Sunday, January 16, 2011

Bank Loan

If government is really interested to ensure due diligence and proper end use of loans and advances made by the bank, government have to identify bad bankers, downgrade them and punish them in shortest period of time. It must stop banks extending bulk credits to corporate to achieve the set target in easy way. It must punish bank officials who disburse loans without applying due diligence and without verifying end use of the loan money simply to achieve the target. It must stop corporate who invest bank’s loan money in stock market and commodity market for quick multiplication of capital.

It is to be kept in mind that misuse of fund has been happening and always happening at all level and in most of the branches. Even small borrowers do not hesitate to divert the fund if they get better opportunity in stock market or elsewhere. Reason for misuse is the ineffectiveness of legal tools to punish bad bankers, the burden of the target at branches and the malicious intention of the officials sitting at top posts.

To add fuel to fire there is no will in the minds of officials to be tight on the issue of recovery of loans or to monitor the loans and advances because it has an inherent risk of getting humiliated by borrowers in some cases and displeasure of big bosses in some other cases. There is none to provide safety to good officers and to those who are loyal to the bank and work wholeheartedly for the bank. There is always in fear of wrong transfer and none promotion in the minds of officers who goes against the will of the bosses.

But in all cases it is undoubtedly true that improper lending and improper use of fund has resulted in rise in prices of all stocks and all commodities.

SEBI, RBI and Ministry of Finance have not applied their mind, wisdom and effectiveness in their own duty. Negligence on the part of these regulating agencies may be said to be due to inadequate manpower and inadequate infrastructure or due to political intervention. But in my view it is due to the fact that many officials of regulating agencies are hand in glove with market manipulators and rich business icons. Such corrupt officials do not forget to preach the sermons to business community from time to time so that they appear to be vigilant. They always talk in terms of growth in figures but they never bother about the quality of growth, distribution of growth and judicious access of product to all common men.

This is why image of India is fully tarnished in international community by one after other exposure of scams in India and it is undoubtedly true that foreign investors will slowly leave India if proper steps are not taken immediately to ensure strict application of existing laws .RBI is silent spectator of evil work of bankers and business giants because RBI has after all to please government headed by great economists Mr. Manmohan Singh who has to listen what Sonia speaks to him. Fraud like Satyam computers, bad lending like LIC Housing Finance and misuse of borrowed fund by corporate has completely shaken the trust of Foreign investors and will have far reaching bad effects on Indian economy. Still our clean PM talks of GDP growth and feels proud of quality of corporate governance in India.

To me it is undoubtedly clear that all types of frauds, scams, relentless price rise are only due to unlimited freedom given to bankers and businessmen under the umbrella of reformation and due to evil culture inculcated, irrigated and promoted by bad politicians of this country. Business giants are using their own surplus funds or bank’s unregulated fund to hoard commodities and cause artificial rise in prices for earning unlimited profit, of course in collusion with bad bankers. Banks in general have left or curtailed lending to agricultural sector or to small traders to a great extent because they have to keep in mind the limitations of existing manpower and attitude of big bosses and also the limitations of legal machineries which provide support in case of mishappenings.

As a result of ll above mentioned facts amount of Non Performing Assets in particularly PSU banks is gradually increasing year after year due to not only ineffective judicial remedy but also due to malicious intention of few bankers who carry out their evil work with the help of flatterer filed officials. One of the vital contributors of malady in the system is also Human Resource Department (HRD) in PSU banks which inculcate and promote flattery culture. HRD sidelines those officers who think for the safety of bank’s interest.

Housing scam which surfaced in the recent pat and which resulted in arrest of eight high rank bank officials are only tip of the iceberg. Corrupt officers are sitting on top post of each bank and they ensure promotion to only those who are expert in the art of earning money and who is number one corrupt.

It is therefore dire need of the hour to find out and identify corrupt officers at top level and ensure that they are punished and without which one cannot imagine of NPA coming down in any bank. When top officers will be booked to task, clear cut message will reach upto the bottom level officers.

Only a healthy culture in bank can help in reducing NPA percentage and help in becoming top ranked performer bank.. Hitherto CEOs and EDs in banks are showing lesser percentage of NPA by increasing volume of fresh and short period advances. Bankers are least interested in lending for agriculture production. They do not want to lend to small traders and industrialists. Similarly they reduce NPA not by recovering the money from defaulters but by selling NPAs to Asset recovery companies (ARC).

Days are not far when this manipulative tactics will also fail to salvage banks. It is therefore necessary that actions are initiated before it is too late.


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