Time to bury the wage pact in the banking industry-LiveMint-By Tamal Bandyopadhyay
The benchmark for such a pact is the paying capacity of the weakest of the banks and this is unfair to the employees of strong and profitable banks
11th May 2015
My column last week on the human resources crisis in India’s public sector banks (PSBs) evoked strong reactions from a few senior bankers. The chiefs of two public sector banks told me that my apprehensions are “highly exaggerated”. The PSBs, according to them, have the systems and processes in place to carry on and grow business. A retired chairman and managing director of one bank said that in an extremely robust PSB work culture, individual employees do not matter.
“A bank can continue to perform well even if it doesn’t have a managing director. The senior management is competent enough to run it for months,” he said.
I have my reservations about their observations though. Indeed, there are talented bankers in the public sector, but by and large, this set lacks the skills and expertise needed for risk management, credit appraisal and credit monitoring. This is evident in their balance sheets. Most PSBs have more bad assets on their books than private banks; they need to set aside dollops of money to take care of such assets and this affects their profitability. The work culture needs to change and a beginning could have been made by burying the industry-wide wage pact, but none of the PSBs are willing to take the initiative.
The PSBs are a motley group in terms of business per employee and profit per employee; return on assets and return on equity; and valuation on stock exchanges. Yet, when it comes to wages and salaries, 800,000 PSB employees are treated equally. The performers are not rewarded and the laggards are not punished. An industry-wide wage pact is the most bizarre performance appraisal that any industry can have. The benchmark for such a pact is the paying capacity of the weakest of the banks and this is unfair to the employees of strong and profitable banks. It is another story that PSB employees are better looked after than their peers in private banks. Barring a handful of executives at the top, the cost per employee in the private sector is lower than public sector banks.
The new wage settlement, effective from November 2012, when the last five-year settlement expired, ensures a 15% wage hike for PSB employees, lower than the 17.5% hike given last time. However, this is not strictly comparable as the last hike was calculated based on an employee’s remuneration, including pension and gratuity, while the basis of calculation this time does not include retirement benefits.
Demanding a 19.5% wage hike, the unions had threatened to go on a four-day strike in February, leading to the intervention of finance minister Arun Jaitley. The United Forum of Bank Unions, an umbrella body of nine trade unions, and the Indian Banks’ Association (IBA), a national bankers’ lobby, spent more than two years negotiating the settlement. The salary hike will lead to an annual outgo of Rs.4,725 crore for the 45 banks that are part of the 10th industry-wide bipartite five-year wage pact ending in October 2017.
Apart from public sector banks, most old private and foreign banks in India are also covered by this pact.
However, old private and foreign banks have only the salaries of their clerical workers covered by this, unlike PSBs, whose officers too are part of the wage agreement. Typically, once the existing settlement expires, protracted negotiations follow for years to reach a new one. The first such settlement was signed in October 1966. Apart from the IBA, the Bombay Exchange Banks’ Association, representing foreign banks in India, was involved in the first pact, which had a tenure of three years. The Bombay Association does not exist any more and foreign banks operating in India have joined the IBA.
The continuation of the industry-wide wage pact for close to 50 years makes it clear that the trade unions still have a strong hold on the industry even though the IBA always tries to extract certain commitments from the unions while negotiating the wage settlement.
For example, in 2002, while signing off on a 13.3% wage hike, the IBA, on behalf of the bank managements, got a blanket go-ahead from the unions for computerization—a move that the unions had been resisting for long.
The unions also accepted transfer of employees, which was quite tough for the bank management till then, even though, theoretically, all bank employees can be transferred within a zone where the same language is spoken. This time around, the unions have extracted two extra days off a month (second and fourth Saturdays) as part of the settlement—not an entirely illogical demand in the age of digital banking.
Since the IBA starts negotiating with the unions after it gets the mandate from all banks, individual banks have the choice to break away from the industry and have their own settlement. They should start doing it now. Also, if the banks are serious about financial inclusion, they should create a separate cadre for this. Ideally, it can be done by floating a subsidiary and the employees of such a subsidiary should be locally recruited and paid much less than the employees of a bank.
Regional rural banks, or RRBs, were set up in the mid-1970s to spread banking to rural India and finance agriculture, but they have not succeeded in their mission. RRBs are owned by the central government, respective state governments (where they are located) and the sponsor banks and the employees earn as much as their counterparts in PSBs following a court order, even though their skill sets are very different.
If banks want to recruit locally for rural pockets, they cannot discriminate between urban and rural staff in terms of wages, even though the cost of living in rural India is lower than in a city. The only way this can be done is by floating dedicated subsidiaries for rural lending. The RRB experiment has failed.
http://www.livemint.com/Opinion/HITsLuFWTUKgI18Tt5KDbO/Time-to-bury-the-wage-pact-in-the-banking-industry.html
Govt of India Not Interested in Honourable Wage Revision But Asks Bankers to Enrol 10 Crore People in Social Security Schemes by 31st May, 2015 i.e. in about 20 days-By Rajesh Goyal (allbankingsolutions.com)
Calling himself the “Pradhan Sevak”, Narender Modi, PM of the country told at a rally in West Bengal that it is launching three social security schemes - the Pradhan Mantri Suraksha Bima Yojana, the Pradhan Mantri Jeevan Jyoti Bima Yojana and the Atal Pension Yojana. The officially these schemes will be effect from 1st June, 2015.
Govt of India Not Interested in Honourable Wage Revision But Asks Bankers to Enrol 10 Crore People in Social Security Schemes by 31st May, 2015 i.e. in about 20 days-By Rajesh Goyal (allbankingsolutions.com)
Calling himself the “Pradhan Sevak”, Narender Modi, PM of the country told at a rally in West Bengal that it is launching three social security schemes - the Pradhan Mantri Suraksha Bima Yojana, the Pradhan Mantri Jeevan Jyoti Bima Yojana and the Atal Pension Yojana. The officially these schemes will be effect from 1st June, 2015.
