Thursday, August 21, 2014

Corruption In Public Sector Banks

After exposure of FD scam in Oriental Bank of Commerce and Dena Bank and after knowing and understanding the stories of bribery led lending undertaken by CMD rank officer of Syndicate Bank or top ranked officials of PNB or SBI or United Bank or Indian bank or Corporation bank and after failing in stopping uptrnd in NPA volume in PS banks, Finance Minister Mr. Arun Jaitley says that bank officers at top post must undergo training in Risk Management before he is assigned the duty of top post.

It seems ridiculous to me that a person who is made CEO or General Manager of a bank is not well conversant with tools of risk management even after working in some bank or the other in various capacities for two to three decades. And if it is so how a Branch Manager who has experince of three to five years is given charge of big branch and delegated huge powers of loan sanctions. It is the branches which actually initiate all loan proposals and it is they who indulge in bribery in small loans and it is they who in fear of action act on big proposals desired and instructed by top officials , willingly or unwillingly. Ganga of corruption flows from top and promotion of bad officers starts from low level. If only corrupt officers are promoted , it is but natural only corrupt officers occupies top posts.

I have no doubt that all these top officials who are found to be corrupt and who are not yet detected and trapped know all normal tools to mitigate the risk but they willingly in greed of money ,status and promotion decide to sanction a loan proposal of a bad company without doing due diligence.

Otherwise it is proved that even appointment of officers for top post was never done on the basis of merit but on the basis of gift and bribe he or she used to manage for ministers and politicians and RBI officials who are responsible for selection of person for top post. And when a person gets award of top post by paying some amount in consideration thereof, he or she will promote same culture of bribery and flattery down the level.

As such there is no merit in saying whether one has undergone training of risk management or not. Rather corrupt officer who knows tools of risk management can manage bribe led lending more cleverly taking all steps to safeguard him or her , at least better than those who do not know Risk management mechanism .A well trained officer try to protect himself first and then his or her organisation. This is why officials become wealthy in short span of time and bank become weak and poor under pressure of bad assets created by such corrupt officials.

A person who is corrupt can suggest how to fabricate papers and documents so that none can blame him if the loan sanctioned by him goes bad in future.

To illustrate I may say that ,a person who knows tax laws and understand them well can only suggest the ways of tax evasion and can train a business man how to have black money and how to use black money, and that too taking hidden concurrence of Income Tax officials. It is trained persons who promote culture of bribery and flattery more than those who possess average knowledge on the topic.

Anther suggestion given by Finance Minister is to bifurcate the post of CMD in two parts , one as Chairman and another as Managing Director . Further MOF has proposed to increase the tenure of CEO from three to five years to inculcate professionalism in the person. It seems to be totally equall ridiculous and absurd, unwarranted, useless, totally Bakwas and unbelievable that an officer will become honest and professional as soon as his tenure is increased or his post is split into two or he or she is given training of risk management.

There are examples when a CMD has been given extension for two to three years in the same bank , but he is found to be the greatest manipulator , fraud master and generator of more and more bad debts. Reality of health of assets created by such clever CMD gets exposed only when he is replaced by some other CMD. We have witnessed such happenings in big banks like SBI, PNB, Corporation Bank, Indian Bank and almost all others. Even branch level evil works are detected only when a corrupt officer is followed by an honest officers , otherwise corruption is protected for decades.

As long as one is in post , he or she does not allow loan sanctioned by him to be declared as NPA. There are many tools in the Almirah of Branch Head or Regional Bosses by which even bad debts can be treated as Standard assets .

Harshad Mehta sued his clever brain to commit fraud not only in U Co bank but in several other banks too only because all became victim of gifts in cash or in kind Harshad Mehta used to offer to bank officials. Similarly middlemen like Pawan Bansal got success in managing not only CMD Mr. S K Jain but several top officials of several other banks. One can find hundreds of such officials in all banks who use to sanction loan only when his middleman propose the same.

I am of the opinion that FM or MOF has not yet understood the root cause why volume of bad assets is increasing in public sector banks only. IN case of loans given to Kingfisher, Winsome group, Deccan chronicles, or Bhusan Steel , it is not one or two CMD but a gang of twenty to thirty CMD agreed to lend money . When middlemen manages the bribe and gifts, it is not difficult for any CMD to sanction loan to any corporate or individual. After all greed for wealth is found in ninety nine percent of officers and employees in almost all offices and all department.

In case of Satyam Computers , none doubted the correctness of financials of the company as long as promoter himself did not tell the bitter truth. Chartered Accountants who are supposed to be master in accounting and whose signature is unavoidable on all balance sheets play vital role in all types of scam in banks as also in tax departments.

It is therefore necessary to start punishing top officials who are playing with public money and who are looting taxpayers' money and getting safe retirement. Only stern action against top officials can send sound and good message down the line. GOI will have to peep into record of past ten years at least to know the corrupt game and rampant corruption at top level. They will have to stop flattery and bribery in recruitment, promotion and posting . They will have to give powers to juniors so that they may deal with loan proposals boldly and without fear of repercussion and without fear of transfer to remote place or without fear of rejection in promotion.

Only action will help in creating good culture in public sector banks. Mere preaching of sermons like politicians of UPA government or setting up of new committees can do no change.

I know Mr. Jaitley Finance Minister is very honest and talented person too. Very son he will realise that it is not training which is needed for such corrupt officials , it is only deterrent action which can help in improving the culture and which can stop rampant corruption in middle level and low level offices and branches.

I submit news item which provoked me write views expressed above.

Govt taking steps to professionalise PSU bank management: FM Arun Jaitley-Financial Express

Concerned over instances of corruption in the PSU banks, Finance Minister Arun Jaitley today said that government is taking steps to professionalise the management and help them strengthen their risk management system.

"Professionalising the management of the banks, we have taken some decisions in this regard. We expect banks to have better risk management. The Department of Financial Services has been actively working in this regard" Jaitley said at a function organised by Indian Bank here.

Without specifying names of banks, the Finance Minister said "some recent incidences have been disturbing. I only hope that they are drop in the ocean. We have all learnt the lessons from such incidents, and there will be no repetition of them."

His statement assumes significance in the light of scams in the state-owned banks.

Earlier this month, Syndicate Bank Chairman and Managing Director (CMD) S K Jain was arrested for allegedly receiving a bribe of Rs 50 lakh to enhance credit limits of Bhushan Steel and Prakash Industries.

Besides, some officials of Oriental Bank of Commerce and Dena Bank were suspected of misappropriating funds worth Rs 436 crore from their fixed deposit customers.

The government has initiated a forensic audit in the alleged scam.

Finance Minister, however, expressed hope that an enhanced level of professionalism will further strengthen and improve credibility of the banking system.

"Credibility is of extreme importance as far as banking system is concerned. We must endeavour improved standards of credibility," he added.

If bankers need training on risk management , then why not politicians and officials of regulating, auditing and inspecting agencies need training who use to auction these top posts and who use to provide umbrellas and shield when their corrupt children are trapped in CBI or media net. If leaders becomes honest , there is no possibility or remote chances of low level officers indulging in bribery or flattery. An honest top official never keep Yesman around him. It is only corrupt officers who use to keep team of 'Chamchas' around him who provide 24 hours shield to them.

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