Thursday, November 11, 2010

Who are Bad Bankers

We have seen downfall in net profit of Union bank, Vijaya Bank, Uco bank, Syndicate Bank, Indian Bank and now in SBI. These banks have added 7 to 8 thousand crores worth NPA in their balance sheet and they still talk of being star performer. Executive called as ED, Deputy General Manager, General Manager, Assistant General Manager in banks who has contributed crores of rupees in NPA are treated as star performers.

What is reason behind abrupt rise in NPA? Is it not due to the fact that quality of asset in banks has suffered continuous erosion though it has been year after year concealed by talented executives? Bankers have been hiding bad assets for last so many years just to please Ministry and befool innocent public by showing false rise in profits so that their share prices goes up and up like Satyam Computers? But how long? It has to face puncture like Satyam Computers.

Flattery culture prevalent in banks and in government departments including Ministry of Finance has resulted in growth of bad assets and bad man power. Lobby of corrupt bosses is so strong at controlling offices that only corrupt officers are chosen as Branch Heads, Regional Heads, Zonal Heads, EDs and who in turn freely indulge in bad lending .improper waiver of loan, dishonest compromise with so called bad borrowers to earn bribe , buy deposits from government offices and manage their survival. Big bosses are indulged in earning commission not only from their team of corrupt manager but also from contractors, suppliers and what not.

It is true that corruption prevalent in banks cannot be proved because of so many legal hurdles and shortcomings in the system. But RBI or CMD of the bank who treat them as honest and star performer should at least prepare a list of executives who is instrumental directly or indirectly in sanction of maximum bad advances. Borrower wise thorough investigation will reveal the name of corrupt officers and will at least reflect the name of real culprits behind sudden spurt in NPA and considerable fall in profits in banks. It is not that banks who are showing rise in profit or fall in NPA are really healthy but in fact they are master in concealment of bad assets and they are master in manipulation. As such, sooner or the later Indian government like US government has to understand the ground reality. Regulators of banks have to understand why private banks are showing rise in profit, fall in NPA and rise in share prices too.

Now Mr. Clean Prime Minister Mr. Manmohan Singh and Finance Minster Mr. Pranab Mukherjee should therefore ask CMDs of all banks to prepare and provide the reason of increase in rise in NPA along with the name of sanctioning officials and controlling circle head of that bank. List so prepared will at least expose the corrupt top officials who are inculcating wrong culture in the banks and who are really responsible for rise in NPA. Name of Branch Head or circle head whose advances are invariably bad will come to light so that government can take corrective steps even now before it is too late.

Deso anyone in India you feel that all bad advances are caused due to due to global recession or due to bad monsoon?

Don’t they believe from the core of heart that bad advances are also due to corrupt practices, wrong management, wrong promotion culture, inadequate safety measures, deficient monitoring, and inefficient legal system and so on. Don’t they feel that posting of good officers at wrong places and bad offices at sensisitive places has caused a great loss to banks? Top executives are incapable as also unwilling to work honestly and devotedly because they have unlimited greed for money and power and this is why they select bad officers who can earn bribe and share with big bosses as happens normally in all government offices.

I therefore reiterate that RBI should now collect a list of bad borrowers where amount of NPA involved is more than one crore or five crores and ask the name of officers who sanctioned such loans. RBI may also collect the names of sanctioning authority in all big amounts NPA account which has come on the floor during last year or during last five years. It is the duties of RB to identify all those officers who are holding executive post in banks and who are behind bad advances. An officer who is capable to lend to bad borrowers is promoted quickly by big bosses because such officers are corrupt and think it wise to take care of personal interest of big bosses and number one in flattery of big bosses for quickest promotion and best posting.

Until strong punitive action is taken against top officers, culture in juniors cannot improve. Corrupt culture is the rot cause of deteriorating bank's health. Cancer of corruption has been killing PSU banks. It is unfortunate that auditors,CBI officials, even officers in RBI and Banking Division has shut their eyes and ears because they are given warm welcome whenever such big officers visit such banks. Even selection of ED and CMD is not based on merit but based on relation .Every successful officers at top posts has a God father to back and support him even if he or she is caught on wrong footing.

If hidden bad debts are declared by all banks there is no doubt that visible profitability of all PSU banks will vanish and all tall claim of shining banking industry in India decoupled from the global recession prove to be farce.

Banks in USA has seen closure or erosion in their capital and share value in the year 2008 and 2009 not because of a sudden hear stroke but due to sickness in the banking system continuing since last one or two decades. Similarly in India PSU banks has started adding NPA worth thousands of crores every quarter. It is astonishing that SBI management proudly say after declaration of their September 2010 half yearly results that thousand of crores of NPA can be managed and tolerated every quarter and RBI accept their logic blindly.

If the existing trend continues NPA in banks will grow upto many lacs of crores of rupees and to add fuel to fire there is no in built fool proof legal and administrative system to ensure recovery from bad borrowers. Continuous rise in NPA will no doubt block circulation of good money of good investors and in future adversely affect liquidity of banks. Ultimately the small investor and small depositors who has reposed faith in government banks will have to suffer. Small borrowers are already victim of wrong policies of the government because they have to borrow money at higher rate from newly introduced Micro Finance Companies. These MFIs use to charge interest rate at more than 24% and upto 2400% from small borrowers whereas bulk financing made by PSU banks is around base rate of 8%.Financial inclusion policy propagated by PSU banks has become useless for rural people because it allows only zero balance account opening facility and nothing else. Rural people, poor farmers and small traders still depend on local money lenders and they are still in clutches of local exploiters as they used to be before nationalization of banks. Reformation started in banks in India in 1991 by cleaver Manmohan Singh has made the life of poor more miserable.

Until flattery culture in promotions and posting is stopped there is no power on earth which can stop erosion of bank's health. Every year government has to infuse capital in banks for their survival. But how long such ventilators will be provided to dieing banks. Government has to punish bad lenders sooner or later to salvage banks, otherwise they will face the same fate as banks in USA faced in the name of Subprime Crisis and as Satyam Computers faced two years ago.Obama in USA has tightened the bankers in USA despite huge protest from bankers after facing severe Subprime crisis. It is true that our government kept Indian banks unaffected by global crisis but all these could happen only after sacrificing lacs of crores of rupees by RBI in favour of sinking PSU banks. After all the core value of banks has not shown any real improvement and neither there is any improvement of position of common men in India.

I hope government will investigate and find out the real reason of rising NPA and take immediate steps to reverse the trend before it is too late.

Danendra Jain

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