We are aware that 10th BPS has already become overdue by over 900 days. Bankers are not only getting the least of the salaries among the central, state and PS units, but are being time and again burdened which are schemes of Government departments. The Government departments do not have to do any spade work except issuing instructions about the scheme and giving targets to PS Banks.
I just have come across a news item on internet (10th May, 2015 evening) at Economic Times website wherein it is reported that the Centre has exhorted bankers to work towards surpassing the target of bringing 10 crore people under the ambit of the three social security schemes launched by Prime Minister Narendra Modi, before the end of this month. "The bankers must ensure maximum coverage upto May 31 so that the national target of enrolling 10 crore population in the country is not only achieved but surpassed," MoS PMO Jitendra Singh said.
I think on this website we have written so many times about the ineffectiveness of various unions in banks (i.e. mainly nine unions being represented in UFBU), that there is no need to repeat the same . Modi Government wants to leave its impression on masses by introducing these social security schemes. There is no doubt that it is a great job and India needs the same. However, without the required infrastructure and manpower, banks are being forced to do this unprofitable job, which in the long run will impact the profitability of the banks.
The lower profitability will be raised as a boggy to merge the banks and /or deny an honourable wage revision or deny the retired bankers updation of pension. Thus, the effect of these schemes is likely to be good for the nation but it will be at the expense of bankers and their shareholders.
Unions have to play an active role in protecting the interests of the bankers and not remain mute spectators. They at present are begging for a meeting with IBA (which is only informal association of banks and has no locus standi in the eyes of law). For over 900 days IBA is playing a hide and seek game and has befooled the UFBU in cancelling the strikes in January and February 2015.
At the same time, bankers are dictated by Government to complete the target to bring 10 crore people under the ambit of the three social security schemes within less than 20 days. No additional staff and no additional payment for the extra work load. In the whole banking industry, there is NOT EVEN ONE CMD who can even issue a statement in favour of bankers and press for the need to go for much better settlement that is being offered vide MoD dated 23rd February 2015, and request for additional payment to bankers for the additional workload.
All this is because CMDs are self centered and afraid that raising their voice can annoy the government which can bring to light their corrupt practices and they will be completely exposed. Almost all of them have some or the other hidden skeletons in their cupboards.
Therefore, Jai Ho Modi Sarkar, Jai Ho UFBU and above all Jai Ho of all CMDs of PS banks. Down Down with lazy bankers !!
Sri Kamlesh Chaturvedi Writes on Facebook
Management of our great bank-"PNB", known for indulging into unnecessary litigation paving way to miscarriage of justice has put following notice on its website.
By this Notice our Bank has denied appointment to those candidates belonging to "Jat" community who had applied for appointment in pursuance of Notification issued by Government of India and mentioned in advertisement of IBPS and after being declared successful, they have been allocated PNB.
Now a basic question arises as to what mistake has been committed by these candidates for being deprived from appointment? The Notification referred in the Notice has been issued by Government of India, IBPS acted on Notification, Candidates applied on the basis of information given in advertisement, they obtained requisite marks in written test for being declared successful and they cleared interview for being eligible for allocation of Bank for appointment and joining the duties. It is worth mentioning that IBPS allocated banks to candidates of "Jat" Community in April, i.e. after the Judgement dated 17.03.2015 by Hon'ble Supreme Court Of India. Why and how these candidates must be punished for acts of Government of India and IBPS ?
Then another question which arises is as to how vacancies which were to be filled through appointment of candidates from "Jat" community would now be filled ? It is manifest that IBPS allots Banks on the basis of requisition/demand made by particular bank. For example if our bank demanded 500 officers and out of 500 candidates to whom PNB has been allotted, 25 belongs to "Jat Community". How these 25 vacancies would now be filled?
We consider this notice as unilateral, arbitrary, unjust and in utter violation of rules of natural justice. In our considered opinion, candidates from "Jat" community who have been allotted our Bank after completion of process of selection can't and shouldn't be penalised for mistake or fault committed by Government of India.
We urgently need information on appointments made in pursuance of gazette Notification vide which "Jat" community was included in common central list of other backward classes not only from banks but in other departments also. Can any one provide information on appointments made after 04.03.2014 in which members of Jat Community were given appointment on posts reserved for other backward classes? Please provide information urgently.
Further we invite suggestions on grounds for challenging this notice of our bank.
Now you know why the pile of bad loans in India’s state-owned banks has been rising and why both the banking regulator as well as the finance ministry are upset with many bank chiefs.
The official reason behind the growth in bad loans is a faltering economy but everyone knows there is more to it.
Yes, there are bank chiefs who are dishonest. They give loans to those who don’t deserve them and make money cutting such deals. They make money but their banks pay the price. The Reserve Bank of India (RBI) is well aware of this practice. So is the finance ministry. But they don’t openly talk about it as that may shatter public confidence in our banking system, some 70% of which is accounted for by state-owned banks.
On Saturday, the Central Bureau of Investigation (CBI) arrested Sudhir Kumar Jain, chairman and managing director of Syndicate Bank Ltd, for allegedly taking a Rs.50 lakh bribe. His brother-in-laws are allegedly involved in the mechanics of the pay-off.
Jain, who took charge as chief of Syndicate Bank in July 2013, was allegedly offered the bribe for increasing the credit limit of a few companies, throwing banking norms to the wind. A commerce graduate and a chartered accountant, Jain started his banking career in June 1987 in Dena Bank.
There aren’t too many instances of public sector bank CEOs being arrested by CBI, but CEOs stepping down before the end of tenure or being sacked are no novelty. More on them later but let’s first try to understand the modus operandi.
