Bank Officers Association

Government framed policy for posting of bank employees in Villages as also for posting in North Eastern States to promote rural banking and to help development work in rural areas and North Eastern states. But management of banks have always misused this excellent policy to discard non-flatterers and to torture those employees who do not indulge in corrupt practices and who do not implements bad orders of the executives.
RBI or any investigating agency on honest inquiry will find that some officers have been working in villages for two or three decades whereas flatterers of the top officials of the management have been allowed to work in Metros for decades together. When an officer do not provide gifts to General Manager, he is posted in North Eastern States on the plea of Non Performance whereas those who commit fraud or indulge in irregular credits but always provide golden gifts to GMs, DGMs, AGMs in the name of some function either of inauguration or customer’s meeting are allowed to remain in big towns.
Some officers are simply creating bad advances and some others are constrained to recover the bad advances merely to save the corrupt officers from punishment. This is why loans or advances become Sub Standard in one or two years of its disbursement. It is also a bitter fact that such bad advances are concealed by gifting Auditors and inspectors and treated as good advances till the sanctioning officer wither is promoted or get safe exit from the bank. Honest workers are made scapegoat for the misdeeds of big executives.. It is undeniably truth that excellent results exhibited through annual balance sheets are due to devoted work of good performers and it is they who are salvaging banks from the misdeeds of bad officers. As such shining balance sheet of a bank should not give conclusion that the results shown are hard work of top officials sitting in AC rooms but that of field workers who are head of a branch and who is doing hard worker even under acute manpower shortage. In banks manpower is adequately provided only to flatterers even if he has caused banks crores of rupees. Until RBI or CBI catch hold of corrupt executives and punish the evil performers and at the same time award those officers who have been whimsically kept away from promotions and unless good officers are given respectable posting and promotions one cannot imagine of any rise in intrinsic value of any bank
On the contrary PSU banks are facing erosion in intrinsic value due to dirty implementation of apparently good HRD policies. In the name of Interview any employee can be deprived of and denied of promotion. Power makes executive corrupt if the decisions made by them are not transparent and subject to review. Root cause of persistence and promotion of such corrupt officers is due to the bitter fact that even courts fail to provide justice in decades together and this is why management bosses indulge in whimsical promotions, arbitrary transfers and postings.
I request bank officers to send their personal experience and story of corrupt officers to me at dkjain49709@rediffmail.com so that such illustration may be incorporated in PIL to be filed in the court. These information will be helpful in seeking information from bank under Right to Information Act to expose the true colour of officers who have been holding top posts in the bank and who have been getting continuous shelter from Banking division, RBI and Ministry of Finance. The aggrieved officer may also send the real story about them, how they have been cheated by their bosses, how they have been denied promotion and how they have been given always critical posting. After all how long you will bear with injustice in fear of repercussion from higher authorities. One has to come out of imaginary fear and expose the true picture of bad officers. How long meritorious and talented officer will face humiliation and posting against their dignity.
I will come with name of AGM,DGM ,GM,CM and BM and tell the officer community and Government of India how reign of injustice prevails in the banking industry. I need your cooperation in making a strong case against some of CMDs who are recognized as star performers but under the shelter of such CMDs ,their left and right hand officers who themselves are facing CBI charge sheets are exploiting power for self interest.

Non Performing Officer in Banks

Now I would like to ask top management as also CBI to look into each actions of executives (scale IV to scale VII) who have been elevated to scale IV and above during last three years during the tenure of present CMD Mr. M V Nair. I hope management will be honest enough to come forward with white paper on these executives depicting their good or bad works of last ten years and prove that the action of Interview panel in giving him or her promotion was justified. Otherwise normal perception of junior officers that promotions are bought by gifting top officers will be substantiated and exposure of top management will take place. At least top 20 branches of Jharkhand or Bihar or UP or Orrisa or West Bengal will be enough to expose the unhealthy culture perpetuated by top officers in promotions, postings and transfers. Bank must ascertain profit earned or loss incurred by the actions of officers promoted to scale IV and above during last three years.

1.credit decision taken by promoted executives and the present status of these advance accounts .If the credit sanctioned or disbursed by them directly or indirectly (building pressure from administrative office on BM) above Rs 10.00 lacs has become bad ( though bad , concealed and categorized as standard in collusion with top management), reason behind it should be looked into.
2. Number of accounts and amount involved in those NPA accounts where sanction or disbursement made by such executives during last ten years.
3. Waiver of loan or sacrifice of bank's dues under compromise settlement sanctioned by them directly or through the Branch.
4. How many good accounts they have added during their posting at any branch. Good account means average balance more than one lacs. How many such good customer left the bank due to the misbehavior of BM. Overall analysis will tell about level of customer service extended by them. This will also tell the management whether they are really good officers or they were promoted after taking some gifts in cash or in kind by Interview panel officers.
5. How many bad accounts have been shown as standard in the branch but they are actually substandard.
6. It should be looked into whether there was any abrupt rise in deposits due to buying of government fund. If yes wherefrom the illegal money was managed.
7. Real cash recovery in bad accounts due to the efforts of promoted officers
8. Whether there is real positive change in the image of the bank in the area where they worked.
9. Whether the so called performance said to have been of the promoted officers was actually the performance of other honest and devoted workers
10 Whether malady created by / fraud committed by / bad advance generated by flatter officers war getting support from higher bosses due to some other hidden reason which cannot be revealed.

Reality of bad loans

It has been the demand of many bankers before RBI to relax norms for classification of assets as Non performing Assets. It is because most of banks are showing profits by hiding bad assets and cutting down the amount of provision and booking inflated profit on unearned income. Banks know very well that concealed NPA are likelty to explode if norms are norms are relaxed by RBI.

RBI has infused capital in so many banks so many times in the past because they also know very well how bankers are cooking their balance sheets by concealing bad assets and window dressing in credit delivery and deposit mobilization. Government of India waived loans of 70000 crores last year before the evil activities of banks are revealed by Auditors. Waiver of loan and compromise settlement is an on going process where banks are constrained to sacrifice good money in bad hands.

CMD who flatter Ministry and key figure in the government is believed blindly as long as big exposure takes place as happened with Satyam Computers. Once upon a time Chairman of Indian bank was most beloved figure in banking circle, but when reality came on the floor, he was thrown out of system. I have been regularly writing on various forums on this subject in my language and as peer my competence to open the eyes of person sitting at the top of affairs. In banks , an officer who try to say the truth is thrown ina remotest place to shut his mouth.

