Risk Number One
Jump in large-value frauds
Up from Rs 3,500 cr in 2009-10 to Rs 8,600 cr in 2012-13
MUMBAI, DEC. 30:
The number of cases of large-value frauds (involving Rs 50 crore and above) has increased significantly over the last three years, from three cases in 2009-10 to 45 cases in 2012-13, according to the Reserve Bank of India’s Financial Stability Report.
There is an even more alarming increase in terms of total amount involved in such cases.
“The rise in incidences of frauds in large value loan accounts is a concern and concerted action to improve checks and balances and deterrent action will be required to tackle the problem,” the RBI said.
While the number of fraud cases have shown a decreasing trend from 2009-10 (about 24,000 cases) to 2012-13 (about 12,500 cases), the total amount involved has increased substantially over this period from about Rs 3,500 crore in 2009-10 to about Rs 8,600 crore in 2012-13.
Online frauds
The RBI said online frauds, lottery SMS alerts, advertisements inducing customers to share the details of bank accounts, cloning of cards etc., pose a real challenge for the banks and customers alike in matters of safety and security. Banks need to evolve a comprehensive policy with regard to online banking services, by focusing on compensation, insurance and/or a limited liability clause, it added.
The RBI said online frauds, lottery SMS alerts, advertisements inducing customers to share the details of bank accounts, cloning of cards etc., pose a real challenge for the banks and customers alike in matters of safety and security. Banks need to evolve a comprehensive policy with regard to online banking services, by focusing on compensation, insurance and/or a limited liability clause, it added.
Read this Link Also which gives data on fraud and few lines of which given belowfor ready reference ( http://importantbankingnews.blogspot.in/2013/11/fraud-in-bank-goes-up-and-up.html
Fraud In Bank Goes Up And Up
Bank frauds rising: Double to Rs 6,212 cr in 2012-13-Business Line
Public sector banks main victims of poor appraisal systems
Supreme Court Says Fraud With Bank is Fraud With Society but no corrective action appears to have been taken by anyone neither on human resources improvement nor stopping political exploitation nor inefficiency of judiciary Read thislink too http://importantbankingnews.blogspot.in/2013/10/fraud-with-bank-is-fraud-with-society.html
Risk Number Two
Health of banks worsened in past six months: RBI
( By Poor Credit appraisal and Poor monitoring And finally By poo Recovery )
MUMBAI, DEC 30:
With stressed assets continuing to rise and expected to get worse, the Reserve Bank has cautioned that risks to the banking system have increased over the last six months, but added that there are no systemic risks at the moment.
“The banking stability indicator shows that risks to the banking sector have increased since June 2013,” the Reserve Bank said in its half-yearly Financial Stability Report released today.
The indicator combines the impact on all major risk dimensions, said the RBI, which has carried out multiple tests before coming to this conclusion.
“The strain on asset quality continues to be a major concern,” the report said.
Recast loans
With the present conditions continuing, the gross NPAs in the system will rise to 4.6 per cent by September 2014 from 4.2 per cent in September 2013 or about Rs 2.29 lakh crore from Rs 1.67 lakh crore a year earlier, it said.
The amount of recast loans touched an all—time high of Rs 4 lakh crore or 10.2 per cent of the overall advances as of September 2013, the report added.
However, the RBI expects some positives in the second half of the next fiscal and is estimating gross NPAs to improve to 4.4 per cent by March 2015.
In case the economic conditions deteriorate, the same number will be 7 per cent by March 2015, the RBI warned.
Worst-affected
The state-run banks will be the worst-affected, the report said, pegging the GNPAs for public sector banks at 4.9 per cent by March 2015. It projected the GNPAs for private banks at 2.7 per cent in the same period.
If the restructured assets are added, the total stressed advances ratio will rise to 10.2 per cent as of September 2013 from the 9.2 per cent in March 2013, the RBI said.
The report reiterates that the RBI will discontinue the system of relaxed restructuring of advances from 2015 onwards and warned that state-run banks will be affected the most as the provisions will shoot up.
“The regulatory concerns regarding restructuring arise from the possibility of the relaxations not being used judiciously by banks commensurate with the viability of projects. These relaxations for asset classification/ provisioning will be phased out by April 2015,” it said.