One way of making money is to give loans to a creditor who does not deserve it. The second popular way is giving loans at a price which is lower than what it should have been.
In both cases, the deal maker pockets a certain portion of the load value (could be a few basis points for big ticket loans or even a few percentage points for small loans). The third way of money making is restructuring a weak loan account and giving breathing time to a rogue borrower. I am aware of a former chief of a large public sector bank whose wife used to cut such deals.
In banking lexicon, such deals are called an accommodation, but all such transactions do not necessarily need to involve money. Often a bank chief indulges in such a deal under the influence of politicians in power to ensure a smooth future. And many public sector bankers entertain politicians from their days as general manager, because this helps them climb the greasy pole and become chairman of the bank.
Many appointments of public sector bank chiefs are such quid-pro-quo deals. The favour is returned in the form of loan sanctions and other accommodations.
Last year CBI arrested Shyamal Acharya, a deputy managing director of State Bank of India, the country’s largest lender, for allegedly taking a bribe in kind—an Omega and a Rolex watch worth Rs.7.75 lakh each. Both the watches were seized from Acharya’s cabin by CBI.
Allegedly, Acharya violated norms for a loan approval. The State Bank of India (SBI) instituted a two-member internal panel to look into the allegation but could not find any procedural lapses in a Rs.75-crore loan sanctioned to Delhi-based Worlds Window Group (WWG).
CBI had filed a case against Acharya, K.K. Kumra, who was an adviser at WWG, and Piyoosh Goyal, founder, WWG. Apparently, Goyal had sought a Rs.400 crore loan from the bank and Kumra, a former bank official, in turn got in touch with Acharya, who allegedly influenced his juniors and got Rs.75 crore sanctioned to begin with.
CBI conducted simultaneous raids at various locations including offices and residences of Acharya, Kumra and Goyal and Rs.7 lakh in cash was found in Acharya’s residence. Many bank insiders say Acharya was “framed”.
In 2013, the finance ministry sought an explanation from Corporation Bank chairman and managing director Ramnath Pradeep on charges against him by the Central Vigilance Commission (CVC) over alleged violation of norms. Pradeep faced eight key charges that include sanctioning loans to a few companies in contravention of regulations, extending a big-ticket loan to a tower construction company that had already defaulted on payments to another state-controlled bank, and changing rules in a bid to appoint a consultant at the bank.
I am not aware of the latest development of this case.
CBI in late 2011 had arrested eight senior officials belonging to nationalized banks and financial institutions for allegedly accepting inducements to issue loans to vested parties or leak vital information from their top committees in the so-called loans-to-bribe scam. They were later released on bail.
There have been many instances when a bank chief’s tenure has been cut short by the government for alleged irregularities. For instance, S.C. Basu of Bank of Maharashtra Ltd could not complete his full term in 2006. Ditto N.S. Gujral of Punjab and Sind Bank in Delhi. Chairperson and managing director of United Bank of India Archana Bhargava too has recently settled for a shorter tenure, citing health reasons. Other bankers say there was something more to it behind her exit but nobody has spoken about corruption.
When it comes to being discredited, none can beat the record of former Indian Bank chairman and managing director M. Gopalakrishnan. He was sentenced to one year’s rigorous imprisonment by a CBI court for allegedly causing a loss of Rs.31.75 crore by granting loans without proper security between 1992 and 1996. He was found guilty by the court of conspiracy, criminal breach of trust, misconduct and cheating under various provisions of the Indian Penal Code and Prevention of Corruption Act.
How does one make all bankers, who are custodian of public money, honest and incorruptible? And, how to punish a corrupt one?
One way could be offering them a respectable salary. Currently they earn a pathetic pay packet. Take a look at the chief of State Bank of India who handles a balance sheet of Rs.22 trillion. (I am in no way suggesting that the State Bank chief is corrupt.) And compare it with the chief of any private sector bank who oversees a balance sheet which is one-fifth of the size of State Bank or even smaller. Yes indeed, the State Bank chief lives in a big bunglow in Mumbai’s posh Malabar Hills but that doesn’t add to the salary.
To start with, if the government decides to monetize all benefits that a public sector bank chief earns, their salary will be many times more. Open up the sector; pick up competent people from the market, give the CEOs more money, keep them happy, and put them under 24X7 surveillance. If they are caught taking money, punish them. They are playing with public’s trust, and deserve exemplary punishment.
Can Modi get rid of corruption in public sector banks?-Rediff
Link Rediff
Public sector banks are inefficient, poorly governed and beset by largescale corruption, says Debashis Basu.
Narendra Modi's many passionate election speeches last year and earlier this year were punctuated by a very colourful expression.
"Send me to Delhi as your chowkidar and I will protect your wealth," he claimed. This was accompanied by another colourful expression: "Na khata hoon, na khane deta hoon" (I neither make money, nor do I allow others to make money).
We hope that at some stage Mr Modi starts applying these two of his many pre-election promises where they matter the most: government-owned banks.
Public-sector banks (PSBs) dominate the Indian financial sector. They hold the bulk of people's savings. They are the main source of loans to small businesses and large projects alike. They are vehicles for his ambitious Jan Dhan Yojana. They are also inefficient, poorly governed and beset by largescale corruption.
In May, the All India Bank Employees Association (AIBEA) assessed wilful defaults worth Rs 70,300 crore in 400 PSB loan accounts.
They also estimated that over the past seven years, there were fresh bad loans worth Rs 4.95 lakh crore in the PSBs - while during the same period, these banks wrote off bad debts worth Rs 1.4 lakh crore.
Gross non-performing assets (NPAs) and bad loans in these banks had increased more than three times to Rs 1.64 lakh crore on March 31, 2013, from Rs 39,000 crore on March 31, 2008.