As a matter of fact none wants to say and accept the truth and think it wise to remain in fool’s paradise.

There are several Harshad Mehtas, several Raju, many Ketan Parikh, many Natwarlals ,Many Kodas,many fake Sai Babas, Many Icchadharis, a lot of Mayawatis,several Lalus , hundreds of Mulayams, plenty of Rabri Devi in our country who earn unparallel popularity and after a few years face severest erosion in it and have to bear with just reversal in popularity with greater momentum. When they go up in their ladder even if by fake means, media and so called great leaders start worshiping them, following them blindly.

In share market when share prices of a script goes up, all experts on TV and all investors start recommending and buying it. Suddenly real value of that script comes on the floor and all experts starting giving negative news for the same script. Similarly some people are worshipped and condemned without knowing the facts.
Is there anyone who will investigate and discover the real and intrinsic value of PSU BANKS?

Danendra Jain
Ganaraj Chumuhani
Agartala
03.04.2010

CMD should Introspect

It is the time that our honourable CMD MVNair conducts introspection and justifies the actions of various DGMs and GMs who transferred whimsically a lot of officers to other states on the excuse of non-performance. I especially mention the case of DGM Jharkhand and the then GM of Kolkata who practically transferred all Non Orriyas to other states, some officers to Bangladesh Border i.e. to Tripura state, some to Gangtok, some others to West Bengal or UP or MP or Maharashtra. The DGM and the then GM satisfied their ego by disturbing the family life of officers who did not flatter him and who did not belong to a particular caste lobby. It is worthwhile to mention here that officers of West Bengal, Tripura, Tamilnadu ,Maharashtra are seldom transferred to remote states as those of states like Jharkhand, Bihar, Orissa and UP

Our beloved and renowned CMD should now see whether there is any improvement or further deterioration in the value of assets during last three years in those branches wherefrom some special type of officers were transferred by biased DGM (surrounded by some different type officer’s lobby) two years ago?

I do not want to enlighten the complicated matters, which may violate bank’s secrecy policy. Management has every tools in its almirah to look into each account of big and old branches and ascertain whether so called non performers had improved the health of Bank’s asset or their successor or their predecessor had/have done better for the bank which resulted in their promotion and rejection of so called non performers in the same promotion process and their posting at the most remotest and the most critical branch.

If CMD hesitates to touch his corruption ridden General Managers AGM, DGM till their retirement, other competent authorities may be ordered to peep into the matter and try to precipitate the reality and truth of banking administration.

CMD should justify his action of picking management executives from MBA college campuses at packages higher than those of employees of the same bank who have served for more than two or three decades.

I hope bank will justify the action of promoting young officers at the cost of senior, experienced and devoted officers.

CMD should tell the people of India whether there was actual cash recovery in bad accounts or manipulation in the system to hide bad accounts which portrayed better picture of some officers who got preferred promotion and posting.

Whether government deposit mobilized by an executive may turn bad assets into good asset and thus help bank in enhancing the intrinsic value of the bank?

It has to be ascertained whether so called good officers have added bad assets in the name of achievement of credit delivery target

And so on…………………..

Lastly I agree with the idea of CMD of punishing non-performers. But it has to be ascertained by the system whether the non- performance is due to lack of motivation by his boss or by virtue of his posting at a critical branch or it is lack of will of the officer to perform or lack of knowledge.

In case of lack of knowledge management impart the best training to him to convert him performer.

In case the boss is lacking motivating skill the boss may be given a lesson to improve.

In case the non-performance is due to adversities attached with the branch or due to environmental impediments in the path of performance, the officer shouldering the load of such branch should rather be awarded.

In case of non willed officer, transfer to some other place may appear justified, but not without giving him an opportunity to improve.

It is always to be kept in mind that a person is not always bad. It rather depends on the perception of his assessor who may be caste biased, region biased or there may be some hidden greed of money or gift or flattery in the mind of assessor which forces him to be biased against any officer even if he is devoted performer.

Best tool available in the almirah of Human Resource Development Department should be applied on case-to-case basis. Otherwise there is every possibility that an executive sitting at the top of affairs uses his whims even at the cost of intrinsic value of the bank.

Real success of the management lies in not only transferring an officer to remote place but in making efforts for value addition in an officer and thus in bank. It is always told for branch head to be tactful in handling junior staff in the branch. Similarly it is expected from Regional head to apply prudence and wisdom in dealing with Branch head shedding personal ego. Everyone in the bank knows how officers under work pressure and in want of enough manpower are constrained to bypass rule to achieve the target under various parameter, it may be credit delivery, opening of accounts, deposit mobilization, monitoring of advances or recovery under NPA accounts.

Despite all if management is really interested to give value to merit and merit only, same team of officers sitting at head office should judge the performance of all officers and there should be no room left for regional heads to apply their mind in whimsical manner and there should be no room for Interview in promotion processes. It is bitter truth that delegated power vested in different persons cannot be utilized by different person in similar manner ant in desired and expected manner. Under CBS system management can assess the performance of all officers sitting in office at Mumbai and in this path there will be minimum use of whims. Management can save lot of expenses incurred in conducting promotion processes and ensure better reign of justice.

Better to give donation than to lend and then waive

Government has been using banks as convenient method for mobilization of rural votes since long. They are for this purpose announcing waiver of loan frequently. This time they have extended repayment period further for six months because they know very well that farmers have developed a habit not to repay the dues of the bank till government comes forward with new scheme of either waiver of loan or compromise scheme for delayed repayment. Gradually small traders have also developed this tendency not to repay the loan availed by them from banks.

As a result banks have either to waive the loan given to farmers and small traders or treat the bad account as standard account till government announces new relief scheme. There is no repayment culture and I am unable to understand how long this vicious circle of reckless and blind lending and then waiver of credit may help banks survive. How long concocted and window dressed balance sheet may help banks in portraying attractive picture in balance sheet.

To add fuel to fire government has allowed private banks to be established in all districts to act as local banks. Already numerous Regional Rural Banks and Cooperative banks are actively participating in rural credit and suffering from huge loss due to non-repayment culture created by vote bank politics of ruling party. Health of these cooperative banks is so bad that government has to keep interest free fund in these banks in many states and also prove capital to them to ensure survival of these banks on ventilator. Many cooperative banks have declared bankruptcy during last two three decades. Now addition of rural banks will add fuel to fire. Either these local banks will exploit the rural people by charging high interest rate or by keeping their properties or gold in mortgage as they used to do before nationalization of banks. Both ways it is farmers who will suffer and ultimately they will either leave farming or migrate to towns in search of labour oriented unskilled job or commit suicide or make the banks sick by not repaying the bank's loan.

