I have huge volume of praise for present RBI governor who is not only intelligent but also brave, bold and firm in his approach,. He did not reduce interest rates under pressure of politicians and corporate houses.
He has made it clear how banks are making provisions for terminal benefits accruing to employees. He has boldly accepted that banks were not and some banks still are not making adequate provisions towards their liability for payment of wage revision, pension, gratuity and other terminal benefits. He said that many provisions which should have been done long ago but banks did not do so to inflate profits and now they amortized these provisions to save their balance sheet from turmoil.
In the year 2010 and 2011 it was clearly exposed by trade union leaders how public sector banks willfully avoiding making adequate provisions towards pension and bad loans liability and inflated profits. These banks distributed dividends without earning profits and caused capital erosion and now they are facing the self created crisis.
I would also like to hope from him dilution and reduction of all stimulus packages allowed in favour of big corporate houses in the year 2008 to meet so called global fiscal crisis. He should prevail upon bankers to made full provisions honestly and punish severely top officials of banks who willfully and cleverly do not do so despite instructions from RBI. CMDs and ED of banks who provided less on wage revision and pension liability should be brought to task because they are willfully repeatedly committing such mistakes.
RBI Governor should create an example of punishing top officials who willfully concealed bad assets for years together and got exposed only when identification of Bad debts started through Core Banking solution under pressure from RBI. Punishment should be awarded to EDs and CMDs of banks who are continuously and who are even now indulged in window dressing of their balance sheet by concealing bad debts through the methods of rephsaing, restructuring, ever greening of bad loans and through tapering technological tools as exposed recently in United Bank of India. I have no doubt that most of banks are still in habit of playing foul game with man, machines and methods.
I put emphasis on punishment to top officials only because it is top officials who propagate bad culture on phone and by giving verbal instruction. Junior level officers do not have guts and courage to protest ill-motivated orders of their bosses in fear of repercussion in form of critical transfers and rejection in promotions for decades ( top officials have ‘Bhrahmastra’ of Interview to reject any good officer on their whims and fancies. ).
It is the dirty game of rising in career that top officials inflated profits for decades, at least after the reformation and free era launched from 1991and which continues even now in one form or the other. The culture of “Yes Sir” and flattery has damaged the fundamentals of all public sector banks and it will need some surgical operations and also some change in treatment.
As regards interest rate, I praise him once again that he did not reduce interest rate to give benefits to corporate. Rather I would like to suggest that RBU should once again adopt and prescribe Uniform interest rate structure for all banks keeping in view national priorities to avoid unnecessary, unwarranted and avoidable competition among banks of the same government. Banks should focus on business expansion by extending excellent service to customers and not by sacrificing bank’s income at the cost of investors and depositors.
Reduction of interest rate by big banks like SBI or PNB results in loss to weak bank which is part of the same government. And ultimately it is the government which has to bear the loss by way of capital infusion.
RBI should not promote the habits of first demanding dividend from these banks and then infusing capital. Government and RBI in particular should stop the culture and tradition of first damaging banks for political advantage and then coming to rescue of these banks as they have given treatment to other public sector undertakings.
RBI should stop Window Dressing done by EDs and CMDs of public sector banks during last fortnight on every financial year to inflate business by 5 to 10 percent and earn false image .Banks which could not achieve growth of business by 10 percent in entire year usually achieve the target by booking false growth of 5 to 10 percent only in last fortnight. Under pressure of Top officials of the bank , every Branch Head , Regional Head and Zonal head have to indulge in window dressing during last few days of the year in the same way as government officials spend entire budget during last few days of March every year . Government should stop this unhealthy practice without delay and should stop building pressure on target .