Thousands of crores of write-offs are happening without accountability. Spectacular defaults such as Deccan Chronicle and Kingfisher Airlines have led to no action against defaulters or against the senior bank officials and chairmen who allowed the loans to go far beyond enforceable collateral.
This is a huge scandal, which should get the chowkidar worried, because the reasons for such massive bad loans and write-offs are deep-seated. Forget about maximum governance, even minimum governance in missing in the PSBs. And has been for decades.
In the 1970s, the government used the PSBs to mainly fund its various socially oriented loan schemes and public-sector projects, which often left a big hole in the banks' books.
Throughout this period, private-sector companies also relied on government-owned banks and financial institutions for loans. Since the lenders insisted that promoters bring in substantial amounts of cash, borrowers would inflate the cost project and siphon off the money.
Therefore, contrary to all prudent norms, projects were more than fully funded by government banks, with most promoters having no skin in the game. Naturally, many projects turned sick while the promoters enriched themselves. Bankruptcy laws were weak. Nothing could curb the corrupt nexus between PSBs and their defaulting borrowers. When such poor lending weakened the banks, the government would step in and "recapitalise" them for the game to continue.
From the mid-1990s, amid the euphoria of economic liberalisation, Indian businesses expanded their capacities rapidly with the help of loans from PSBs and so the inherent weakness of the government banking system got magnified manifold. By 2001-2002, bad loans had reached an alarming 13 per cent of advances.
After 30 years of unaccountable lending, banks started complaining that they need tougher laws to enforce collaterals. In response, the government created the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi) of 2002, designed to help banks in the recovery of bad loans.
One of the key provisions of the Act is for banks to be able to auction the assets of defaulting borrowers. But notice that even after getting a tougher law, banks have not been able to claw back much money from Vijay Mallya of Kingfisher or the Reddy brothers of Deccan Chronicle.
The answer is obvious: bank officials have lent money without adequate collateral, as part of their nexus with promoters. Yet neither the Reserve Bank of India (RBI) nor the finance ministry is questioning the officials or directors involved.
Indeed State Bank of India (SBI) Chairman Arundhati Bhattacharya, in an interview with the Financial Times last week, has called for a shake-up in the regulatory system and asked for tougher rules for defaulters, as well as "a proper bankruptcy law to help get orderly resolution of [bad] assets".
That is a smokescreen. Working with the same set of laws, ICICI Bank, Axis Bank and HDFC Bank have negligible bad loans. Why? The real issue is corruption in various forms, starting with how bank chairmen are appointed.
Appointment of PSB chairmen is an elaborate process. It starts with intense lobbying by various senior bankers. Finance-ministry bureaucrats play favourites. Selection is often influenced by quid pro quo - a promise to be pliant and sanction certain loans that are bound to go bad. The RBI usually rubber-stamps this selection process.
Who will go after a chairman when he enjoys the ministry of finance's support and the RBI is hands-off?
Mr Modi has repeatedly talked about governance. The first step in governance of PSBs is to fix responsibility on their top brass for loans that have turned bad. Right now, accountability in the PSBs is a black hole despite the fact that banks have stringent credit-appraisal process.
Small businesses complain of onerous conditions imposed by banks before loans are sanctioned. Often banks arm-twist borrowers to buy some expensive insurance as an unwritten precondition.
And yet loans worth tens of thousands of crores have gone bad - something that should happen only in exceptional situation, such as a natural disaster. A loan such as that of Kingfisher goes progressively bad, not overnight.
What were banks doing at each stage that Vijay Mallya's collateral was falling short? Would they extend the same courtesy to a small borrower?
The fact is, borrowers have repeatedly siphoned off money from the banking system in connivance with bankers, no matter what kind of regulatory system and process we have had.
The previous prime ministers did not claim to be chowkidars. Mr Modi has. For the first time in 45 years, can taxpayers hope that accountability in the PSBs will be fixed?
Sri Kamlesh Chaturvedi Writes on Facebook
Management of our great bank-"PNB", known for indulging into unnecessary litigation paving way to miscarriage of justice has put following notice on its website.
By this Notice our Bank has denied appointment to those candidates belonging to "Jat" community who had applied for appointment in pursuance of Notification issued by Government of India and mentioned in advertisement of IBPS and after being declared successful, they have been allocated PNB.
Now a basic question arises as to what mistake has been committed by these candidates for being deprived from appointment? The Notification referred in the Notice has been issued by Government of India, IBPS acted on Notification, Candidates applied on the basis of information given in advertisement, they obtained requisite marks in written test for being declared successful and they cleared interview for being eligible for allocation of Bank for appointment and joining the duties. It is worth mentioning that IBPS allocated banks to candidates of "Jat" Community in April, i.e. after the Judgement dated 17.03.2015 by Hon'ble Supreme Court Of India. Why and how these candidates must be punished for acts of Government of India and IBPS ?
Then another question which arises is as to how vacancies which were to be filled through appointment of candidates from "Jat" community would now be filled ? It is manifest that IBPS allots Banks on the basis of requisition/demand made by particular bank. For example if our bank demanded 500 officers and out of 500 candidates to whom PNB has been allotted, 25 belongs to "Jat Community". How these 25 vacancies would now be filled?
We consider this notice as unilateral, arbitrary, unjust and in utter violation of rules of natural justice. In our considered opinion, candidates from "Jat" community who have been allotted our Bank after completion of process of selection can't and shouldn't be penalised for mistake or fault committed by Government of India.
We urgently need information on appointments made in pursuance of gazette Notification vide which "Jat" community was included in common central list of other backward classes not only from banks but in other departments also. Can any one provide information on appointments made after 04.03.2014 in which members of Jat Community were given appointment on posts reserved for other backward classes? Please provide information urgently.
Further we invite suggestions on grounds for challenging this notice of our bank.
