Monday, September 23, 2013

Bankers AND Politicians Are Meritorious But Health of Bank Is Still Bad AND Their Rating Downgraded

Rating agencies are exposing the bitter truth of Indian banks .The most interesting story of rating is that banks which are and which were always treated as best banks , leading banks and shining banks are rated rotten . An experienced and true bank may easily imagine of the factual current status of other public sector banks which were already running behind in all parameters of tests to ascertain the health and growth prospective of any bank.

Some top officials of the bank have remained always optimistic and have always given positive outlook about Indian banks knowing very well that internal position of the banks were moving fast from bad to worse. Still they portrayed the bank's image as brightest , shining and prosperous. 

It was because they are the persons who are mainly responsible for creating such deep rooted mess in public sector banks.

It is they who manipulated figures in balance sheet to show rosy picture. It is they who played foul game in making provisions for pensions and other terminal benefits.It is they who in greed of better posting and better personal career remained busy in flattery to ministers, who willfully sacrificed the interest of the bank, who fraudulently inflated the profit , who won the heart of ministers by window dressing in deposits and advances and so on. 

It is they who played with quality of credit disbursal in an attempt to achieve the target and it is they who inculcated such bad culture in juniors and built pressure on juniors to follow their bad orders and to achieve the Branch target by hook or by crook. It is they who promoted flatterers even if they caused loss to banks and it is they who humiliated officers who were truely loyal to banks. 

It is unfortunate that management of public sector banks is still in the hands of corrupt officials who are continuing their ill habits in the same way . Quality of credit processing is still bad and there is complete lack of monitoring . Officers working in branches are under such hug pressure that they somehow or the other disburse loan to any Tom Dick and Hurry so that their target is exceeded and their bosses become happy.  This is why slippage of advances from standard to Non Performing Asset category is very quick , say two to three years of sanction.This is perhaps why slippage declared by each banks is more than what they recover from their bad borrowers.

RBI is totally unaware of such unhealthy  culture. Majority of branches are working under huge mental pressure and hence they cannot safeguard bank's interest. It s absolutely beyond my imagination that officers who are always in fear of action from bosses and who are always threatened of transfer can work wisely and safely. The key target of majority of field functionaries is to please the boss and not to safeguard bank. 

Monitoring of advances is almost nil because most of the branches are suffering from staff shortage or they are pulling the branches with totally inefficient staff . Good officers have either left attending promotion processes or have been posted at insensitive posts or shunted in remote areas. The greatest fun is that top management still feel proud of having merit oriented promotion policy , of having best training system , of having world level Human Resource Management policy and so on. RBI also use to cry loudly that public sector banks are safer than ever before. MOF always says that banks in India are better than foreign banks and private banks all over the world. 

Ministers talk of various ratios derived from balance sheet of banks in the same way they feel proud of GDP rate despite the suffering of majority of population of India. Banks are called safe though assets are bad. The most painful is that there is no effort to ensure posting of enough quality staff in all branches. Top executives of the bank want to lead their life lavishly sitting in AC cabin and hence they use to keep a good number of  quality staff in administrative offices . Branches are suffering staff shortage but administrative offices have surplus staff in general.It means workers are less but controllers of workers are more.

Only God can save Indian banks and there is no doubt that rating of Indian banks will move from bad to worse.Government of India will comes to senses and RBI officials come out of hibernation only when some bank collapse or when the thing goes beyond control. It is only when a bank fails or on the verge of failing  , the regulators and GOI comes into action , form a committee and ultimately the same is merged with some better bank. This has happened so many times in the past. I doubt whether anyone takes lesson from mistakes of the past. 

A bank becomes sick not in a year or two , assets of the banks have gone bad overnight  and working officers have not become negligent and yesman not because of fault of any executive or any policy but all these have happened due to prolonged bad culture , consistent fraud in implementation of good policies and prolonged negligence by regulators . This is why private banks have grown by leaps and bounds whereas public sector banks are moving from bad to worse , are being rated downwards and are sold in share market at least PE. Rating agencies treat PS banks as junk but GOI still feel proud of these banks. 

It is just like the fact that Government is blamed in failing in containing price rise  by common men, is accused of promoting scams , is blamed of suffering from policy paralysis and administrative deficit but the central government led by persons like Manmohan Singh and Chidambram   feel proud of higher GDP growth than that of other countries. American are happier than Indians despite the fact that their GDP growth is less than that of India.

Read following links to know how banks have been rated

Moody's downgrades SBI's debt and local currency rating to junk--ET 23.09.2013

KOLKATA: Moody's Investors Service has downgraded State Bank of India's senior unsecured debt and local currency deposit ratings to Baa3 or lowest investment grade rating from Baa2 and changed the outlook on SBI's financial strength rating to negative from stable as the economic slowdown puts pressure on the bank's credit quality. 

Banks ARE NOT Prepared To Mitigate Risk, They Are Still Fueling To Fire

‘Indian banks unprepared to mitigate risk’--Business Line

The Indian banking system does not yet have a systemic approach to managing risk, said the Reserve Bank of India Deputy Governor K. C. Chakrabarty on Monday.
Speaking on risk-based supervision in Indian banking at a meeting organised by the Bankers’ Club, Dr. Chakrabarty said that the global financial crisis had shown that banks that were doing well were also the ones that bore greater risk. “After the global crisis, there is no such thing as risk-free returns, only returns-free risk,” he said. “The focus area, from a supervisory perspective, should be to identify institutions that are bearing greater risk,” he said. 

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