Private banks have threatened to stop Auto Loan

Private Banks have rightly told that they will stop financing loan for private and commercial vehicles if RBI fails to issue clear guidelines enabling banks to take repossession of vehicles where borrowers default in repayment.

Private Banks are worried about their capital, profitability of their bank and their ultimate survival and this is why thought it fit to stop lending for vehicles than to bear the risk of assets going bad and weeping for having no weapon in the hands of banks to recover the money from recalcitrant and willful defaulters. On the other hand Public Sector Banks (PSB) are least bothered of loss of asset, profitability of banks, growing level of bad assets, and growing number of willful defaulters in want of proper and effective legal safeguards and overall ill health of the bank and hence they continue to indulge in auto lending despite increasing number of defaults. To add fuel to fire SBI has no reduced lending rate to 8% for one year for purchase of vehicle.

PSB can afford to be careless because they are public servants whereas officers in Private Banks perform as owner of the bank. PSBs know very well that whenever any PSB become sick due to wrong policies or wrong implementation of policies or dirty politics, government does not hesitate to provide capital to such ailing banks. During last two decades of reformation government has infused thousands of crores of rupees in PSBs and at the same time forced PSBs to sacrifice or waive loan worth at least one lac crore of rupees.

It is wise and prudent for CMD of PSB to become yes-man and flatterer of FM than to worry about ill health of bank and invite sickness in his personal life. This is why they bother only what Finance Minister tells or advises to banks during meetings.. CMD's of PSB compete with each other in obeying the instruction of FM.

It is therefore wrong and foolish to say or conclude that since the financial health of PSB is better they have not stopped auto loans. As a matter of fact health of Private Banks is far better than that of PSB and this is why they have grown so rapidly that their business has surpassed that of many PSBs which are more than 50 years old banks. Even public image of private banks is better and this is why share prices of private banks is valued higher. PE ratio (which is considered as indicator of market evaluation of any company) of PSB is less than four whereas that of private banks is more than 10.

Another indicator of ill health is said to be NPA ratio. If Net NPA ratio is less than one, the bank is considered as healthy. Now-a -days all banks are showing net NPA less than one, as if all Indian borrowers are sincere and honest in repayment of loan they take. Here also private banks show the real NPA whereas PSBs know the art of hiding real NPA and hence they also reflect net NPA ratio as less than one. It is ICICI bank which dared to admit that there was 25% rise in NPA in auto loan last year and they have taken corrective steps to safeguard their capital. On the contrary PSB conceal bad accounts and need not bother for recovery or taking corrective steps. For them it is easier to restructure the loan and postpone the corrective steps for future generation.

It is difficult to distinguish between bad and good bank where figures in balance sheets are cooked, concocted, fabricated and manipulated as per whims of CMD of PSBs. As long as team of Chartered Accountants work in the same fashion as they did in Satyam Computers, one cannot assess the factual position from Balance Sheet of any bank particularly that of PSBs. It can be said with firmness now that Balance Sheet is no more a mirror of business of any company.

As a matter of fact Private Banks have realized during decade old experience that case of default has been increasing sharply due to some restriction imposed by RBI and Government of India on seizure of vehicles from defaulters in concurrence with a few judgments pronounced by Apex Court in this regard. Borrowers as a result are not afraid of any punitive action even if they willfully stop repayment of loan they take from banks. So far as PSBs are concerned , borrowers of all kind ( auto loanee or house loanee or business loanee ) are very much sure that they banks officers can be manage by gifts and cash incentives even if they do not repay the loan in time and ultimately they can manage waiver or loan or compromise settlement.

To conclude it can be said that CMD of {Private Banks has to worry about actual health of their own bank whereas CMD of PSB has to keep FM and RBI Governor happy so that their own future may be brighter. Real exposure will take place only if asset classifications of top three banks are thoroughly checked.

And so far as lending to any sector is concerned, it cannot grow until government is serious and sincere for recovery of loan from those who fail to repay their dues as per contractual terms to bank.
No politics and no sympathy is needed for person who defaults in keeping commitment until there is natural calamity or until the situation goes beyond the control of the borrower. Non repayment of loan is a crime and the criminal must be punished in all sphere of life to maintain social discipline. Obviously demand of private banks for clear guideline for repossession of vehicles from defaulting borrowers is completely justified.