How to deal with corrupt bosses of state-owned banks-LiveMint
The official reason behind the growth in bad loans is a faltering economy but everyone knows there is more to it
BY Tamal BandyopadhyayNow you know why the pile of bad loans in India’s state-owned banks has been rising and why both the banking regulator as well as the finance ministry are upset with many bank chiefs.
The official reason behind the growth in bad loans is a faltering economy but everyone knows there is more to it.
Yes, there are bank chiefs who are dishonest. They give loans to those who don’t deserve them and make money cutting such deals. They make money but their banks pay the price. The Reserve Bank of India (RBI) is well aware of this practice. So is the finance ministry. But they don’t openly talk about it as that may shatter public confidence in our banking system, some 70% of which is accounted for by state-owned banks.
On Saturday, the Central Bureau of Investigation (CBI) arrested Sudhir Kumar Jain, chairman and managing director of Syndicate Bank Ltd, for allegedly taking a Rs.50 lakh bribe. His brother-in-laws are allegedly involved in the mechanics of the pay-off.
Jain, who took charge as chief of Syndicate Bank in July 2013, was allegedly offered the bribe for increasing the credit limit of a few companies, throwing banking norms to the wind. A commerce graduate and a chartered accountant, Jain started his banking career in June 1987 in Dena Bank.
There aren’t too many instances of public sector bank CEOs being arrested by CBI, but CEOs stepping down before the end of tenure or being sacked are no novelty. More on them later but let’s first try to understand the modus operandi.
One way of making money is to give loans to a creditor who does not deserve it. The second popular way is giving loans at a price which is lower than what it should have been.
In both cases, the deal maker pockets a certain portion of the load value (could be a few basis points for big ticket loans or even a few percentage points for small loans). The third way of money making is restructuring a weak loan account and giving breathing time to a rogue borrower. I am aware of a former chief of a large public sector bank whose wife used to cut such deals.
In banking lexicon, such deals are called an accommodation, but all such transactions do not necessarily need to involve money. Often a bank chief indulges in such a deal under the influence of politicians in power to ensure a smooth future. And many public sector bankers entertain politicians from their days as general manager, because this helps them climb the greasy pole and become chairman of the bank.
Many appointments of public sector bank chiefs are such quid-pro-quo deals. The favour is returned in the form of loan sanctions and other accommodations.
Last year CBI arrested Shyamal Acharya, a deputy managing director of State Bank of India, the country’s largest lender, for allegedly taking a bribe in kind—an Omega and a Rolex watch worth Rs.7.75 lakh each. Both the watches were seized from Acharya’s cabin by CBI.
Allegedly, Acharya violated norms for a loan approval. The State Bank of India (SBI) instituted a two-member internal panel to look into the allegation but could not find any procedural lapses in a Rs.75-crore loan sanctioned to Delhi-based Worlds Window Group (WWG).
CBI had filed a case against Acharya, K.K. Kumra, who was an adviser at WWG, and Piyoosh Goyal, founder, WWG. Apparently, Goyal had sought a Rs.400 crore loan from the bank and Kumra, a former bank official, in turn got in touch with Acharya, who allegedly influenced his juniors and got Rs.75 crore sanctioned to begin with.
CBI conducted simultaneous raids at various locations including offices and residences of Acharya, Kumra and Goyal and Rs.7 lakh in cash was found in Acharya’s residence. Many bank insiders say Acharya was “framed”.
In 2013, the finance ministry sought an explanation from Corporation Bank chairman and managing director Ramnath Pradeep on charges against him by the Central Vigilance Commission (CVC) over alleged violation of norms. Pradeep faced eight key charges that include sanctioning loans to a few companies in contravention of regulations, extending a big-ticket loan to a tower construction company that had already defaulted on payments to another state-controlled bank, and changing rules in a bid to appoint a consultant at the bank.
I am not aware of the latest development of this case.
CBI in late 2011 had arrested eight senior officials belonging to nationalized banks and financial institutions for allegedly accepting inducements to issue loans to vested parties or leak vital information from their top committees in the so-called loans-to-bribe scam. They were later released on bail.
There have been many instances when a bank chief’s tenure has been cut short by the government for alleged irregularities. For instance, S.C. Basu of Bank of Maharashtra Ltd could not complete his full term in 2006. Ditto N.S. Gujral of Punjab and Sind Bank in Delhi. Chairperson and managing director of United Bank of India Archana Bhargava too has recently settled for a shorter tenure, citing health reasons. Other bankers say there was something more to it behind her exit but nobody has spoken about corruption.
When it comes to being discredited, none can beat the record of former Indian Bank chairman and managing director M. Gopalakrishnan. He was sentenced to one year’s rigorous imprisonment by a CBI court for allegedly causing a loss of Rs.31.75 crore by granting loans without proper security between 1992 and 1996. He was found guilty by the court of conspiracy, criminal breach of trust, misconduct and cheating under various provisions of the Indian Penal Code and Prevention of Corruption Act.
How does one make all bankers, who are custodian of public money, honest and incorruptible? And, how to punish a corrupt one?
One way could be offering them a respectable salary. Currently they earn a pathetic pay packet. Take a look at the chief of State Bank of India who handles a balance sheet of Rs.22 trillion. (I am in no way suggesting that the State Bank chief is corrupt.) And compare it with the chief of any private sector bank who oversees a balance sheet which is one-fifth of the size of State Bank or even smaller. Yes indeed, the State Bank chief lives in a big bunglow in Mumbai’s posh Malabar Hills but that doesn’t add to the salary.
To start with, if the government decides to monetize all benefits that a public sector bank chief earns, their salary will be many times more. Open up the sector; pick up competent people from the market, give the CEOs more money, keep them happy, and put them under 24X7 surveillance. If they are caught taking money, punish them. They are playing with public’s trust, and deserve exemplary punishment.