I fail to understand why politicians of this country do not understand the ground reality and try to please farmers and banks by jeopardizing their health and killing them through slow poison. At present they talk of Indian growth story and speak with pride that Indian government is decoupled with sub prime crisis of America. They should know that due to high standard of living and low earning capacity most of the American used to take loans from banks for consumption and there were many bankers (Indian government is also increasing number of banks in rural areas through addition of newly conceptualized private local banks) who were ready to lend them though at higher rate of interest. But consequence of this unhealthy practice ultimately precipitated Sub prime crisis when banks started falling like playing cards and poor American started committing suicide or selling their blood for survival

Danendra Jain
Ganaraj Choumuhani Agartala 799001
1st march 2010

Manmohan Singh

Arbitrary promotion and whimsical transfer is the root cause of rampant corruption and culture of flattery to superiors. Culture of flattery to bosses and tendency to become Yesman of Ministers, MPs and MLAs is the root cause of all maladies prevailing in the society. Every employee in our country knows the bitter truth that only those who are yesmen of bosses can get elevation in their career or get cream and comfortable posting.

Most of MLS, MP and Ministers have accumulated properties worth many crores of rupees. Department of vigilance or CBI or Anti corruption cell or Economic offenders cell are silent spectators.

So many IAS and IPS officers have been found indulged in corrupt practices only because they have got the blessings of their mentor Ministers.

So many bank officers and executives have properties worth crores of rupees, which is far more than their total earning in their entire tenure. It is possible only because there is practically none to look into corrupt practices prevailing in the bank at higher level.

When Head of any department or office is corrupt, or when any minister in the government is corrupt it will be foolish to imagine of healthy culture down the line.
It is very difficult to survive with dignity when the boss is corrupt and when boss likes flattery.
Only when boss loves real performance, employees feel delighted in working sincerely.

When real performers are awarded, there will be positive motivation. On the contrary if corrupt is promoted and given good posting, it is but natural that people will be tempted to toe the line of boss even if it is wrong and unethical and against the interest of the organization

As long as we are unable to provide a reasoning based transfer and merit based promotion and as long as the wrong doers are not punished by either head of the department or by the courts we cannot imagine of stopping corrupt practices prevailing in the system and spreading like cancer in the society.

Old proverb survival for the fittest no more holds good. Now a days survival is possible only for the person who is well versed in flattery to bosses, who can earn money through ill methods and share the same with his bosses.

The bitter truth is that there is no foolproof method of providing perfectly merit-based promotion or seniority based promotion in any office. None of the promotion processes can ensure justice to all, justice to the organization and discomfort to none as long as the person responsible for carrying out the promotion process is dishonest and corrupt. When protectors become destructors, damage to society cannot be stopped,

One easy way to stop whimsical transfer and arbitrary promotion is to maintain transparency and abolish the requirement of passing through Interview for existing employees for getting promotion. Interview is such a test where Interviewers can easily spoil the candidates career.

During interview, key role is played by elements like bribe, gift, sources, godfathers, and flattery possessed by employee whose performance is assessed during interview. When Interviewer desires to promote an employee he raises easy questions or do not raise any question and give higher marks and on the contrary he may raises toughest and irrelevant questions before the candidate to reject him in the promotion process.

The interviewer as per his whims and fancies gives marks for interview and unfortunately there is no method to penalize such malicious interviewers or the interview team made of birds of the same feather. There is hardly any place for merit in the mind of Interview panel and this why whimsical promotions take place and a reign of injustice and that of corruption spreads like epidemic and is followed by inefficiency, frustration, depression and what not.

Last but not the least; our courts cannot deliver justice in decades. This eliminates the fear from the minds of interviewer and the aggrieved employee is constrained to bear with the rejection in promotion process. Justice delayed is justice denied. And when there is no hope of justice even from court, aggrieved person in promotion process is left with no alternative other than digesting the poison of injustice.

It is an open secret in our society that victim is afraid of lodging complain in police department against any type of criminal. Not to speak of promotions, management can torture an employee by using his power of transfer and posting an employee in the name of exigencies as per his sweet will.

I therefore request you to take immediate steps to ensure merit based transparent promotion and reasoning based transfers and posting in all offices. Only one remedy to cure disease of corruption is to award honest performers and sideline corrupt performers. Only the bearer knows where the shoe pinches is a right proverb in this regard.

IN BANKING INDUSTRY THERE ARE HUNDREDS OF OFFICERS WHO ARE FACING TRANSFER EVEN TWICE OR THRICE A YEAR WHEREAS OFFICERS SITTING IN METROS ARE SITTING IN ONE TOWN SINCE JOINING SAY FOR TWO OR THREE DECADES.
EVEN POLICY OF RURAL POSTING IS MISUSED BY THE MANAGEMENT TO ISOLATE NON FLATTERERS .
EVEN POLICY OF POSTING OUTSIDE STATE AFTER PROMOTION IS MISUSED TO FAVOUR THE PEOPLE OF WEST BENGAL OR THAT OF MAHARASHTRA.
POLICY OF NORTH EAST POSTING IS USED TO ISOLATE NON FLATTERERS. POLICY OF TRANSFER FOR NON PERFORMERS IS ALSO USED BY THE EXECUTIVE TO KEEP NON FLATTERES AWAY.
NOWHERE AND NONE OF POLICIES ARE USED TO PROMOTE THE CULTURE OF PERFORMANCE.
AS SUCH IT IS COMPARATIVELY BENEFICIAL TO ELIMINATE THE ELEMENTS OF DISCRETION OR DISCRIMINATION IN THE INTERNAL PROMOTION PROCESS AND TRANSFER POLICY.THE MORE TRANSPARENT WILL BE THE POLICIES , THE LESS WILL BE QUANTUM OF FLATTERY IN THE MIND OF WORKING OFFICERS.
EXECUTIVES WHO ARE INDULGED IN CORRUPT PRACTICES WHILE RELEASING ORDER OF TRANSFER OF PUTTING THEIR SIGNATURE ON PROMOTION ORDERS MUST BE SUITABLY PUNISHED SO THAT RECURRENCE OF SUCH MALPRACTICE DO NOT TAKE PLACE.
JUSTICE DELAYED IS JUSTICE DENIED. YOU CANNOT IGNORE THE RESENTMENT, FRUSTRATION AND DEPRESSION PREVAILING IN THE FIELD LEVEL FOR LONG WITHOUT INVITING STRIKE AND LARGE SCALE REVOLT AND RAMPAGE