Danendra Jain
28th June 2009

Expansaion without Man power

Banks had burnt their fingers when they unduly expanded in seventies and eighties during the course of implementation of Service Area Approach when the then government had put pressure on banks to ensure that there is at least one branch in the area of population 10000. Late banks found that most of the rural branches were not profitable and neither viable from any angle of consideration. They then stopped expansion and started merger of the branch.some of the branches were made settelite branch of some big branch or merged with the bigger branch.

They are not again on expansion path without matching increase in manpower. One may very well imagine what will be the health of banking assets and banking man power. It is to stress here that there is no effective tool in the almirah of the bank to ensure recovery of money from willful and recalcitrant defaulters.

Through this open letter I would like to submit following points before the responsible authorities so that real position of banks may precipitate and required regulatory measures may be taken to prevent further deterioration in situation in banks and preventive steps are immediately taken to safeguard the interest of depositors as also that of human resources victimized by greedy executives in banks and dishonest ministers in Government of India.

I would like to know the total amount of loan waiver and sacrifices made by public sector banks during last three financial years including that of agricultural debt relief allowed by central government.

I would like to know the total advance as on 31.03.2006 of total Public sector banks , credit made during last three years and NPA added during last three years , total NPA as on 31.03.2006 and that on 31.03.2009 and out of which NPA accounts pertaining to period before 31.03.2006. This enables us to know what percentage of advances outstanding as on 31.03.2006 is real NPA. Here it is assumed that there will be hardly any addition of Borrowers in the list of NPA who have been financed during last three years. Banks claim that their gross NPA is hardly 2% and hence borrowers are in general honest and to the point in respecting banking needs of repayment and turnover.

Based on real amount of NPA out of advances made by banks upto 31.03.2006 it will be possible for government of India to ascertain the real trend of NPA in Banks in India compared to that of foreign banks, especially USA banks where more that fifty top banks have gone bankrupt during last one year. It will be possible to know the truth only when government will take into account total amount of loan amount waived and compromised during last years .This will expose the real trend of waiver and recovery culture prevalent in banks as also reflect the ineffectiveness of government machinery to recover the dues from willful defaulters.

Can anyone give the certificate from RBI or Government of India that banks are honestly classifying bad assets as bad assets and making correct provision for the same? Or all regulators solely believe on Chartered Accountants and you wait till exposure of CA takes place as happened in the case of Satyam Computers.

Can anyone verify the genuineness of NPA figure of top five or six PSBs and that of SBI to ascertain the real story of banks so that Indian banks do not face erosion of capital as has happened in more than top fifty banks of USA, and many banks of other developed countries.

Is it not the bitter truth that top executives in banks are yes-men of Ministry and top politicians and they in turn have inculcated flattery culture in their respective banks?

Flattery gives rise to corrupt practices and window dressing of figures to please bosses and also empowers top bosses to discard honest and true officers. Banks bosses have enough power to post and promote officers as per their whims and fancies. they have tool in their hands to sideline those officers who tell the truth. Interview panel have the power to reject officers in promotion process specially those who not keep the executive happy. Officers who are not true flatterers are sidelined to rural areas in the name of policy of rural posting framed under directive of government of India. Is anyone sure that there is healthy practice in promotion and posting processes in banks as also in adherence in prudential norms of classification of assets and income recognition.

If most of the top executives in banks as also top officials in banking division of Ministry of Finance including Finance Minister are birds of the same feather, who will bell the cat is a million dollar question?


Danendra Jain
Agartala
21st June 2009

Can you reply

Can you certify that in Public sector banks, officers are truly and honestly showing bad advances as NPA in their balance sheet?

Do you think that CMD's of PSBs are not indulged in unhealthy practices and hiding the malady in fear of Ministry of Finance or in greed of some other lucrative posting?

Are CMD's not accumulating disproportionate wealth taking the help of their GM, DGMs and AGMs ?

Don't you think that banks are not giving respect to honest working and giving importance to only those who flatter to Bosses?

Are they not whimsical in posting and promotions? Are they not using provision for Rural posting as a tool to sideline honest officers to rural areas?

What is the meaning of focused points in promotion process for Interview when the services of an officer is tested and attested for a decade or two or three?

Interview gives scope for manipulation and earning bribe for posting and promotions. Do you not realize and accept this bitter truth? This is the tool which enables an executive to select officers of his choice for promotion and cream posting who can help earning illegal money and share with them?

If yes, are you so handicapped that you can not stop it?

Can you order assessment of assets of ALL CMD, ALL GMs and ALL DGM's to start with along with those of RBI too who indirectly promote unhealthy culture?

