine starts giving correct result.
Why banks failed to do such exercise and who are responsible for such gross negligence?
Was it not a intentional conspiracy of seniors to conceal bad debts?
How the switch remained off for years and prudent officers could not sense it in time? It gives stinking smell of the dirty intention behind such foul game.
It is definitely not controlled by any junior or middle management officer. Without concurrence and guidance of top officials, junior or senior officers do not have courage to play with the well protected system.
Is it not true that top management of the bank willfully reduced NPA to present better balance sheet and then to ensure grand success of public issue which UBI had to bring in the market in the year 2010.
Will RBI call explanation of ED and CMD of last ten years and also the type of culture they inculcated in the bank and type of culture they inherited from their previous banks to assess the character, knowledge and greed for money and post?
Will RBI also peep into the performance of those banks where from they were elevated to the post of ED or CMD?
RBI has ordered scanning of new loan accounts disbursed by new CMD, But result of such audit may not tell truth of the past loans which has turned NPA this year .
RBI is trying to cover up the evils of past ED and CMDs who allowed and promoted bad culture for their vested interest?
If RBI punishes all responsible General Managers, EDs and CMDs of last ten years who failed to keep technology working without tapering ,who failed to ensure switch on of Infosys system and software and who committed irregularities either in sanction or in monitoring, the message will go to other banks too and thing may improve at least from now.
It is open secret that banks are still involved and indulged in bad lending and there is no doubt that bad loan will rise every quarters to come and in all public sector banks. I have no doubt that same position exists in all public sector banks as it is found to be in United bank during forensic audit . Every bank has kept switch off willingly and intentionally to keep NPA low. Only difference is that new lady CMD of UBI has not tried or failed to managed auditors in hiding NPA whereas other ED and CMDs are clever and smart to prevail upon auditors to get the certificate as per their sweet will.
Will RBI order conduct of forensic audit of SBI where volume of bad debts run in lac of crore of rupees.
If RBI can protect loss arising from such bad assets,I hope bank staff can be paid 100% wage hike without creating any fall in their future profit.
Second question is whether the top officials of United bank of India were and are so much ignorant about the health of high value loan accounts that they could not think it wise to test the correct working of their machines.
Whether it is not their duty to verify the correctness of the volume of bad debts?
A true banker knows very well the prominent loan accounts which are sick in quality or on the verge of going sick.
Rather it may be said without doubt that it is a well planned way of concealing bad debts and this dirty game has been persisting in almost all public sector banks since long. It is not a story of two or three years as claimed by clever and managed auditors, it used to be there even when machine or core banking solutions were not in place.
When CBS system technology was not in vague and manual working was done in bank to identify bad debts, top officials of banks used to say openly in meeting that none of branch head can declare any account as NPA until they are permitted by top officials on phone. Not only this , if any courageous officer dared defy the verbal guidelines of their bosses and used stick to RBI norms in identification of bad assets , they had to bear the brunt of top management . And without fail such sincere officers were rejected in promotion process and got the most critical remote transfer orders.
Further it is not only a singular case of making less provision to inflate profit of the bank, RBI is well aware how top officials of the banks used to make lesser provision or make no provision for pension and other terminal benefits to inflate profits.
When this fraud was detected, RBI officials or officials of Ministry of Finance who were from behind the scene working in collusion with top officials of the bank and who used to misguide in banker meeting and who were protecting dirty game of bad bankers, allowed banks to make provision for residual terminal benefits and pension and amortized the same in five years so that huge burden may not adversely y affect the balance sheet of a bank and tarnish the image of the bank. If bad news spreads in the market, the share value could fall sharply and the wealth of many stalwarts could vanish who had invested huge money in shares of the bank.
Obviously there is no doubt that the fraud which has been detected by auditors in United Bank of India was committed by top officials of the bank and it is the duty of regulating agencies and CBI to call for explanation from Head of the bank and that from General Managers and Executive Directors who were mastermind behind the dirty tricks. Further they should try to peep into the balance sheets of other public sector banks so that the greatest scam of the country could come on the floor and people of India may understand the risk ahead.
All guilty, persons, whosoever it may be, heavy weight or low weight officer, must be punished in the larger interest of the customers investors as also staff working in the bank. Management of United bank has cheated investors by hiding bad assets , by making lesser provision and by showing inflated profit. Even SEBI should look into this fraudulent game with investors played by UBI when they came out with public issue in the year 2010..
Exposure of UBI management will open the eyes of Finance Ministers and politicians who has damaged the fundamentals of the bank by adopting vote bank policies and by pressurizing top bankers verbally to go for all such acts which adversely affects the profitability of the bank.
Especially PC should be made to understand that if bank staffs are not well paid and if bank staffs are not awarded for honesty and sincerity, health of banks has to be bad.
If flattery is the only quality for promotion and respect, volume of fraud and bad debts in government bank will continue to rise and endanger the deposit of innocent common men who keep their hard earned money in government banks only considering them safer than private banks.