Danendra Jain
Agartala

Restructure of loan is not permanent cure for ill banks

Since long I have been pointing out that banks cannot remain in good health by concealing its bad assets. Restructuring of bad loans was allowed by RBI in the year 2008 to give so called relief to developers of real estate after collapse of Lehman Brothers in USA. In fact at that time also there was no any linkage of weakness of Indian developers with that of crisis erupted by dint of Lehman Brother. Rather Real estate developers were in the best health they could ever imagine, earning highest profit by selling their flats and commercial places at exorbitant high prices and by starting new projects beyond their financial capacity.

In fact real estate developer had enlarged their area of work beyond their financial capacity by availing disproportionate huge loans from banks. As soon as crisis of liquidity in USA erupted, Indians government and Indian banks apprehended delay in receipt of export proceeds and consequently fear of liquidity crisis started haunting their mind. When banks were tightened by RBI, the developers started feeling pain in their abdomen and it is they who could not pay their dues to banks as per scheduled time, rather expressed more hunger for more loans to complete their incomplete projects .Such demand triggered so called liquidity crisis.

It was consumers who had to pay the price. Prices of all landed properties went on increasing and government of Manmohan Singh remained silent spectator because there was a clear nexus between profit-maker developers and the government. It is not astonishing that prices of all essential commodities have been going up and up despite all hue and cries by consumers and opposition parties.

So far as banks are concerned RBI knows very well that banks are falsely being portrayed as healthy by management of PSU banks in collusion with RBI and Finance Minister. In fact each PSU banks have thousands of accounts as bad but shown as standard. Real Non Performing Assets (NPA) in each PSU banks is in alarming position and it existed in the month of September 2008 also.

Collapse of Lehman Brother or Sub Prime Crisis in USA gave an excuse to RBI and Government of India to hide bad assets in the name of restructuring of loan .Government of India got an opportunity to hide adverse affects of its bad policies formulated at the instance of dirty politicians of the country. Waiver of agricultural or small loans to the tune of Rs.75000/ crores had already damaged the health of the banks.

But hiding of cancerous disease cannot keep the body healthy for long and eventual death of the system in unavoidable and again the looser will be retail customer for none of their fault. Banks have been demanding therefore one more occasion to conceal bad loans in the name of restructuring. A few months ago banks had raised demand of relaxing in prudential norms which RBI accepted to some extent by allowing lesser provision for housing loan and lesser capital requirements.

Bankers know the bitter truth of the system and each CMD somehow or the other aspires to pass his tenure by hiding the malady .None of CMDs and hence none of his subordinate in the banks have the courage to accept the reality and declare all bad assets as bad assets. But how long this vicious circle of concealment will continue and how long banks will be able to cook balance sheets, only God knows. Banks are however clever enough to show bad loans as lesser or negligible percentage of bad loans compared to overall loans of the banks. This is made possible by extending bulk loans to corporate or selling bad loans to AMC. In this way they are simply trying to pass on time and trying their best to appear as if they are genuinely growing, as if there is no inherent weakness.

I therefore praise RBI that they have taken a bold step to deny the demand of banks to allow them one more occasion to restructure the loan. If RBI does not bow down under pressure built by CMDs of banks or under pressure of government of India to maintain concocted but positive image, I hope reality of some CMD will precipitate on the floor and government will be able to distinguish flatterers from performers. People of India will be able to distinguish between really strong banks and factual weak bank.

Not only this, prices of all landed properties will start coming down and ultimately become affordable for common men. Prices of flats will also come down and come within the rich of common men again. There will be not fall in demand but abnormal rise in demand for landed property and constructed flats. As such the current step of RBI may appear to be curse for developers and bankers but ultimately it will prove to be boon for consumers, bankers and developers also.
Danendra jain Ganaraj Choumuhani Agartala 79001
9th Feb 2010

Union Bank CMD

• Why officers and employees are not transferred out from the Mumbai, Kolkata, Delhi, Bangalore, Chennai etc. and on the contrary employees of states like Orrisa, Bihar, and Jharkhand are frequently transferred out of their states even violating transfer policies?

• Why some officers are always given rural posting whereas some other officers are even promoted without rural posting violating government guidelines in this regard?

• Why some officers are allowed to work in their Metro towns for decades whereas officers of other small towns and villages are to change their place of working every year or alternate year without any incentive or compensation?

• Is there no punishment for those executives who indulge in corrupt practices and resort to whimsical transfers to keep away all employees who may prove hurdle in their money making process?

• Why RBI remains silent spectator of ill-motivated CEOs of banks and allows the malady in banks to accumulate?

• It is worthwhile to mention here that unhappy lot of employees cannot think for and make efforts to keep bank healthy?

• Is human resource not capital in real sense in Banking Industry and for some VIP CEOs of Bank?

Rsing NPA causes bank's disinterest for small loan

This refers to news item that banks is reluctant to dump RBI’s move to dump BPLR based loans published in Economic Times on 31st of December 2009

It is unfortunate that banks demand freedom to decide rate of Interest for loans upto Rs.2.00 lacs so that they may charge interest rate higher than BPLR on small loans sanctioned to farmers, traders and other service providers .I Say unfortunate because Banks are not ready to accept Base rate only because they prefer lending huge money to Corporate and big trade houses at rate much lower than proposed base rate (8.55% tentatively calculated).It is unfortunate because banks are not agreeable to 5% cap on Non Priority sector lending. All these prove that banks in general have forgotten the basic agenda of banks and national priorities.

RBI and Government of India must ponder over this issue and try to find out the reason behind this change in attitude of bankers .After all what may be the reason behind such irrational attitude of banks. I say irrational because they try to forget common men on whom lies the even existence of big corporate and big traders.

Why are Banks in general afraid of lending money to small traders (loan upto Rs.2.00 lacs) and why they prefer investing in MF or depositing the surplus liquidity with RBI even at repo rate.

Is it not the fact that banks are afraid of increasing Non Performing Assets (NPA) in Priority sector lending which dilutes the profitability prospects of banks?

