Friday, January 2, 2015

Banking Reform At Gyan Sangam

In 1991 Country stepped into Reformation era by launch of policy based on liberalisation, globalisation and privatisation in tune with policy dictate given by World Bank, International forums and under pressure of US linked lobby.
In unison with policy of liberalisation, privatisation and globalisation (LPG), bankers got freedom in many areas and bolts tightening the body of bank were slowly and gradually made looser. Process of Determination of Interest rate for various deposits and advances left completely free to individual banks. Process of recruitment were totally made free for each bank. Various restrictions on promotions of bank employees from one cadre to other and from one scale to other were removed and each bank made free to decide its own promotion policy discarding  seniority based on promotion.
It was pleaded by chiefs of all banks that due to seniority based promotion policy , they were unable to promote meritorious officer to higher post and growth of the bank was hampered due to inefficient persons getting promotion. Bankers resorted to campus recruitment and started offering higher pay of scale II or scale III to new recruitees to attract talent. They did all their best to focus on so called merit but in fact  under the mask of merit they chose to recruit and promote only inferior employees for higher post to serve their own vested interest.

Similarly ,It was argued by bankers that due to uniform interest rate regime imposed on them by RBI, they are unable to ensure quality and quantity of credit growth .Unfortunately , they financed in general to bad business men at sub prim rate, gave exorbitant concessions only to those business men who filled their pockets and thus caused rise in bad assets and caused only loss to bank by writing off loans of their close friends to fill their own pockets. They purchased bulk deposits at higher rate by bribing government officials. In this way clever bank officials sitting at top post inculcated a bad culture in public sector banks , fruits of which are now termed as sour.

Top Officials in reformation era used to plead  that if they are given absolute freedom to decide their own rate structure and own recruitment and promotion policy , there will be inter bank competition and banks will run for talented employees. But everyone knows that absolute freedom and absolute power produce absolute freedom , flattery and bribery only. Obviously outcome of freedom is now visible to all and GOI have called for Gyan Sangam.
Banks were nationalised in 1967 by late Indira Gandhi to serve poor mass (new term used today for it is Financial Inclusion ). Banks were taken over by the then government to fulfil social agenda and to implement various social welfare schemes through state run banks. Private banks of that period were accused by the then government that they were not serving poor people of India and hence GOI took decision to nationalise  banks. Poverty did not end but banks became poor and sick.