Main culprit
The report said though agriculture accounted for the highest GNPAs, at 5.5 per cent as of the quarter to September 2013, it is the industrial sector with a GNPA of 4.9 per cent and 10.9 per cent of restructured loans which is the main culprit.
Among the sectors, it said infrastructure, iron and steel, aviation, textiles and mining, which have not been doing well, will continue to perform badly. “Some factors affecting the asset quality adversely are current economic slowdown — global and domestic — persistent policy logjams, delayed clearances of various projects, aggressive expansion by corporates during the boom phase with resultant excess capacities and deficiencies in credit appraisal,” it said.
The central bank also said that present levels of provisioning for loan losses by banks may not be sufficient to meet the expected losses if the conditions were to deteriorate.
Also Raad this link ( http://importantbankingnews.blogspot.in/2013/11/rise-in-bad-debts-due-to-poor-credit.html
Rise In Bad Debts Due to Poor Credit Appraisal
Bad loans: KC Chakrabarty blames poor credit appraisal by PSBs-Financial Express 17.11.2013
Risk Number Three Is Linkage of Banks With Mutual Funds
Strong linkage between banks, mutual funds a cause for concern
The circular flow of funds between banks and mutual funds is a source of systemic instability in times of stress/liquidity crunch, says RBI
MUMBAI, DEC. 30:
The Reserve Bank of India has flagged the issue of strong interconnectedness among banks and mutual funds in India as a cause for concern. Debt mutual funds account for 70 per cent of the assets under management of the mutual fund industry.
Mutual funds have relied more on investments by banks and corporates in the backdrop of low retail participation.
The report said that due to their interconnectedness with banks, liquidity pressure is felt by the money market mutual funds whenever redemption requirements of banks are large and simultaneous.
Liquid debt mutual funds are large lenders in the overnight markets, such as collateralised borrowing and lending obligation (CBLO) and market repo, where banks are large borrowers. Various schemes of mutual funds also invest heavily in certificates of deposit (CDs) of banks.
The circular flow of funds between banks and mutual funds is a source of systemic instability in times of stress/liquidity crunch, etc., the RBI said.
Debt mutual funds, which had seen large inflows in 2012-13, saw a reversal when the sharp depreciation of the rupee began in response to the announcement of tapering by the Fed earlier this year in June 2013.
The RBI’s measures on tightening liquidity during July 2013 saw investments by banks as a percentage of total AUM (assets under management) of liquid/money market schemes declining from 21.14 per cent on July 15, to 13.02 per cent as on July 16, which further declined to 7.77 per cent as on July 31.
The RBI, however, noted that the special windows opened for refinance were not utilised, indicating an improvement in liquidity management by mutual funds.
Risk Number Four is
Bad Manpower Policy, Faster Promotion, Bad Recruitment, Flattery based elevation of Officers and Opening of Branches without adequate manpower and without experienced staff
Read My following blogs
Importance of Human Resource In Bank
God Knows what the Chief of a bank has done for his Human resources during his tenure of three or six years as CMD in a bank. It is easy to preach the sermons to others but difficult to follow it. Some people are clever in teaching and speaking goods ideas and course of action to others to please the audience, but they in action do not do what they speak.
Rapid Expansion Of Branches Will Prove Fatal
Risk Number Five is Cozy relationship of Bankers with corporate houses and Businessmen
FM Express Doubt On Integrity Of Bankers
Banks and corporates have entered into a cozy
relationship: FM---Business Standard-15.12.2013
Says working capital loans to companies have hit growth of corporate bond market
Finance Minister P Chida-mbaram on Saturday said non-performing loans (NPLs) in the banking system were on the rise, as banks and companies had entered into “a very cozy relationship”. He added lenders had been asked to “get cracking” on recovery and avoid extending loans to companies for working capital needs so that companies tapped the corporate bond market.
IBA asks Bank employees to refuse verbal orders ( News items given below)
16.December 2013
16.December 2013
Indian Bank Association has got no legal status and no moral authority and no administrative power to issue orders or advices to field functionaries or to member banks. However IBA has thought it necessary to advice bank employees not act on verbal orders of superiors. It is nothing but an attempt made by IBA which is made of Chief of various banks only, to save chief of banks who are being accused of applying corrupt practices in sanction of loans to serve their self interest and who are responsible for unprecedented rise in Non Performing assets or bad debts in banks.