Is it not true that all legal tools in the hands of banks have proved ineffective so far as recovery from willful defaulters is concerned?

Is it not true that political leaders of our country has polluted the banking culture by announcing one after other waiver of loan scheme or putting pressure on bankers for offering Compromise scheme to from willful or recalcitrant defaulters for recovery of money?

Danendra Jain Ganaraj Choumuhani Agartala 799001 Tripura

31st December 2009

Wage revision in Banks and Stagnation Increment

stagnation in pay scale

I will definitely expect that leaders will remove the word stagnation in pay scale of officers. I feel pity for those experienced officers who have all talent and who are hard workers but could not get promotion due to many constraints beyond the control of officer. But due to constraints before management, senior officers reach last stage of their scale and they are denied annual income.

When number of vacancies is less in upper scale, management is constrained to give fewer promotions and when such senior officers are good worker, they must be entitled to get at least annual increment.

I feel pity for such senior officers because they are not getting annual increment after they reach last stage of their scale even when they are shouldering responsibility of large branches successfully. On the contrary non performing clerks as well as officers get annual increment only because they are junior.

Obviously the word stagnation is deceptive and a curse for senior officers. In olden days when officer was not found fit for promotion due to inefficiency he was to face stagnation as mild dose of punishment. This used to happen when promotion based on seniority used to take place and management used to give promotion even if there were not adequate vacancies in that scale.

In most of the central government department there is provision for time bound promotion and hence question of stagnation in particular scale does not arise. It is perhaps only in banks that even after completing twenty or thirty years of service in a particular scale promotion is not given to an employee. Now-a-days Interview is a killer injection in the almirah of management which can be injected to any good or bad performer in promotion process as pe whims and fancies of the interviewer.

In brief there is no justification for stopping increment for two three years to a senior officer in the name of stagnation. If management feels that there is no scope for promoting officers in a particular scale to upper scale in lack of adequate vacancy , they must keep the scale long enough to accommodate senior officers and ensure that they continue to get increment every year until there is report of any misconduct or inefficiency.

When leaders and bank management can give relief to retired employees, why can’t they agree for continuous annual income to those who have reached last stage of their scale?

Here I would like to add that when management finds an officer guilty of minor misconduct they penalize him by stopping his one annual increment for one year without cumulative effect. It means disallowing an officer for increment for two three years in the name of stagnation, or for the reason that he has reached the last stage of his pay scale is tantamount to penalizing him with more greater penalty for none of his fault.

If management finds an officer unfit for promotion and unfit for release of annual increment in the name of increment they are not justified in entrusting such stagnated senior officer with higher responsibility such as Branch Manager of large branch, rather they should prefer junior officer to should responsibility of bigger branch. It is undeniably ridiculous that most of senior middle management officers and most of the executives in Scale IV to scale VII are not getting annual increment even though they are sitting t top and the hold the most responsible post.

Similarly when a clerk even reaching last stage of his scale is found unfit for promotion to officer cadre it is the weakness and inefficiency of the management that they fail to train, irrigate and convert the inefficient senior clerk to efficient clerk suitably enough to be promoted as officer. It is enough to prove inefficacy of Human Resource Development Department and ineffectiveness of entire training system.

After all what else they give to experienced officers other than stagnation losses for none of their fault. I have no doubt in my conviction that it is not only management but also the union leaders who failed completely to erase the word stagnation from pay scale of bank employees.

There are numerous examples in banks that an officer promoted by the management to scale III but given the posting of branch Manager where a scale I or scale II officer is supposed to work and vice versa. It is enough to substantiate the fact that large scale whimsical promotions are taking place in banks forcing ban management to post unpromted officers to shoulder the responsibility of bigger branches and specially critical and sensitive branches. Such type of anomalies occurs happens only because unchallengeable power is given to interviewer to make or mar career of an officer in the promotion processes.

If anyone do not agree with my views expressed above I request them to please justify the continuance of stagnation in pay scale under changed scenario in the banking industry.

Needless mergers of banks

Central Government has been building pressure on banks to make best efforts for merger and acquisition. But I am unable to understand the motive behind it in Indian perspective. Finance Minister has said that through consolidation, financial powers of banks will improve and they will not only be able to augment efficiency and help in GDP growth but also get success in competing with International big banks.



Here the million dollar question arises whether Late Indira Gandhi had nationalized banks to compete with International banks, whether banks are meant to extend credit in thousands of crores to a few hundred merchants or manufacturers only?

Have government forgotten the social objective of banks completely?

Is it possible for a government to survive by discarding the interest of common men, farmers, small traders in India?

Is it necessary for India to have bigger banks to extend credit to farmers and small traders who together constitutes 95% of population and without whose support even economic viability of large projects would be at stake?



It is important to mention here that there is sharp rise in loan portfolio or visible growth in advances of banks in general is not due to financing made by banks to small traders and farmers but only due to bulk financing made to big corporate houses, to real estate developers and to infra structure developers.



Does any one in the government or in RBI mean that by merger and enhancing powers of banks, there will be equitable GDP growth in country like India?



Even in America where big banks are many, one out of every seven Americans starves and struggle for earning their bread and butter for at least survival. In India the position is worse than that in USA. In India nine out of every ten Indians are unable to earn sufficient money even for respectful living. Considerable large proportion of Indian population is suffering from mal-nutrition; they die of curable diseases in want of proper medical assistance and they remain unemployed in want of adequate opportunities. This is India where even federal structure of the country is at stake due to largely growing unemployment and where person like Raj Thakre has been trying hard to disallow Non-marathi to seek employment in Maharashtra and Shiv Raj Chouhan CM says he would not employment to Biharis and North Indian in the state of MP. Besides in majority of villages, small towns and cities there is no proper sanitation facilities, acute scarcity of water and electricity, crisis for medical treatment and what not. This is why I reiterate that Indian environment is different from other developed nations and hence need unique treatment.



It is worthwhile to add here that USA government have realized after fall of big banks and financial Institution during last year that management of big banks is very difficult compared to smaller ones. Still there are about 8000 smaller banks functioning in USA to serve common men. It is also true that 125 banks became bankrupt or closed their shutters during the current year in USA.



If we talk of India we have less than 30 public sector banks and they are said to be in better health position. They are well scattered in every nook and corner of the country to serve Indians in general. They have to be encouraged to extend maximum help to small borrowers.They cannot extend any better help to poor person after merger of banks.Then what is the need of merger and acquisition? Why is government bent upon merger Need of the hour is to make them able to cater to the needs of common men.