I therefore always say that as long as flattery and yesmanism is the culture in any bank or in any office good workers cannot survive respectfully and only bad officers will prosper and the bank has to suffer in its intrinsic value. Exposure may be delayed by clever team of corrupt officers.
Friday, June 20, 2014
No Fresh Fund By Government To Banks
No fresh funds for state-run banks in Budget: finance ministry official-LiveMint
Sandhu said that there is no pressure from the govt on state-run banks to sell their non-core assets to raise capital
Mumbai: G.S. Sandhu, financial services secretary in finance ministry on Friday ruled out higher fund allocation in the forthcoming Budget to recapitalise state-owned banks.
“Not in this budget. If there is any urgent requirement, the government is always there,” Sandhu told reporters in New Delhi on Friday after attending the board meeting of the Life Insurance Corporation of India.
In the interim budget presented on 17 February, the previous government had proposed to earmark Rs11,200 crore towards equity infusion in public sector banks, which have been facing severe asset quality pressure as bad loans continue to mount.
Total non-performing assets (NPAs), or bad loans, of public sector banks stood at 4.4% of advances at the end of March.
Union finance minister Arun Jaitley is set to present the Budget next month.
The banking secretary said that there is no pressure from the government on state-run banks to sell their non-core assets to raise capital.
“There is no pressure (to sell non-crore assets). We are just examining what all options are available to raise additional capital,” Sandhu said.
He said the government is likely to take a decision on a proposal to create a holding company structure for public sector banks before the budget.
“I am hopeful that by the budget, we would have made up our mind on this (holding company structure),” Sandhu said, adding that the Budget would have a road map on it.
The Reserve Bank of India-appointed P.J. Nayak Committee had called for lowering the government’s stake in public sector banks to 51% to meet their capital requirements under Basel III norms and suggested setting up a holding company for all public sector banks.
According the proposal, the proposed holding company would hold the government’s stake in all state-run banks and raise capital through debt and equity on their behalf.
Wednesday, June 18, 2014
Only PS Banks May Face Risk Due To Mismanaged Power Companies
Discoms to keep stoking banks’ NPA worry if finances don’t improve: Moody’s report-Financial Express
The Indian power sector would continue to be a source of asset quality risk for public and private sector banks in India if the poor financial profiles click hee to read more
The Indian power sector would continue to be a source of asset quality risk for public and private sector banks in India if the poor financial profiles of state electricity board distribution companies (discoms) do not improve through further structural reforms, ratings agency Moody's said in a report on Wednesday.
"The poor financial health of discoms in India is one of the key factors weighing on the asset quality of the country's banks," Srikanth Vadlamani, vice-president and senior analyst at Moody's said.
According to Moody's, public sector banks have both direct and indirect credit exposure to discoms; private sector banks have almost no direct exposure, but they are exposed indirectly if problems with discoms affect the credit quality of other borrowers in the electricity supply chain.
It adds that for public sector banks, loans to discoms as a proportion of total loans range from 1% at SBI to 14% at Central Bank of India as of the end of 2013.
“While loans to discoms are a relatively small portion of overall loans, they are a much larger share of many public sector banks’ impaired loans, with impaired loans to discoms comprising more than 10% of total impaired loans at all PSBs except for SBI and reaching levels as high as 46% at OBC and 48% at Central Bank.”
Unlike PSBs, which in many cases effectively had no choice but to provide credit to discoms given government ownership and role in their management, private banks have mostly avoided directly lending to discoms given their weak finances.
Asset quality at banks has deteriorated in the last couple of years; at the end of March 2014, loans of R2,50,715 crore were non-performing, according to Capitaline data.
The Moody's report said that government measures taken in the last two years have only provided temporary relief to the banks exposed to discom loans. The steps included the substitution of impaired loans with government obligations and some operational improvements including tariff hikes.
The discoms' key problems — pricing based on non-commercial considerations and inefficient operations — have not been addressed, and a political consensus to allow discoms to price power based on commercial considerations continues to be lacking, the report added.
http://www.financialexpress.com/news/discoms-to-keep-stoking-banks-npa-worry-if-finances-don-t-improve-moody-s-report/1262142
The Indian power sector would continue to be a source of asset quality risk for public and private sector banks in India if the poor financial profiles click hee to read more
The Indian power sector would continue to be a source of asset quality risk for public and private sector banks in India if the poor financial profiles of state electricity board distribution companies (discoms) do not improve through further structural reforms, ratings agency Moody's said in a report on Wednesday.
"The poor financial health of discoms in India is one of the key factors weighing on the asset quality of the country's banks," Srikanth Vadlamani, vice-president and senior analyst at Moody's said.
According to Moody's, public sector banks have both direct and indirect credit exposure to discoms; private sector banks have almost no direct exposure, but they are exposed indirectly if problems with discoms affect the credit quality of other borrowers in the electricity supply chain.
It adds that for public sector banks, loans to discoms as a proportion of total loans range from 1% at SBI to 14% at Central Bank of India as of the end of 2013.