It is not that all executives / officers are invariably dishonest and disloyal. But it is undeniably true that 20% of bad officers are spoiling the good work done by 80% of officers and executives.

All policies appear to be good on its face value but when the same policy goes to field for implementation , it gets completely distorted , violated or misused particularly in the hand of bad officers and that too with hidden support of top executives.

India , the most inefficient country in Asia

One of my friends raised a question in a forum in Economic Times which I produce hereunder and submit my opinion thereon.

“Do you think India's surging stock market and strong increase in industrial output and consumption will be a major catalyst to lead the world out of recession?”

There is neither an increase in industrial production and nor increase in consumption. People of India cannot afford buying even essential commodities. If we keep away negligible portion 5% of population which constitute rich and affluent people we will find that India is a country of poor, downtrodden and destitute where per family income is still less than Rs.2000/ a month which is less than even US $50/- .

As such there is hardly any scope of increase in demand and consumption and as a result our country mainly depends on exports and imports. India’s image is projected as the best or comparable with China by our media based on the growth of a few rich people who have been consistently growing and have been ranked in Forbe’s list.

But in fact due to global recession not only India's export has come down; it has adversely affected other sectors too which is visible in production datas released from the government. It proves India depends on global economy more than vice versa. Even agricultural production is not growing as planned by the government inspite of huge subsidies or fund or support said to have been extended by government.

I am unable to understand after all in what respect we are leading. In the recent survey India is categorized as the most inefficient country so far as the work of bureaucracy and that of babus and civil servants are concerned. Singapore has been ranked the most efficient and the top in the efficiency among 12 Asian countries surveyed by the Agency (Hongkong based research firm) whose report published today in Economic Times.

A country where corruption is all pervasive one cannot imagine of real development, real growth and real upliftment in status of general mass. Window dressing, manipulation of figures and concocted balance sheets are helping India in creating image. There are lacs of Rajus (Satyam) and millions of Natwarlals in our country. Even CAs and Doctors who are supposed to save the lives of Human beings and that of Corporates respectively have been found to be indulged mostly in illegal mining of money.

Only silver lining visible to me is that India believes in God and worships God very much devotedly and hence not that much sick of mental agony, depression and other mental madness as it happens in other poor countries. It is however true that India’s position was more pathetic half a century ago or even two decades ago. It is possible there has been slight improvement, but it in no way can be considered that India can lead the world or India can feed the world. One has rightly said that India is unable to feed its own one billion populations satisfactorily and it cannot dream of leading the world.

Stock Market is surging due to many other irrelevant reasons. It has nothing to say about the fundamental of the companies and neither does it reflect the true position of common mass of the country. A few brokers and a few FII have the capacity to twist the direction of Stock market as per their sweet will. If stock market is any indication than Mammohan Singh’s economy proved to be complete failure when sensex came down from 23000 to 8000. When sensex was around 23000, India’s position was not that much strong and India did not became the weakest when sensex came down to 8000.Stock market is more or less a game, equivalent to gambling and less an indicator of health of India’s economy. Stock market cannot be considered as a yardstick to measure the country’s capacity to lead the world or to help the world come out of recession.

Obviously neither Industrial production data nor surge in sensex can capacitate India to lead the world coming out of recession.

Danendra Jain
4th June 2009

Price rise or price fall

People are expecting fall in prices of commodities because the new government has been given full majority and there is no pull and pressure from coalition partners like left front.
Just before election the same congress party leaders, economists and high profile journalists were of the view that India did not suffer much on account of global recession only because UPA could not go for full scale disinvestment under the pressure of left parties. It is also said that great economists like Manmohan Singh and Mr. Chidambaram could keep India decoupled with global recession. This achievement of UPA is said to be the cause of rise of seats of Congress Party in the Parliament. But it astonishes that the UPA government now talking of large scale reformation, speedy disinvestment and more and more power to private sector. And if UPA really succeed in what media is projecting and what congress leaders has been promising after becoming minister I have no doubt that prices of all commodities will go up and up.

As soon as this euphoria over Congress victory is over people realize the real pain of sky rocketing price rise in all commodities. Even cost of home, land or apartment will again rise. This government has started talking with businessmen how to make congress party strong, how to build party fund etc in the name of common men. All freedom will again be given to private sector, prices will continue to be unregulated and common men will continue to suffer more and more.