Even if government feels the necessity of having large banks with huge capital to compete with foreign banks, they can choose to have one or two like SBI or PNB (after merger of SBI with associate banks I think capital size of SBI will be comparable with their foreign counterparts and similarly after merger of PNB with some suitable bank),At least other banks should be left untouched to serve common men and forget big projects, bulk financing, corporate borrowers completely and concentrate only on small and mid size borrowers i.e. credit upto ten lacs.



Even if we leave aside the social objective,it is not commercially proposition to build pressure (frequent request by FM or RBI is enough to build pressure) on banks to go for merger and acquisition especially when government have granted economic freedom to individual banks in the era of economic reformation , liberalization and globalization When need will arise banks will themselves strive hard to grow bigger to survive. As of now banks in India are said to be safer than foreign banks. Even government has admitted it repeatedly.



Inspite of all ,if government still consider it better to go for merger , I would like to suggest our Finance Minister to merge all PSBs including SBI and make them one entity like Income Tax department and other departments of Government of India so that there be no unwarranted interest rate war, no case of multiple financing, no case of take over at the cost of bank’s interest and no unhealthy competition as prevalent in banking industry. There will be unified effort to recover the money from recalcitrant borrowers. Banks will be able to check money laundering in a better way .People will not get opportunity to park their black money in different branches of different banks.



Need of the hour is to strengthen the existing structure of banks, make them more and more efficient and enthusiastic. Government should make efforts for repayment of loan and for this purpose make water tight laws to ensure cent percent recovery of loan from willful defaulters so that proportion of dead money in bank’s balance sheet comes down and they can afford and generate will to make finance to common men. Present scenario is that branch manager of every bank’s branch is afraid of extending credit to small borrowers in fear of account going bad and lastly added to Non Performing Asset. Need of the hour is to avoid political intervention in banking affairs and to resort to healthy norms for financing without any fear of target achievement. To add fuel to fire every banks are suffering from staff shortage and as a consequence there is no monitoring on existing borrowal accounts and gradually service quality in banks at many branches is deteriorating in want of adequate staff. Banks are even unable to redeploy the existing surplus staff at Metro branches due to protest from powerful employees union.



Last but not the least; bitter truth is that big business houses are getting all sorts of help from the government, from the banks and from all corners but all at the cost of poor and middle family. Rich business houses are producing, hoarding and realizing maximum profit on their products and it will not exaggeration to say that the present trend of rising price is caused by these profit makers only. Government has been making promises and promises to control price, but always fail on this front because they have given undue freedom and undue privileges to these business houses. I hope government will make all best efforts to give relief to general mass who are subjected to unbearable pain on account of sharp price rise in all commodities without proportionate rise in their monthly income.



India is said to be suffering from naxalism due to increasing poverty and due to the fact that they are denied their legitimate right and they are even deprived of justice in proper time. Can merger and acquisition by banks help in ameliorating their problems of poverty ridden Indians? I would like to draw the attention of learned FM and PM that late Indira Gandhi (Congress Party) had nationalized banks because private banks were hesitant to extend credit to common men, villagers were deprived of banking facilities and common men was afraid of even entering in to bank. Private Banks were exploiting not only staff working in the banks but were also exploiting business houses. It will not be exaggeration to predict and say that the same Congress Party under the banner of UPA is dragging banking industry in pre-nationalization era.



Please keep in mind that during reformation era 23 banks were forcefully merged to bigger banks by government of India because they succummed to malady and irregularity they accumulated , and not because they were small banks.Giant banks ,Lehman Brothers,AIG failed not because they were big but they followed wrong policies and commited misadventure in delivery of credit and in making investments.

In India I doubt the honesty and integrity of government in their efforts for merger,acquisition and consolidation of banks because they know the quantum of malady and bad assets hidden behind the rosy balance sheets of PSBs.Otherwise there is no reason for providing capital infusion to various weak banks from time to time. It is their political agenda to save the banks from exposure of their reality when the misdeeds increases to such a large extent that it punctures the tyre of running banks.They are trying to divert the attention of public from inherent weaknesses of PSBs and this is why they are not agreeable to respectable wage revision of bank employees even after two year long dialogue with union leaders. Exodus of talented employees and non entry of well qualified person in PSB banks is also a vital reason behind growing weakness of Banks. On the contrary private banks like ICICI and HDFC banks have grown to such a large extent in last 15 years of their existance that even 100 year old PSBs are facing challenge for survival.



Danendra Jain

21st November 2009

Confused policy on interest rates

The Reserve Bank of India (RBI) is preparing to ban lending below the prime lending rate (PLR), the benchmark for all floating-rate.

Lending for export, home ,agriculture,vehicle,education are not related to PLR and credit facilities under these sector are extended by all banks at sub PLR rates in unison with government policies announced in this regard from time to time. It is astonishing that Government is now advocating complete stop on sub PLR loans. Till today banks were forced to extend credit facility to farmers, students, and exporters and to compensate bankers government used to give interest subsidy to banks. Now RBI desires to ban sub PLR lending and stop subsidy too . It means the entire loan will come on the shoulder of common men and there will be undoubtedly no change in profitability of rich and affluent class.

When government has given freedom to banks to decide its rate structure, it has got no right to ask or advice or change in rate structure. It is rather fun that inspite of risk reward ratio being adverse for most of the bankers, CMDs of most of PSU banks prefer loss to displeasure of FM and Government of India and this is why they have not only given respect to advices of the government but also taken its own initiative to extend more and more sub PLR loans to corporate sector.

It is also true that due to sharp reduction in CRR,SLR and repo rates banks are flush with enhanced liquidity and hence they are in such an awkward position that they also find it comfortable and profitable to extend credit to valuable and reliable corporate at Sub PLR rates than to make finance to small and mid-size borrowers with lesser reliability and poorer creditworthiness .It is to be kept in mind that even if banks do not like sub PLR financing they will have to opt for parking their surplus fund at RBI at rate as low as 3.5%.

Since total credit under sub PLR rates has been mounting gradually it will be very difficult now for bankers to prohibit sub PLR loans completely in short period.
Not only this, if bankers decide to stop the same immediately I think they will be left with no alternative else than stopping accepting fresh deposits from public till they are able to use profitably the exiting surplus fund.