It is a classic example of a leader of a gang of thieves thief dictating member thief not to steal and not allow stealing to co-workers or colleagues. Advices given by IBA to bank staff is just like politicians delivering sermons and making large promises to common men while delivering “Political Bhasan” in his constituency or elsewhere. Politicians never say that they will promote corruption, they always say that they and their party will give clean government and whoever indulges in corruption will be taken to task.
But the level of corruption in all offices and in all ministries has increased to unbearable extent all over the country. India’s ranking in the world on the matter of corruption is increasing year after year. It is however also true that whenever any minister or any Neta is accused of indulged in scam or promoting corruption, he blames administrative officers for the crime and on the contrary when officers are accused of corruption in their work or use of corrupt practices they cleverly put entire blame on Neta under whose pressure or verbal orders they acted. This is the normal culture and normal ritual in all sphere of life.
There is a warning in all packets of cigarette “Smoking is injurious to health”. There is warning on each bottle of wine, “Drinking is not safe and injurious to health” . But neither drinking nor smoking has been stopped or reduced .There are many types of board containing valuable advices and warning for customers and staff available in all offices and properly displayed in all banks too. But the question is whether they are able to stop the corruption or they are hanged on wall as ritual and as date calendar. Government in India runs on boards and banners, hoardings and advertisements, slogans and sermons and in the same way all offices functions and get award of excellence by certificates of good work given by purchased juniors and inspectors.
Boards are hanged on wall in all branches and in all government offices that “corruption is a bad practice”. Boards displayed on wall speak clearly “we solemnly take oath to work devotedly, sincerely and honestly in the interest of the bank and customers of the bank without taking any bribe or gift in lieu of any work done by us. ”. Boards containing addresses of Regional Head of the bank or Zonal Head of the bank, or that of Chief Vigilance officers and Ombudsman are displayed prominently in all offices, but these boards are proved to be ineffective. There is a board on every office, “May I help you”. But customers of the bank cry for smooth and quick work, there is no one to listen to this demand and his request.
In judiciary , whenever any witness or any accused appear before any magistrate or any judge , he or she to take oath keeping hands on pious religious books that he or she will speak true and true only . But the fact is that the act of crime has been increasing in judiciary or in all administrative offices in India unabated. And the most painful is that real criminals are always or mostly exonerated and a few innocent witnesses or who watch the act of crime willingly or unwillingly or who dare say the story of crime are taken to task and punished.
As such the advice given by IBA is nothing but BUKWAS and nonsensical .I may rather say without any hesitation it is the mostly the top officials who create corrupt culture in an office. If a boss is hard, honest and sincere worker, there is no doubt that all evil doers will stop their ill-motivated work or take transfers to other places. There are many instances of hard IAS and IPS officers whose effectiveness and image of toughness reaches new place of posting before he or she actually joins duty there. Criminals move to other district as soon as an effective and honest officer is posted in a particular district. People all over the country perhaps know the image of Kiren Bedi. Similarly there are good officers in banks too, but their effectiveness is dismal, their value is negligible and their elevation to upper post is a rare phenomenon. This is why most of corrupt officers reach top position in short tenure of service and they form a gang to serve the mutual interest of each other.
No rule or no circular in any bank ask any bank staff to indulge in corrupt practice or to act upon verbal bad orders . Still corruption and bad practices are there in banks in case of not only in sanction of loans but also in recruitment, transfers, promotions, allotment of work to contractors, renovation of branches, on advertisement bills, in purchases of hardware or software etc.
Eyes and body language of the seniors are enough to say what a junior has to do and what not to do if he or she has to survive , if he or she to remain in bank peacefully . Otherwise a chain of transfers, rejection in promotion processes and issue of false charge sheet is common. ON the other hand if an officer is Pucca Yesman , who always speaks ‘Yes Sir’, who earns bribe and share honestly with the bosses and who is number one flatterer is exonerated even if he or she is found to be responsible for hundreds of irregularities and thousands of act of corruption.
Until this culture of flattery and bribery is changed at ground level, it is foolish to believe that any such circular as issued by IBA or Government of India advising to refrain from verbal orders of seniors will be effective.
Last but not the least
Read this blog too
http://importantbankingnews.blogspot.in/2013/12/can-rbi-or-ministry-of-finance-stop.html
Last but not the least
Read this blog too
http://importantbankingnews.blogspot.in/2013/12/can-rbi-or-ministry-of-finance-stop.html
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