Can Modi get rid of corruption in public sector banks?-Rediff
Link Rediff
Public sector banks are inefficient, poorly governed and beset by largescale corruption, says Debashis Basu.
Narendra Modi's many passionate election speeches last year and earlier this year were punctuated by a very colourful expression.
"Send me to Delhi as your chowkidar and I will protect your wealth," he claimed. This was accompanied by another colourful expression: "Na khata hoon, na khane deta hoon" (I neither make money, nor do I allow others to make money).
We hope that at some stage Mr Modi starts applying these two of his many pre-election promises where they matter the most: government-owned banks.
Public-sector banks (PSBs) dominate the Indian financial sector. They hold the bulk of people's savings. They are the main source of loans to small businesses and large projects alike. They are vehicles for his ambitious Jan Dhan Yojana. They are also inefficient, poorly governed and beset by largescale corruption.
In May, the All India Bank Employees Association (AIBEA) assessed wilful defaults worth Rs 70,300 crore in 400 PSB loan accounts.
They also estimated that over the past seven years, there were fresh bad loans worth Rs 4.95 lakh crore in the PSBs - while during the same period, these banks wrote off bad debts worth Rs 1.4 lakh crore.
Gross non-performing assets (NPAs) and bad loans in these banks had increased more than three times to Rs 1.64 lakh crore on March 31, 2013, from Rs 39,000 crore on March 31, 2008.
Thousands of crores of write-offs are happening without accountability. Spectacular defaults such as Deccan Chronicle and Kingfisher Airlines have led to no action against defaulters or against the senior bank officials and chairmen who allowed the loans to go far beyond enforceable collateral.
This is a huge scandal, which should get the chowkidar worried, because the reasons for such massive bad loans and write-offs are deep-seated. Forget about maximum governance, even minimum governance in missing in the PSBs. And has been for decades.
In the 1970s, the government used the PSBs to mainly fund its various socially oriented loan schemes and public-sector projects, which often left a big hole in the banks' books.
Throughout this period, private-sector companies also relied on government-owned banks and financial institutions for loans. Since the lenders insisted that promoters bring in substantial amounts of cash, borrowers would inflate the cost project and siphon off the money.
Therefore, contrary to all prudent norms, projects were more than fully funded by government banks, with most promoters having no skin in the game. Naturally, many projects turned sick while the promoters enriched themselves. Bankruptcy laws were weak. Nothing could curb the corrupt nexus between PSBs and their defaulting borrowers. When such poor lending weakened the banks, the government would step in and "recapitalise" them for the game to continue.
From the mid-1990s, amid the euphoria of economic liberalisation, Indian businesses expanded their capacities rapidly with the help of loans from PSBs and so the inherent weakness of the government banking system got magnified manifold. By 2001-2002, bad loans had reached an alarming 13 per cent of advances.
After 30 years of unaccountable lending, banks started complaining that they need tougher laws to enforce collaterals. In response, the government created the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi) of 2002, designed to help banks in the recovery of bad loans.
One of the key provisions of the Act is for banks to be able to auction the assets of defaulting borrowers. But notice that even after getting a tougher law, banks have not been able to claw back much money from Vijay Mallya of Kingfisher or the Reddy brothers of Deccan Chronicle.
The answer is obvious: bank officials have lent money without adequate collateral, as part of their nexus with promoters. Yet neither the Reserve Bank of India (RBI) nor the finance ministry is questioning the officials or directors involved.
Indeed State Bank of India (SBI) Chairman Arundhati Bhattacharya, in an interview with the Financial Times last week, has called for a shake-up in the regulatory system and asked for tougher rules for defaulters, as well as "a proper bankruptcy law to help get orderly resolution of [bad] assets".
That is a smokescreen. Working with the same set of laws, ICICI Bank, Axis Bank and HDFC Bank have negligible bad loans. Why? The real issue is corruption in various forms, starting with how bank chairmen are appointed.
Appointment of PSB chairmen is an elaborate process. It starts with intense lobbying by various senior bankers. Finance-ministry bureaucrats play favourites. Selection is often influenced by quid pro quo - a promise to be pliant and sanction certain loans that are bound to go bad. The RBI usually rubber-stamps this selection process.
Who will go after a chairman when he enjoys the ministry of finance's support and the RBI is hands-off?
Mr Modi has repeatedly talked about governance. The first step in governance of PSBs is to fix responsibility on their top brass for loans that have turned bad. Right now, accountability in the PSBs is a black hole despite the fact that banks have stringent credit-appraisal process.
Small businesses complain of onerous conditions imposed by banks before loans are sanctioned. Often banks arm-twist borrowers to buy some expensive insurance as an unwritten precondition.
And yet loans worth tens of thousands of crores have gone bad - something that should happen only in exceptional situation, such as a natural disaster. A loan such as that of Kingfisher goes progressively bad, not overnight.
What were banks doing at each stage that Vijay Mallya's collateral was falling short? Would they extend the same courtesy to a small borrower?
The fact is, borrowers have repeatedly siphoned off money from the banking system in connivance with bankers, no matter what kind of regulatory system and process we have had.
The previous prime ministers did not claim to be chowkidars. Mr Modi has. For the first time in 45 years, can taxpayers hope that accountability in the PSBs will be fixed?
There may be a mole in your banking app-By Saurav Kumar 11.05.2015
Banking transactions on an app are common. But beware as someone may be copying the information
Most banks ask their customers to download the respective banking apps. And with more smartphones in India (networking infrastructure company Cisco Systems Inc. expects the number to grow 4.7 times to 651 million by 2019), there are many who use banking apps. But how safe are these? “Telling whether an app is secure or not is very tricky,” said Saket Modi, co-founder and chief executive officer, Lucideus Tech, a cyber security firm, which provides online security solutions to banks such as ICICI Bank Ltd, Kotak Mahindra Bank Ltd, Standard and Chartered, HDFC Bank Ltd and DBS Bank India.