To add fuel to fire, government will be forced to change its policy on agricultural and export loans which forces banks to lend under this sector at sub PLR rates. Banks will have to stop sub PLR lending under retail segment and there is no doubt that it will have repercussion on the entire demand value in auto sector and related ancillary sector. Obviously steps taken at this stage by the government are not only against its own policy but also suicidal attempt at a critical juncture when the entire economy is victim of global slowdown.

Too much hype had been created by government to reduce interest rates and banks were under continuous pressure from RBI to bring down interest rates to create demand and now the perfectly opposite step suggested by the same government to stop sub PLR lending is confusing also.

It is therefore desirable that government decides structure of the rate of interest on deposit and advances and it should be made uniformly applicable in all private and public sector banks. And this will be better than confusing statements issued from RBI on rate structure from time to time . Freedom given to banks on interest rate structure is unwarranted and should be taken back. Quality of service and other non interest income will be the area where banks will compete among them.There is no doubt thatinterest rates were better regulated before 1991 and in all parameters banks were performing better then compared to inflated profits shown by them under the current regime of freedom.

CMD Of Public Sector Banks AND Credit Growth

Latest statistics on lending done by the banks in the first quarter released by RBI reveal that credit delivery in the first quarter was hardly 5% of quantum of credit made by the banks in the same quarter last year. Though banks have shown credit delivery of Rs.8000 crores in the last fortnight of June quarter , resultant increase in quarter to quarter in outstanding credit was hardly 3000 crores of rupees compared to more than Rs.50000 crores increase in June last year. This show how much slow are banks in credit delivery in the current financial year and undoubtedly it is a matter of concern for the economy and the country as a whole.

Most of the top rated banks are enhancing their lending by financing to big corporate houses. Most of the new borrowers added during recession period are belonging to owner groups of medium and large industries and trade houses, and that too in amounts in hundreds of crores per borrower. If number of accounts and amount involved in fresh credit disbursements is furnished by all banks month wise for last 12 months, it will become crystal clear how much loan amount has been disbursed during last one year to big corporate houses and to how many common people. It will also be proved that banks are indulged in simple window dressing or manipulating of figures to show improvement in lending.

It is true that there is some fall in credit demand in the market due to global recession. But it cannot be believed that entire economy and entire turnover in trade have come to standstill. It is bitter truth that major chunk of turnover is confined in the ands of a very few business houses and it is they who create crisis in the market. It is sad and condemnable that even our government is also worried about the crocodile pain of big business houses, and not about the real pain the common men have been suffering. Entire stimulus package being provided are directed to provide benefit and relief to only rich people. Similarly banks are also providing bulk credit to big business house so that chances of account becoming bad remain lesser. Only those who want to avail loan for consumption, home or education or vehicle for personal use are approaching banks for lending. Government of India has been putting pressure on banks to reduce lending rates. But in the present recessionary market it is not possible to increase genuine lending even if the rate of interest is zero.

Yes it is worthwhile to mention here that those who are bad borrowers, who will invariably default in repayment of loan are able to manage the branch manager of a PSU bank and avail loan for any false or right purpose by extending some gifts to Branch Manager in cash or in kind. Such bad advances will ultimately contribute in increase in Non Performing Assets , NPA of the bank as have been happening for last so many years under targeted lending programmes of Government.

Besides honest and true branch manager of a bank is very much afraid of making new finance because probability of account turning bad seems more than the account proving to be healthy asset for the bank. The main reason behind such thinking is that there is practically no full proof method or legal effective steps or any intimidating weapon in the almirah of the bank to recover the loan from defaulting borrowers.

Banks have in fact to depend on the mercy of the borrower so far as repayment of the loan is concerned. Government has failed completely in ensuring the effectiveness of its legal recourse of action.

To add fuel to fire our politicians have polluted the repayment culture by announcing one after other waiver of loans and putting pressure on banks for entering into compromise settlements with will full defaulters as if government advises the banks to surrender fully before the borrowers. There is no fear in the mind of borrowers and they repay the loan as per their whims and fancies. Banks have got no control mechanism, other than persuasions and bagging in front of bad borrowers. This is why there has been poor growth in lending in banks whereas on the contrary there has been quantum jump in NPA of the bank

And it is only due to bulk lending to big corporate house, banks are able to reduce the NPA percentage wise compared to gross advances which helps the bank to project rosy picture and attractive balance sheet.

But the million dollar question is how long such window dressing, concealment of bad assets or restructuring of bad loans will help bank in survival. Lastly banks have to fail as their counterparts are failing in USA and other countries.

Obviously government has to provide effective tools to banks so that they can recover the bad loans and make fresh finance without any fear of action from their controlling bosses. Government has to understand that any lending by banks has to be repaid by borrower and those who fail to do so should be treated as criminal and treated according in quickest time. When borrowers are serious in making repayment of loan they avail from banks, bank will surely become liberal in lending and there will be definite and solid growth in bank’s lending

In conclusion we can say that to improve lending by banks , government has to stop political intervention, treat bank advance as advance , not as charity or subsidy and ensure quickest method of recovery of loan from willful defaulting borrower . This will create fearlessness in bankers and seriousness among loan seekers. In the long run, positive culture will penetrate in the minds of both bankers and borrowers and there will be real and consistent growth in lending. Not only big corporate houses but small traders and farmers will be able to get immediate loan facility from bank.

Last but not the least government has to develop quickly the Permanent Identification Number of any citizen so that multiple financing to the same borrower may be stopped at the earliest. There should be complete ban on opening of multiple accounts and any individual or any firm can open account in only one branch and in only one bank. This will helpful in stopping unhealthy lending and compel bad borrowers to repay the dues of a particular bank first and then only he can imagine of opening an account at other bank or seek loan facility. As of now, banks are so much ill equipped to stop multiple financing that bad borrowers take advantage of it and they get success in taking advances at various banks against the same asset and for the same purpose which is very much harmful for the bank and the greatest impediment in real growth of lending.

12th July 2009

Why poor credit growth in banks

Most of the top rated banks are enhancing their lending by financing to big corporate houses. Most of the new borrowers added during recession period are belonging to owner groups of medium and large industries and trade houses, and that too in amounts in hundreds of crores per borrower. If number of accounts and amount involved in fresh credit disbursements is asked by all banks month wise for last 12 months, it will become crystal clear how much loan amount has been disbursed during last one year and to how many people. It will also be proved that banks are indulged in simple window dressing or manipulating of figures to show improvement in lending.

