Bank bad loans a concern, effort on to fix it: DK Mittal, Financial Services Secretary
Rising bad loans is a concern for state-run banks, but the situation should look better soon as a lot of effort is going into addressing the problem, says Financial Services Secretary DK Mittal. Excerpts from an interview with ET.
SBI and the Union Bank of India have been downgraded due to NPAs. How serious is the issue?
The increase in bad loans (following the shift to a system-generated NPAs) was expected, but all these are not bad debts.
The benefit of this exercise will be there to see in the next quarter as there is a huge effort on to recover this money or make them regular assets. It is unfortunate that everything coincided with the bad phase of the economy.
http://economictimes.indiatimes.com/opinion/interviews/bank-bad-loans-a-concern-effort-on-to-fix-it-dk-mittal-financial-services-secretary/articleshow/12420869.cms?curpg=2
Great Economist doctor Manmohan Singh , learned Finance
Minister Mr. Pranab Mukherjee and educated and experienced managing directors
of all banks have failed to assess the critical situation of government banks
.These veteran CEOs have aggravated the disease
by their ill motivated decisions in lending, recruitment, promotions and
transfers.
They have been choosing so called meritorious officers through merit and fast
channel promotion processes for last two decades but they failed to provide
enough safety to banks and it is due to their evils that crisis of banks is
becoming alarming year after year. Volume of Non Performing Assets is
increasing quarter after quarter and profitability is facing erosion day after
day. God knows how long government will provide ventilators and this is sure if
the people do not change their attitude, crisis has to grow alarming in coming
days.
- When repayment does not come from bad borrowers, problem of liquidity arises and asset liability mismatch deteriorates.
- When greedy corrupt officers do not show their wisdom and experience in assessing the creditworthiness of loan seekers and when they give value to underhand dealings, loan sanctioned by them are likely to add bad assets in the balance sheet of banks.
- When legal system is manned by corrupt, weak and ineffective persons, one cannot dream of recovery of bad loans from willful defaulters as per schedule.
- When politicians put pressure on CEOs of banks for sanction of finance to their friends and relatives and when they resort to loan waiver for vote banks, the healthy culture in banks cannot prevail.
- When flattery is the key for success at all levels, there s no need to bother for performance and no need to worry for future of banks.
Banks are constrained to offer higher and higher rate of
interest on even short term deposits to cope with liquidity crisis. Though RBI
has during last few months have taken unprecedented steps by reduction in CRR
and SLR. RBI has even allowed borrowing by banks by Liquidity Adjustment
Facility (LAF),liquidity crisis continues to pose a problem before bankers.
After all RBI and Government of India has given them liberty
to fix their own rate of interest structure and hence they buy deposit at
higher rate and then sanction loan at low rate to achieve lending target.
Until integrity of bank officials and that of regulators is good, no power can save these
banks from further erosion in intrinsic values. Government will have to provide
capital to compensate the sin they committed in the past.
Top bankers have been selecting officers for top post based on merit and fast track promotion process for last three decades. But still they have failed to provide safety to banks only because they resorted to whimsical and arbitrary decisions in promotion and transfer processes. Top bankers have become wealthy but banks have become empty.
Top bankers have been selecting officers for top post based on merit and fast track promotion process for last three decades. But still they have failed to provide safety to banks only because they resorted to whimsical and arbitrary decisions in promotion and transfer processes. Top bankers have become wealthy but banks have become empty.
- It is ironical that the persons who spoiled the banks are now blaming Technology for rise in Non Performing Assets in Banks. Top officials are so much clever that they boldly say before media that rise in NPA is one time phenomenon and it is due to recognition of NPA by system.
- It appears as if it was system and technology which accumulated bad assets during last two decades and all of a sudden it vomited under pressure.
- It appears as if borrowers, bank officers and legal system were all good, honest, devoted and sincere but the system created bad assets during last year.
- It appears bankers are not corrupt but the technology is guilty for recognition of NPA.
Even if the lame excuse of bankers and that of other
regulators is accepted for abrupt rise in bad assets in government banks, not
in private banks, I would like to request responsible officers to ensure that at least now government and bank officials show their charismatic action by stopping further rise in bad asset ..
It will be a great achievement if loans sanctioned by these
meritorious bankers do not go bad in coming years. It is expected that at least now onwards bank officials and team of Charted Accountants do not play foul game to conceal bad assets as usually they did in the past.
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