In the name of reformation, liberalization and globalization our government has been giving more and more power in the hands of private sector and in return enriching fund of not only party but that of self and their kith and kin too.

To add fuel to fire government has been selling the hard earned property (of PSU) through disinvestment. Mr. Manmohan Singh and Mr. Chidambaram have been considered as Pundit and Doctor of liberalization. They have simply sold the PSUs which were developed during Nehru and Indira's regime. They feel proud in selling the property (modern name is disinvestment) and distributing the same in the name of social welfare scheme.

During last two decades government has not built any college or institute, any manufacturing unit, any worth saying hospital or anything of public utility. Even highway project was started by NDA government and not the government headed by UPA.
In rainy days, it is said and seen that common man sells his household goods, ornaments, furniture etc to run his livelihood. Similarly our government feels respectful, elevated and dignified when it sells or disinvest some PSUs, partially or fully.

Our UPA government talks of freedom to banks and then asks PSU banks to finance at lower and lower rates and then advises for writing off the dues of farmers and traders either to create vote banks or for cleaning the balance sheet of banks so that PSU banks can compete with private sector and foreign banks. It is absolutely a cruel joke with banking industry. As a matter of fact political leaders neither think of health of bank and nor do they think of real welfare of farmers.
Inspite of all instructions from FM none of private sector banks have reduced lending rates till date though some of PSU banks have reduced lending rates even at the cost of health of the bank just to remain in good book of the FM. This is because private sector is worried of their profit and about the health of their bank and they hardly give much significance to whether they are in good book of FM and PM or not as their counterpart in PSU bank thinks. Flattery is meaningful of CMD of PSU banks and not that of private banks.

In aviation sector we have seen in the past that private airlines did not reduce airfare despite drastic fall in prices of ATF fuels. Government went of shedding crocodile tears during last six months for sharp rise in airfares but actual airfare did not come down.

Similarly real estate builders have been raising cost of land and apartment by leaps and bounds. During last five six years of UPA regime cost of house has been doubled or trebled by builders. Due to global recession prices were slightly and gradually coming down when left party pulled support from the previous government. But unfortunately again the same UPA has come to power and the same builders have started making contacts with ministers and stated making arrangements for pleasure of ministers and congress party leaders..

It is observed that prices of home has started going up slowly .In the name of low rate flats government has decided to extend support to private builders. Prices will invariably go up in real estate sector and the quality will deteriorate. Government will cry and shed crocodile tears but none of private developer will listen because they contribute to party’s fund only on this condition that they will decide the price and quality of flat and apartment.

Lastly I can say without doubt that prices of all commodities are sure to rise if the same degree of freedom is given to private sector and if the disinvestment process is accelerated and executed as contemplated and spent on so-called social welfare schemes.GDP growth rate is falsely and uselessly projected high by the government by either increasing salary or employees or by giving farms loans or by window dressing in similar way. Actual development and continuous monitoring of prices can only stop price rise and nothing else. Mixed economy is the real solution for common men and neither solely Private nor t solely Public sector can give stable comfort to general public.


Danendra Jain 3rd June 2009

Comparision of Private Banks

Parameter Private Banks Public Sector Banks

Prudential norms Fulfilled Whimsical
Age of Bank Less than 20 Years More than 50 years
Markety Image Good Bad
Branch Ambiance Good Good in General
Deposit Rate High Low
Advance rate High Low
Retail advances Interest Rate Low High
Spread /profit margin Less More
Government Deposit Less More
Bulk Deposit Less More
Corruption Less More
Yes man to Ministers Less More
NPA Less More
Flattery Less More
Expenses onBoss Less More
Restructuring Advance Less More
Inaugurational Exp. Less More
Gifting to Boss Less More
Executive Wealth Less More
Manipulation Less More
Write off of NPA Less More
Compromise Settlement Less More
Hide NPA Less More
Window Dressing Less More
Inter state Transfer Less More
Remote Transfer Less More
Whimsical Transfer Less More
Branches Number Less More
Total employees per bank More Less
Staff per Branch More Less
Deposit Growth More Less
Advances Growth More Less
Retail asset growth More Less
Outsourcing More Less
Advertising expenses More Less
Salary More Less
Services Charges More Less
Yearly Growth More Less
Monitoring of Advances More Less
Share Value /PE More Less
CASA deposit More Less
Retaul Contribution More Less
Profit and Profitability More Less
Incentive to Staff More Less
Promotion Performer Flatterer
Exploitation of Staff Yes but Happy Yes but Unhappy