As a matter of fact there is steep fall in credit demand in the market. Only those who want to avail loan for consumption, home or education or vehicle for personal use are approaching banks for lending. Government of India has been putting pressure on banks to reduce lending rates. But in the present recessionary market it is not possible to increase genuine lending even if the rate of interest is zero.

Yes those who are bad borrowers, who will invariably default in repayment of loan will manage the branch manager of a PSU bank and avail loan for any false or right purpose by extending some gifts to Branch Manager in cash or in kind. Such bad advances will ultimately contribute in increase in Non Performing Assets , NPA of the bank as have been happening for last so many years under targeted lending programmes of Government.

Besides honest and true branch manager of a bank is very much afraid of making new finance because probability of account turning bad seems more than the account proving to be healthy asset for the bank. The main reason behind such thinking is that there is practically no full proof method or legal effective steps or any intimidating weapon in the almirah of the bank to recover the loan from defaulting borrowers.

Banks have in fact to depend on the mercy of the borrower so far as repayment of the loan is concerned. Government has failed completely in ensuring the effectiveness of its legal recourse of action.

To add fuel to fire our politicians have polluted the repayment culture by announcing one after other waiver of loans and putting pressure on banks for entering into compromise settlements with will full defaulters as if government advises the banks to surrender fully before the borrowers. There is no fear in the mind of borrowers and they repay the loan as per their whims and fancies. Banks have got no control mechanism, other than persuasions and bagging in front of bad borrowers. This is why there has been poor growth in lending in banks whereas on the contrary there has been quantum jump in NPA of the bank

And it is only due to bulk lending to big corporate house, banks are able to reduce the NPA percentage wise compared to gross advances which helps the bank to project rosy picture and attractive balance sheet.

But the million dollar question is how long such window dressing, concealment of bad assets or restructuring of bad loans will help bank in survival. Lastly banks have to fail as their counterparts are failing in USA and other countries.

Obviously government has to provide effective tools to banks so that they can recover the bad loans and make fresh finance without any fear of action from their controlling bosses. Government has to understand that any lending by banks has to be repaid by borrower and those who fail to do so should be treated as criminal and treated according in quickest time. When borrowers are serious in making repayment of loan they avail from banks , bank will surely become liberal in lending and there will be definite and solid growth in bank’s lending

Danendra jain
11th July 2009

Finance Minister has to reply

Rebate in Income Tax on Home Loan Interest, Home loan Instalment, Reduced rate of lending for Home loan upto 30 lacs



Why all benefits to those home seekers who are rich and who can afford repayment of loan worth Rs.30.00 lacs and also margin of 20% needed for loan. Naturally such person must have annual income of at least more than five to 8.00 lac to become eligible for finance of Rs.20.00 lac to Rs.30.000 lacs.



Why all types of rebates for such rich class people whereas poor who cannot afford repayment of loan of even Rs.2.00 lac are fully neglected. Obviously rebates are being allowed to win the hearts of real estate developers and home builders.



Why not government comes out with affordable housing project for poor and middle class person whose annual income is less than Rs.2.00 lacs. Government has large chunk of land under its control and by the disinvestment proceeds they can acquire land for building small houses at cheaper rates.



Similarly there is pressure for reduction in lending rate of interest and why not stress for recovery of bad loans which is rising in momentum every year and which has become a cancer for banking industry. Waiver of loan or compromise settlement with poor and middle class farmer is understandable. But why banks are forced to compromise with willful defaulting industrialists and traders.



Until there is culture of recovery supported by government of India, any bank cannot imagine of healthy lending. Bank is therefore forced to opt for parking surplus fund with RBI at 3.5%. After all if a bank goes bankrupt it is the government, which has to infuse capital for its survival. How many times will government provide ventilator to sick bank? Why not defaulters are treated as criminals excluding the case of natural calamity?



What is control of disproportionate increase in assets of top bank executives of various banks?



Has government any plan to verify the credentials and assets of GM of any bank before promoting him to ED or CMD?



There is provision for rural posting for all officers to be promoted to higher scale. Have you ever verified whether banks are using this rural provision for punishing those officers who do not flatter to their bosses?



Are all GM or DGM or AGM having rural exposure before his or her promotion?



Are banks giving promotion to honest officers or sidelining them as happens in other government departments?



What is the need of Interview marks in Promotion marks when bank has tested and attested the services of any officer for more than a decade or two or three. Don’t you agree that interview marks gives scope for manipulation and injudicious promotion to corrupt officers, which give rise to flattery culture?

Is there any remedy for officers who are unjustifiably rejected in promotion process?



Are banks showing real status of bad loans in their balance sheet?



Hiding of NPA or recovery of NPA-- which is getting importance in PSBs



Net NPA ratio of bank is being projected as less than 1% . Gross NPA ratio is little more. But the question is whether Gross amount of NPA has been increasing every year and whether the same is within control of individual banks, and whether they are capable to monitor bad assets and adequately capacitated to recover the bad loan from bad borrowers. Banks have been showing lesser NPA ratio by increasing total advances of the bank and not by positive recovery from existing bad loan accounts.





Are you happy with attractive balance sheets of the bank or you also doubt their correctness as happened in case of Satyam Computers which was awarded twice for best Corporate Governance and which company was rated high by best Credit Rating Agencies of the country.



Do you really believe that private banks are not better than PSBs so far as standard of customer service, sincerity of officer working in banks and health of banking assets are concerned? It is possible that CMD of Private banks do not oblige FM or Government of India or RBI governor by reducing lending rates whereas CMD of PSB compete among each other to become front runner in the good book of FM. I remember CMD of Indian bank was considered as the best for more than a decade and government came to senses only when fraud of amount of Rs.1200/ crore was detected.



It is desirable to find out as follows:

Total advances as on 31.03.2006 with number of borrower accounts
( it is assumed that finance made during last three years are standard )



Out of which total amount of NPA in how many accounts


Finance made in the year
Total Ac and Total amount
Out of which NPA a/c & Amt.

2001



2002



2003



2004



2005



2006








Out of which written off / sacrificed during the year 2006 –07 , 07-08 and 08-09.
Name off officers who sanctioned the loan in the beginning and who subsequently monitored and renewed the same. Then find out the list of those officers whose name appear in more than 100 or 50 or 10 (Benchmark fixed by government) bad accounts.
Whether the NPA account has been restructured and if yes why?

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