Friday, July 10, 2015

Government Not Serious On Sickness Of PSU Banks

AIBEA has given a call for all bank employees to observe strike on September 2 , 2015 to protest against proposed modification / amendments in labour laws to the detriment of bank employees and to favour employers.

AIBEA has further requested Government to declare Loan to Kingfisher as wilful default so that bankers can recover the money from defaulter like Vijya Mallya. This makes it clear that despite several efforts made by many banks, bank officials failed to convince the borrower and the court that the default is wilful. Not only Vijya Malya, there are hundreds of such big defaulters , who are not repaying the dues to banks despite the fact that they have capacity to repay in time, but bankers are unable to consider the default as wilful default.

It is just enough to prove that not only bankers have acted with negligence in lending to high profile borrowers  in greed of some favour and  some material gain but also  Indian laws and Rules framed by RBI are proved to be ridiculous and ineffective. It is painful that banks are needed to prove the default as wilful to recover the loan given to a borrower. After all,  default is default. Courts and tribunals are unable to decide bank cases filed against defaulters in years and decades. It is Himalayan task for bankers to prove in court that they have given loan  to defaulter, that documents are genuinely executed by defaulters only and that amount of default is correctly calculated.

Government of India do not hesitate in building  pressure on banks to lend money to big infrastructure project, big corporate, high value business houses, Power generating companies or power distributing companies or even to farmers,  small traders and small industrialists.

But when it is the issue  of recovery of overdues from defaulters, Government of India do not extend any support to bank officials , rather bank officers are advised to be tactful and effective. When default occurs, blame is pointed towards nature, or global situation or domestic economic slowdown.

GOI fail to make laws or is unwilling to make laws effective so that money is recovered from all types of defaulters without the need of proving various points, like whether the default is wilful or not, like advance made was adequate or inadequate, documents executed by defaulters are time-barred or within limitation, whether proper notice has been served to defaulters or not, whether proper formalities for creation of mortgage of properties was created or not, whether any property not under mortgage can be seized or not,  interest rate was low or high and so on.

Government of India is not willing to build pressure on courts and various tribunals like Debt Recovery Tribunals to decide the bank cases pertaining to recovery from defaulting borrowers in timeframe and fix accountability on judges and magistrates who in collusion with borrowers and in nexus with advocates go on delaying decisions on bank cases on flimsy grounds for years and decades.

It is very much painful and ridiculous too that Banks are forced to give loan to a person or a company in a timeframe of few days or few months but borrowers , loan takers are not forced to repay the loan on demand or face stern punishment and judiciary is not forced to decided the case in a fixed timeframe of few months or a year or two and courts are not forced to decide the case in fixed timeframe. I am unable to understand why does it takes years and decades to prove that loan has been given , that default has occurred and that defaulters have to repay the dues.

Banks are required to give loan to farmers, students, business men, professionals   or industrialists without any trouble to loan seekers , but when loan takers fail to repay the loan in time willingly or unwillingly, then bank need to prove it from various angle that bank has truely given loan or default is wilful . It means needle of doubt is always pointed out towards bankers and not against borrowers who have wilfully defaulted in repayment of loan in time with a malicious intention to get it written off or to settle the loan under compromise with huge discount. 

The root cause of accumulation of stressed assets in public sector bank is neither global recession or economic recession as claimed by clever bankers and clever politicians. Reasons for rise in stressed assets starts from the first day of loan sanction to days of  monitoring, day of default and finally  days when recovery processes are initiated till it is parked in courts for final ordeal. Quality of sanctioning of loan, quality of monitoring, quality of legal system , quality of politics, quality of governance, quality of workforce who handle such cases  all need to be questioned and made effective .

The key reason is that bank officials in public sector banks are to sanction loans under pressure from some corner or the other or under pressure of achieving the target. If loan growth is not achieved , the career and personal life of bank officers may be affected badly. There is no protection to bank officers who are shouldering the task of loan sanctioning and loan processing. Loan processing officers and loan sanctioning officers may face threat to their life and their family or may face critical and frequent transfers or rejection in promotion. In such position , some officers become extraordinary clever and they start earning money from unfair means by giving loan to those who bribe them better. In this way they kill not only two birds but many birds with one stone. They achieve the target given by management and earn money from evil ways, they get appreciation in all meetings, they get quicker promotion, cash incentives not only from borrowers but also from bank management for achieving the target  and finally get cream posting.

Bankers are meant to do banking activities , but they are forced to indulge in non-banking activities which adversely affects the quality of lending , quality of monitoring and quality of ownership for assets created by bank. Bank officers act as machine which work as directed by machine owner. They do not have love for banks but love for higher bosses who can make or mar their life and career. The culture in government banks is to pass the time somehow or the other and leave the evil work behind for followers. There is complete lack of ownership and loyalty. Quality is not significant , quantity is important.

Second reason is political exploitation of banks by politicians and local muscle men. Safety of bank officers depends on the mercy of God. In naxal areas , bank officers do not have courage to say 'no' to any loan seeker or even reduce the amount of  loan sanction compared to what is demanded by local goondas and muscle men  directly or indirectly for others.

Third reason is position of bank officers become pathetic when loan turns bad . When loanee do not repay the loan, bank officers can do nothing other than worshiping defaulters as if defaulters is God. It takes years and decades for bankers to prove in courts that they have really given loan to defaulting borrowers and they have calculated interest correctly or the documents executed by defaulters are genuine and with Limitation act provisions.

Government , either state or central , is unable to pressurise their officials in various departments to clear the project in timeframe and penalise who wilfully delay the process of statutory clearances. GOI is unable to provide land, coal ,power and other inputs for timely completion of projects promoted by various business houses. It is known to all that project valued Rs.400000 crore in steel sector are pending and languishing in various offices for decision for years and finally when cost escalates , promoters surrenders which finally resulting in converting standard asset to Non Performing assets.

Similarly power generating companies and distributing companies have been financed thousands of crores of rupees by various public sector banks and most of them are defaulters because they are unable to recover even the cost from consumers of power to political reasons. Politicians do not want to increase rate to give comfort to voters but when these power companies book loss and default in repayment of bank loan, Government blame banks for failing to recover the dues .

Finally , even if it is proved and it is known to all that loan sanctioned to such defaulters was with ill-motivation and with negligence there is none to penalise such bad officials. Rather corrupt officers are awarded in various ways. As such there is no fear of action in the minds of any bank officer even if the loan given by them become Non Performing Asset. Officers in bank or elsewhere pass time somehow or the other and get retired leaving behind stressed assets in amounting to crores of rupees. Officers and ED and CMDs  of bank sanction loan lavishly and after two to three years transferred to other branches or other banks and none is held responsible for lapses because all of them are birds of same feather. This is why ownership for assets crated by bank loan is not developed in bank officials of government bank as it is inculcated , promoted and crated for each asset in private banks.

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