Country's biggest lender State Bank of India (SBI) on Friday posted a standalone net loss of Rs 2,416.37 crore for quarter ended December 31, 2017 against a net profit of Rs 2,610 crore in the corresponding quarter last year.
Q3 result of SBI are enough to open the eyes of those who were of the view that SBI is a strong bank. As soon as chairman of SBI changed, hidden NPA has started coming out. In the past too , SBI had sudddnly declared huge NPA when new CMD joined SBI. Much more will surface gradually. Rise in NPA cannot stop in any bank specially in public sector banks without punishing guilty bank top officials & politicians after making case by case analysis.Fixing of accountability and punishment without delay to negligent persons can only guarantee for good health .
Every bank has been using various tools to hide bad debts to protect guilty bank officers and to shield bad borrowers. Restructuring of bad loans or the culture of evergreening of bad loans to show it as standard advance is a deep rooted culture in all banks.This culture of window dressing is not new in any bank. For decades bankers are using art of hiding bad debt to make their balance sheet shine as also to get quick promotion and safe retirement.
If government wants to keep banks healthy, they will have to inculcate a habit of carrying out forensic audit of each bad debts account instead of trusting blindly on false and unconvincing reasons submitted by top bankers for bad debts. Banks are in habit of protecting seniors and making juniors scapegoat for bad advances although each high value loan is sanctioned by top bankers and by bank board .
RBI will have to audit honestly. They had during last two to three decades almost stopped auditing and monitoring banks. Absolute freedom to top bank officers is root cause of evil culture prevailing in all banks.
Every bank has formulated merit oriented promotion policy to choose deserving candidates for key posts but unfortunately officers with flattery and bribery culture are only given preferences in postings as well as in promotions.
CVO and CVC are silent spectator because they are also chosen from group of corrupt bank officers. RISK OFFICERS posted in various administrative officers are mostly those who are weak, inefficient and unskilled in lending and who can act as puppets of top bankers.
Ombudsmen are those who are Ex_bankers and who can provide protecting to bank officers not banks.
Advocates pleading bank cases in courts are victim of bribe offered by defaulting borrowers. Bank auditors are those weak officers who can remain silent on bad debt and project good picture of each branch in shortest period of audit. Values of property are assessed by those who can inflate value of assets as per need for sanctioning a loan. And so on.......all are borrowers friendly and very few rejected officers who really worry for safety of banks fund . Majority of officers work to serve self interests.
Government will have to strike at root cause of bad debts, otherwise they cannot stop creation of bad debts in future too. They will have to focus on quality lending and stop giving importance to quantity and target oriented lending. They will have to instruct banks to stop doing non banking activities like insurance and mutual fund businesses and give full focus on banking job for which they are meant to. They will have to provide full safety to bank officers who are working as branch head or who are assigned key post so that they can take decisions without fear of any repercussions. They will have to ensure that legal and administrative machinery extend full support to bankers in recovery of bad loans. They will have to stop culture of bribery and flattery at all levels if recruitment, posting and promotion.
Government will have to stop political leaders who interfere in lending work of banks for vote banks and who make promise for waiver of bank loans. Culture of loan melas for achieving targets forces bank officers to compromise with lending principles. Announcing loan waivers from time to time for vote bank destroys recovery culture and forces good borrowers to become bad borrowers and seek relief. It gives temptations to bankers to earn illegal money in sanction of new loans or in compromise settlement of bad loans with bad borrowers and that of loan waivers.
Loans and charity are two different acts and government will have to stop distributing loan as charity. They will have to stop inter bank competition to attract loanee from other banks by sacrifice of interests of banks. There should be uniform loan policy and uniform interest rate structure as per priorities of various states and various sectors. And so on......
from Danendra Jain
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