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Danendra jain (manager)     08 December 2011

All is not well in public sector banks


Bad Assets Hidden in Bank without Action from Bankers


News item collected from Economic Times of 7th December 2011


Big borrowers of India Inc default on Rs 47,000 crore loans

6 Dec, 2011, 0930 hrs IST, Pradeep Thakur, TNN

NEW DELHI: Large borrowers, who took loans of Rs 10 crore or more, have defaulted on payments to the tune of Rs 47,000 crore, with banks not even pursuing cases to recover over half the amount. 


Data available with the finance ministry shows that least 700 defaulters who had borrowed Rs 10 crore or more from public sector banks and cumulatively owe over Rs 26,000 crore have gone scot free despite not clearing their dues. In another 3,400 cases where loans are of the order of Rs 1 crore or more, the lenders have moved courts and tribunals to recover Rs 21,400 crore. 


But there are still concerns over the way banks are using options such as one-time settlement scheme to recover the dues. Investigations have shown that in several instances, it was not a simple case of default but even cheating was involved. Bank executives failed to attach personal assets of directors of companies that had defrauded the banks, sources said. 


In fact, in several cases, defaulters have gone ahead to get a second loan despite not clearing their past dues. These facts were brought to the notice of the Central Vigilance Commission by CBI sometime ago after many of its cases fell in the courts when bankers reached one-time settlements with its big defaulters. 


In one such case in Patna, a PSU bank auctioned a mortgaged property at 20% of the valuation made by its experts. Investigation had revealed a conspiracy involving bank officials, valuators and the borrower as the property mortgaged was an agricultural land used as security against a commercial loan. 


The finance ministry has now asked these banks to spruce up their balance sheets given the fact that nearly Rs 14 lakh crore of credit has been outstanding against big borrowers - those who have borrowed Rs 10 crore and above. There are over 22,500 borrowers who owe over Rs 10 crore to nationalized banks. 


The RBI has refused to divulge the names of the defaulters against whom no suits have been filed, citing secrecy clauses. 


To help the banks recover bad debts, the government has also brought in a bill seeking changes in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, and in the Recovery of Debts due to Banks and Financial Institutions (RDBF) Act, 1993. 


The new bill seeks to provide mandatory registration of mortgages and is expected to help reduce the cost of funds for banks and also reduce NPAs.


This refers to article published in Economic Times on 7th December captioned as “Big borrowers of India Inc default on Rs 47,000 crore loans “

In light of above news I use to ask following questions from authorities who are supposed to take action:--


When loan of value of a few lacs rupees goes bad , accountability is fixed on junior officers , why not senior officers are booked to task when high value loan goes bad?



Who are ED and CMD (working or retired or in pipeline) who willfully avoided action against big defaulters?


What action CVC, CBI or RBI or MOF has taken against these top bankers?


Who are the GMS, DGMs, AGMs and field functionaries who are directly or indirectly responsible for sanction, monitoring and controlling officials who neglected in performing their duties?


Who will compensate if these high value loans become bad and bank has to suffer loss?


Will government carry out investigation of assets of these top bankers and their kith and kin (even if some of them may have patronage of ministers and powerful officials) and confiscate their property if found disproportionate to their annual income?


Will government conduct unbiased inquiry to find out how much money is paid for getting a berth of ED or CMD?


Will government ask IT officials to compare assets of top ranked banker’s with their actual income, will they conduct raid on bankers, minister who provide patronage to corrupt bankers and vigilance officials who give honesty certificate to such corrupt officials after getting some award in return?


Will government clarify why thousands of cases against bankers are pending for disposal for years in the office of CBI, CVC and Anti Corruption bureau even if more than two thousand crores of rupees are involved in such fraud?


Will government justify why they are not providing adequate manpower to such investigating agencies to ensure timely and quick action against top ranked corrupt officials and to prevent continuance of corruption chain in promotion, transfer and posting?


If all CMD and ED are found to be corrupt, will the controlling authorities punish Finance Minister and officials of Banking Division who oversee banks under public sector and who are supposed to ensure good health of banks?


Lastly I dare ask a question directly to learned Finance Minister respected Pranab Mukherjee who is advocating employing young officers for top post to lead the banks:his refers to an article published in esteemed newspaper Business Line of 7th December vide link”  In brief “What the Ministry is envisaging is that an exceptionally bright probationary officer, joining a public sector bank at 22, can become a general manager at 40 if he gets promotion once in three years under the ‘merit channel' and go on to head a bank at 45.”


 Why he is interested to select young officers as CEO or ED or GM, DGM or AGM of bank superseding seniors?


Does he want to do so on ground of merit?


If yes he should first remove non performing officers from the top and give promotion on the basis of seniority instead of giving whimsical powers to members of Interview Panel to sell the promotion as hitherto happening in Public sector banks.


Does he want to introduce, irrigate and promote tradition of flattery in banks as prevalent in government services?


Message for Chairman and Managing Director of all public sector banks:


One cannot cure disease merely by applying ointment on the skin until they purify and modify the system, bring about u-turn in HR management, avoid direct recruitment in higher scale, and identify experienced officers who have been rejected in Interviews by officers of vested interest.


 Abolish Interview system and ensure time bound promotions to motivate and judicious award to senior officers,


 Don`t humiliate seniors by forcing them to work under juniors, inculcate work culture and avoid flattery culture, stop visiting branches and offices just to deliver lectures and punish officers who are constrained to spend lacs of rupees from bank account to extend red carpet welcome to visiting officers,


Those who deliver good lecture are not always good for health of bank.


Unfortunately banks have gone in the hands of a few executives who have acquired talent in delivering good speech but who are corrupt in their action.


Flattery to big bosses occurs only in India, not elsewhere in the world. Interview system has been abolished in many central government offices; stagnation word is removed from Central pay rules. Inculcate work culture like private banks.


It is shameful for 100 year old PSBs that in less than two decades business of private banks has gone higher than that of many PSBs and customers preference is not PSB but ICICI, HDFC or Axis bank. This should be clear indicator of some fault in HRM. Whimsical powers of transfer and promotion has adversely affected the work culture and it has gone worse than what existed before 1980.


If you do not believe on what has been said above you may compare the business profile of pre-nationalization, post- nationalization and post reformation and draw results to bring about positive change. Prosperity of any organization depends on pleasure index of workers and customers. 


It is not pay structure which can create devotion and loyalty to the organization. Had pay been real motivator, PSBs would have remained in better position than private banks because average pay of employees of PSBs is little more than that of private banks.


I therefore always say that flattery culture has spoilt health of banks in public sector , also in all other government offices. BSNL and Indian airlines are facing the same sickness compared to new generation telecom companies and private airlines.


Ministers like flattery and money and hence they do not like poor and honest persons, they too like rich and corrupt who can earn and share their ill earned money with government officials and politicians.CBI and CVC all are victim of flattery culture. Good performers are allwhere sidelined and isolated from mainstream and hence all PSUs are almost sick.


Discard flattery and keep away flatterers, if you want to make your organization strong enough to compete with global giants. Otherwise you will like MMS and his team also prefers FDI for survival of the economy. Indira Gandhi became victim of flatterers and MMS along with Sonia is also suffering from same disease. This is why, India as a whole is rated worst on corruption index by Transparency International. Image of the country is getting eroded year after year only due to all pervasive flattery culture.








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