After 24 years of nationalisation, again GOI found that banks were not fulfilling the task of growing economy and hence policy of reformation in the name of LPG put into force. After 24 years again  , it is thought by so called well wishers of the country that the agenda of Social welfare and that of growth of the country remains unfulfilled and hence they have called banks Chiefs at  Gyan Sangam. 
Unfortunately after lapse of more than two decades, say after 24 years of reformation, bankers find that health of their banks is again worse than what used to be in pre-reformation era. Assets of almost all public sector banks is full of non performing assets and stressed assets or restructured assets. Volume of frauds have gone up many fold. Bank employees in general are unhappy, demotivated , frustrated and depressed. .Profitability of each PS bank has been  sharply coming down year after year   due to inter bank competition and inter bank take over of assets . It is important to mention here unhappy lot of workers cannot think of betterment of banks they serve.
Medicine which was considered and prescribed as Ramvan (panacea) by Pandits of banking and by so called Gurus of Reformation of period of eighties and  nineties proved as cause of all ailments banks are now suffering. Borrowers took full advantage of  this inter bank competition and banker's run for achievement of target and they became millionaire and billionaire during this period an banks became sick. Similarly top officials grew in their personal wealth but bank staff in general became poorer and exploited mass. Medicines which were prescribed  from 1991 onwards for curing so called sick banks upto the year 1990 has made banks sicker than they were during pre-reformation era.
It is a matter of coincidence , that after 24 years again, Chief of Banks have gathered together at Gyan Sangam (knowledge confluence)  in Pune under call of Prime Minister Mr. Narendra Modi to debate and discuss the modalities of reformation in banking and to plan strategies for success in Financial Inclusion , to grow in priority sector and to motivate Human Resource of banks.
In 1991 bank officials , RBI officials and the then government blamed policy of socialism for poor health of public sector banks and after 24 years the same officials and present government are blaming policy of reformation as launched, adopted, promoted and propagated in banks after 1991 in the name of reformation. And the greatest fun and irony is that Private banks which took birth in reformation era have been growing and flourishing, year after  year, quarter after quarter and day after day, that too , under same economic conditions and same global economic scene and same government
I reiterate here that these clever top officials of public sector  banks , clever government officials and clever ministers cannot do any good for banks and neither for the economy of the country until they are dishonest in integrity , dishonest in execution of best plan and policy framed by them. None of the plan can achieve desired success until the implementing agencies and enforcing officials are honest. and sincere to their task.  They can preach sermons on all points , they can have well worded banners, hoardings and well acted TV shows on fabricated and concocted  success stories of banks and they can falsely and fraudulently furnish figure of achievement of targets to fool government and to fool their juniors. But They cannot hide their sins for ever, bitter truth surfaces sooner or later. Sins of bankers and government officials surfaced during nineties and eighties are resurfacing in more dreadful but different shape. Assets of private banks is healthier but that of Public sector banks is moving from bad to worse and worse to worst. 
Now in Pune , bankers will put entire blame on Global recession, economic slowdown all over the world, adverse political situation and lastly  RBI which is not prescribing low rate of interest. I am very much sure that clever government officials and clever political masters who gathered at Pune will also admit their ill-motivated logic given for their failure and for rise in bad assets because they are equally responsible for country level loot through banks going on for decades. They will not accept that under same circumstances and same environment of global recession and economy slowdown, private banks have booked excellent rise in profit every quarter.
There is not doubt that old wine in new bottle will come out of marathon exercise, debate, discussion on agenda of reforming and transforming banks at Pune. Bankers , officials and politicians will get another brand name of schemes ,policies  and plans and resume their loot in new style. I may be termed negative minded , but the ground reality does not change even if clever officials and bankers crying loudly for positivity standing at Red Fort in Delhi.
At  most , bankers or GOI may prescribe medicine of merger and consolidation to cure ailing banks and to conceal weakness and sickness of banks. But I am fully sure that this medicine will prove more harmful and suicidal step in banking industry. Culture does not change by merger only, this has to be kept in mind. They as usual may postpone the death and dreadful disaster in banks for a very short period if they decide to change only the bottle , not the contents.
India is reputed for making best plans in the world but equally accused of worst in execution of plans .Every year we make plan and every year we accuse others and extraneous factors if we do not get desired success in our goal. Even if hundreds and thousands of crores of rupees are lost by ill-motivated decisions of  ED or CMD of a bank in nexus with ill-motivated political masters or business houses., none will get the punishment . This freedom given to all and this culture of excusing all faults of omission and commission in the name of credit growth and in the name of social welfare have proved suicidal for banks. Culture of punishing the honest and good performers and awarding the corrupt and non performers have resulted in growth of Non Performing assets and Non Performing Banks.
Let us wait what types of magic Bankers  learn from Gan Sangam  and which magic stick GOI distributes among corrupt bankers to cure ailing banks , to RBI officials to serve social agenda and finally to  ministers  to serve the country. Ultimately it is taxpayers , stake holders, shareholders, bank staff who have to suffer the pain of their evil works and it is they who have to shoulder the burden .
Bank staff will be denied wage hike, depositors will be denied interest rate hike, Tax payers are denied relief in tax ,share holders will be denied dividend on their share in banks , but defaulting borrowers ,will get relief in interest rate, will get relief in taxes and relief in repayment period to pay bank loan they took from banks. Health of Public sector banks will continue to deteriorate , but they will learn new tools to conceal bad debts and their evil lending .Old wine in newly branded  bottles are like to come in Market very soon.  

There appears no decline in Pain of Poor people of India and neither there appears any considerable fall  in unemployment though for last fifty years various banks as also various governments have formulated various poverty alleviation schemes and launched and implemented various unemployment eradication programmes. In the name of social welfare government prescribed targets for banks for financing to priority sector and neglected sector. But actual growth took place in non-priority sector like real estate sector, infrastructure or retail lending only benefits of which is more often than not directed towards rich class of the society. Poor have grown poorer despite all claims b previous governments that they are involved in "Garibi Hatao Abhiyan" only. 

Policy after policy for Reform has come in the market but real reforms are yet to usher in. Poverty and unemployment are still cancerous disease for the country. Water, pure food, affordable house, affordable education, affordable health care,Power, roads, cleanliness, affordable and comfortable transportation facilities are still scarce commodity for poor and downtrodden class of society.

Even bank staff who work day and night are fighting for justice in their wag hike, but there is none to listen their grievance on the ground that banks are not earning adequate profit. But when we talk of what regulating agencies and vigilance departments are doing , why bad debts are rising, why corruption is at its peak in banks, RBI says that bank in India are safer than their counterparts in other countries.
 Please wait.    .... Do not Lose Patience......Be Positive, Don't Lose hope ....
There is one silver lining. Mr. Narendra Modi PM cannot become fool so easily and Mr.Arun Jaitely , Finance Minister cannot understand wrong prescription even if it emerges and evolves after Pune Gyan Sangam.
Danendra Jain--3rd January 2015

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