There are various reasons behind why Modi doubts that a banking app is foolproof.
A fraud survey report released by Deloitte Touche Tohmatsu India Pvt. Ltd in April, said, “There has been a substantial increase in the dependence on technology in the banking sector. With cyber crime continuing to increase in volume, frequency and sophistication, it is not surprising that the top three areas giving sleepless nights to the survey respondents were Internet banking/automated teller machine fraud, e-banking fraud and identity fraud.”
Many experts voice similar concerns. Mumbai-based cyber expert Vijay Mukhi wrote a letter to the Reserve Bank of India in October 2014, pointing out the dangers that lurk behind using banking apps. “There exists a very major security breach in over a dozen banking apps by Indian banks that I have personally tested. These apps use the standard Android keyboard to enter your username and password. The keyboard in the Android ecosystem is a simple Java app that can be replaced in seconds by a virus,” read a part of the letter. If a virus infects the app, a hacker, sitting anywhere, will have possession of the customer’s username and password, and can control the bank account. “The hacker can also use the bank’s website to use my account,” said Mukhi, who runs a computer training centre, and is former chairman, information technology committee, Federation of Indian Chamber of Commerce and Industry (Ficci) and Indian Merchants’ Chamber. He is still to get a reply from the central bank.
Core issues
The problem is that when a customer tries to log in through a banking app, an Android keyboard is used to key in details. It may be that the user has loaded some other app or has inadvertently clicked on a link that leads to a keylogger getting installed in the phone. A keylogger maps keystrokes, and this can be used to capture personal data whenever keyed in. Someone can also physically install a keylogger on a mobile phone. Mukhi admits that this is difficult to do, but not impossible.
Android apps are more susceptible as Google Store does not vet apps posted on it, and since the source codes of these apps are available, the vulnerability increases. “If you look at normal Android apps, 99% are hacked because source code is available. Around 52% of Apple apps are hacked, even though they have a vetting process,” said an executive of a private bank, who oversees the bank’s online security, requesting anonymity. “Guaranteeing 100% security is extremely difficult,” he added.
One of the reasons behind this is that when an app is downloaded, it asks for permissions, which users give. “The way technology is changing, the new mode of attack will be malware residing in mobile phones and extrapolating data from other apps,” the bank executive said. In other words, there could be apps which may capture data from other apps on the phone which may include financial information.
Level of threat
According to Wegilant Net Solutions Pvt. Ltd, a cyber security firm, out of the 33 Android banking apps in India (22 from state-run banks and 11 from private banks) that allow financial transactions and which it tested, at least 29 apps (21 state-run banks and eight private banks) had at least one security loophole. The firm also tested an app by a state-run bank that does not allow financial transactions. On clicking “about us”, the app was so tampered with that it redirected the user to a login page. An unsuspecting user may think that to proceed any further, it is necessary to login. If she does that, the data got captured. Mint has seen a demonstration video of this process.
Toshendra Sharma, founder and chief executive officer, Wegilant, said, “We have found many vulnerabilities in banking apps, most of which are made by outsourced third-parties.”
“India is no less developed than markets such as Hong Kong or parts of Europe in terms of security, and that too at a lower cost. It’s not about the money spent but the understanding of the problem at the top level, especially in state-run banks,” said Modi.
However, the bank official quoted earlier said that many banks are aware of the threat and constantly monitor for rogue apps.
Basic hygiene
If the level of threat is high and widespread, what can a banking app user do to protect personal information?
Most phones use a system called “containerization”, said Modi. The system does not allow one app to “talk” to the other, or exchange data. But this won’t work with apps that are using common shared resources. For example, two apps using global positioning system on the phone.
There are basic rules that banking app users can follow, even if banks are striving to offer the most secure apps. “A bank may be taking all security measures, but if your phone is breached, it’s not the bank’s fault,” said Modi. Users must realize that protecting personal data is their responsibility as well. Many users fall prey to socially engineered hacking wherein a user gives out data inadvertently to fraudsters.
The bank official added that a lot of people route their mobiles to become the administrator of the phone, download and install keyboard apps, thus becoming vulnerable to hacking.
Updating software regularly; not clicking on random links; avoiding to download too many apps—these are a few things that a user can easily do to avoid theft of financial information.
As for the problem of Android keyboards being used to input data on banking apps, Mukhi suggests that banks could add a virtual keyboard—same as what’s available for Netbanking on a desktop or laptop—as an immediate solution.
Led by SBI Group, PSU Banks Dominate Credits, Deposits Space -NDTV
State-owned lenders remain dominant players in India's banking system with SBI group alone accounting for about a quarter of the market share both in the credits as well as the deposits arena.
Public sector banks (PSBs) had 73.2 per cent and 73.9 per cent market share in credits and deposits respectively as of end March 2014, as per the latest report by the Reserve Bank.
It did not offer comparative figures for the previous 12 months in its 'Basic statistical returns of commercial banks (BSR report), volume 43'.
According to the BSR 2014 report, as of March 2014, gross outstanding credit of the system rose 13.7 per cent to Rs 62,82,082.43 crore in 2013-14. In the previous fiscal, it had registered an increase of 15 per cent.
The deposits stood at Rs 79,55,721.22 crore, up 13.4 per cent in 2014 as against 15.4 per cent in 2013.
The BSR report said State Bank of India Group's credit share stood at 22.1 per cent of the total at Rs 13,90,569.58 crore, while their deposit share stood at Rs 17,11,690.86 crore or 25.9 per cent as of March 2014.
The share of credit market of other public sector banks as a whole stood at 51.1 per cent at Rs 32,07,506.54 crore and that of deposits at Rs 61,31,037.72 crore or 50 per cent, the RBI report showed.