“While loans to discoms are a relatively small portion of overall loans, they are a much larger share of many public sector banks’ impaired loans, with impaired loans to discoms comprising more than 10% of total impaired loans at all PSBs except for SBI and reaching levels as high as 46% at OBC and 48% at Central Bank.”
Unlike PSBs, which in many cases effectively had no choice but to provide credit to discoms given government ownership and role in their management, private banks have mostly avoided directly lending to discoms given their weak finances.
Asset quality at banks has deteriorated in the last couple of years; at the end of March 2014, loans of R2,50,715 crore were non-performing, according to Capitaline data.
The Moody's report said that government measures taken in the last two years have only provided temporary relief to the banks exposed to discom loans. The steps included the substitution of impaired loans with government obligations and some operational improvements including tariff hikes.
The discoms' key problems — pricing based on non-commercial considerations and inefficient operations — have not been addressed, and a political consensus to allow discoms to price power based on commercial considerations continues to be lacking, the report added.
http://www.financialexpress.com/news/discoms-to-keep-stoking-banks-npa-worry-if-finances-don-t-improve-moody-s-report/1262142
Monday, June 16, 2014
Why Should Govt Inject Fund In PS Banks?
Why should government fund PSUbanks all the time?-By A K Das
Money Life
Money Life
At least some of the PSU banks cannot claim to be cash-strapped, especially looking at their cash reserves. By capitalising their reserves instead of seeking fund from the government, they would be rewarding their share holders as well
Press reports indicate that some of the public sector banks (PSBs) are seeking more capital ahead of the budget, which is scheduled to be presented by the second week of July. According to these reports, cash-strapped public sector banks "hit by a higher proportion of stressed assets and global Basel III requirements" have begun listing out capitalrequirements ahead of the budget in July.
Press reports indicate that some of the public sector banks (PSBs) are seeking more capital ahead of the budget, which is scheduled to be presented by the second week of July. According to these reports, cash-strapped public sector banks "hit by a higher proportion of stressed assets and global Basel III requirements" have begun listing out capitalrequirements ahead of the budget in July.
In the interim budget, the Congress-led United Progressive Alliance (UPA) government had earmarked Rs11,200 crore as capital for all public sector banks. In 2012-13, the government had, in fact put in Rs14,000 crore. This kind of funding must stop, and thebanks need to be able to generate their required funds from investing public.
Since the last couple of months, all leading newspapers have carried details of the balance sheet of a large number of organisations, including pubic sector banks. The following information has been collected from these announcements:
Name of Bank
|
Paid up Capital (Rs crore)
|
Reserves (Rs crore)
|
Allahabad Bank
|
544.61
|
10644.56
|
Bank of Baroda
|
430.68
|
36349.21
|
Bank of India
|
643
|
24629.95
|
Bank of Maharashtra
|
839.1
|
4917.02
|
Canara Bank
|
461.26
|
23660.6
|
Corporation Bank
|
167.54
|
9952.37
|
I D B I
|
16.03
|
202.93
|
Karnataka Bank
|
188.42
|
2863.78
|
State Bank of India
|
746.57
|
146623.96
|
Syndicate Bank
|
624.58
|
11387.25
|
UCO Bank
|
1014.71
|
9624.18
|
Union Bank
|
630.31
|
16544.67
|
From the above, most of the banks mentioned appear to have healthy cash reserves. If and when they need funds, they should be able to raise it from the investing public either by rights issue or even by capitalising their reserves.
However, in the present situation, specific amounts of assistance appears to have been sought from the government by IDBI and Indian Overseas Bank, and it is likely that some more may join the band wagon to seek capital infusion.
As mentioned above, at least some of the banks cannot claim to be cash-strapped! By capitalising their reserves, they would be rewarding the share holders too.
In the meantime, it is being reported in the press that GS Sandhu, secretary for financial services, has underlined the need for banks to sell off their non-core assets. The companies identified as non-core include rating agencies such as ICRA, CARE, National Stock Exchange (NSE), IL&FS, UTI, Multi-Commodity Exchange (MCX), Stock Holding Corp of India Ltd (SCHIL), Central Depository Services (India) Ltd (CDSL), and asset reconstruction corporations (ARCs). The estimated value of these assets would be around Rs25,000 crore.
As we can see from the details given above, the reserves are huge, compared with the paid up capital of these state-rund lenders. It is pay back time for these banks. Why not buy out the government share in line with the established formula for this purpose and reduce the government holdings?
Years ago, the Atal Bihari Vajpayee government had suggested that the Centre could reduce its stake in public sector banks to 33% but the move did not go through as the law could not be amended. Now this can easily be achieved and Vajpayee's proposal could be implemented!
After doing this, should the banks need any additional capital infusion, they ought to go to the shareholders instead of going back and forth to cash rich Life Insurance Corp of India (LIC) and other similar institutions, which only means that the Government stake would keep rising, instead of being held by the investing public.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
Subscribe to:
Comments (Atom)