Against this, private sector lenders' credit market share stood at 19.4 per cent at Rs 12,21,334.14 crore while the deposits at 14,96,793.90 crore or 18.8 per cent.
This shows that over a dozen private sector lenders together are smaller than the SBI Group on both the credit and deposit fronts.
In contrast, 96 foreign banks, most of which are one branch set-ups with no retail presence, had credit share of 4.8 per cent of the system at Rs 3,03,790.29 crore and deposits pie at lower 4.3 per cent or Rs 3,66,127.2 crore.
The regional rural banks' had a credit share of 2.5 per cent at Rs 1,58,881.88 crore and that of deposits at 2.9 per cent at Rs 2,33,272.34 crore, the report showed.
Rural and semi-urban centres registered higher deposit growth in 2014 at 17.5 per cent at Rs 79,13,443 crore and 16.5 per cent at Rs 69,34,280 crore respectively, compared to urban and metropolitan centres at 14.5 per cent and 11.6 per cent, respectively, the RBI report said.
Despite this, it said, the number of borrowal accounts rose 8.2 per cent to 139 million in 2014 from 128 million in 2013, led by small borrowal accounts contributing to 78.7 per cent of the total number of such accounts in 2014.
However, share of small borrowal accounts in outstanding credit declined to 8.4 per cent from 9.3 per cent in 2013.
The number of deposit accounts increased to 1,227 million in 2014 from about 1,045 million in 2013 marking a growth of 17.4 per cent.
Total number of savings bank accounts increased to 978 million in 2014 from 823 million in 2013.
The national credit-deposit ratio rose to 79 per cent in the reporting year, up marginally from 78.8 per cent in 2013.
The report said, the average share of priority sector lending in total non-food-credit rose to 35.1 per cent in 2014 from Rs 33.7 per cent in the previous year.
The data on the basic statistical returns of banks provides information on different dimensions of deposits and credit of the banking sector.
The data on the basic statistical returns of banks provide information of different dimensions of deposits and credit of the banking sector.
The information is collected from bank branches through basic statistical returns-1 & 2 (BSR-1&2), annually.
Under BSR-1, information on occupation/activity and organisational sector of the borrower, type of account, interest rate, credit limit and outstanding amount are collected for each loan account, while under BSR-2, branch- wise data on type of deposits, maturity pattern of term deposits and number of employees is collected.
Public sector banks (PSBs) had 73.2 per cent and 73.9 per cent market share in credits and deposits respectively as of end March 2014, as per the latest report by the Reserve Bank.
It did not offer comparative figures for the previous 12 months in its 'Basic statistical returns of commercial banks (BSR report), volume 43'.
According to the BSR 2014 report, as of March 2014, gross outstanding credit of the system rose 13.7 per cent to Rs 62,82,082.43 crore in 2013-14. In the previous fiscal, it had registered an increase of 15 per cent.
The deposits stood at Rs 79,55,721.22 crore, up 13.4 per cent in 2014 as against 15.4 per cent in 2013.
The BSR report said State Bank of India Group's credit share stood at 22.1 per cent of the total at Rs 13,90,569.58 crore, while their deposit share stood at Rs 17,11,690.86 crore or 25.9 per cent as of March 2014.
The share of credit market of other public sector banks as a whole stood at 51.1 per cent at Rs 32,07,506.54 crore and that of deposits at Rs 61,31,037.72 crore or 50 per cent, the RBI report showed.
Against this, private sector lenders' credit market share stood at 19.4 per cent at Rs 12,21,334.14 crore while the deposits at 14,96,793.90 crore or 18.8 per cent.
This shows that over a dozen private sector lenders together are smaller than the SBI Group on both the credit and deposit fronts.
In contrast, 96 foreign banks, most of which are one branch set-ups with no retail presence, had credit share of 4.8 per cent of the system at Rs 3,03,790.29 crore and deposits pie at lower 4.3 per cent or Rs 3,66,127.2 crore.
The regional rural banks' had a credit share of 2.5 per cent at Rs 1,58,881.88 crore and that of deposits at 2.9 per cent at Rs 2,33,272.34 crore, the report showed.
Rural and semi-urban centres registered higher deposit growth in 2014 at 17.5 per cent at Rs 79,13,443 crore and 16.5 per cent at Rs 69,34,280 crore respectively, compared to urban and metropolitan centres at 14.5 per cent and 11.6 per cent, respectively, the RBI report said.
Despite this, it said, the number of borrowal accounts rose 8.2 per cent to 139 million in 2014 from 128 million in 2013, led by small borrowal accounts contributing to 78.7 per cent of the total number of such accounts in 2014.
However, share of small borrowal accounts in outstanding credit declined to 8.4 per cent from 9.3 per cent in 2013.
The number of deposit accounts increased to 1,227 million in 2014 from about 1,045 million in 2013 marking a growth of 17.4 per cent.
Total number of savings bank accounts increased to 978 million in 2014 from 823 million in 2013.
The national credit-deposit ratio rose to 79 per cent in the reporting year, up marginally from 78.8 per cent in 2013.
The report said, the average share of priority sector lending in total non-food-credit rose to 35.1 per cent in 2014 from Rs 33.7 per cent in the previous year.
The data on the basic statistical returns of banks provides information on different dimensions of deposits and credit of the banking sector.
The data on the basic statistical returns of banks provide information of different dimensions of deposits and credit of the banking sector.
The information is collected from bank branches through basic statistical returns-1 & 2 (BSR-1&2), annually.
Under BSR-1, information on occupation/activity and organisational sector of the borrower, type of account, interest rate, credit limit and outstanding amount are collected for each loan account, while under BSR-2, branch- wise data on type of deposits, maturity pattern of term deposits and number of employees is collected.
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