Finance Minister can use coercive methods to shut the mouth of rating agency which downgraded SBI's rating as they did to shut the mouth of Ramdeo Baba and his associate as also Team Anna. But the fact is that intrinsic health of all public sector banks is too weak and hence downgrading of rating of not only SBI but all public sector banks is possible.
Prominent reasons for health of banks going from bad to worse are many. I mention hereunder a few of them.
Quality of bank officers who process and recommend for loan sanction and also that of who accord sanction on any lending proposal is very poor.
Bank management, in fact all ministers and all department heads give value to corrupt officer and to flattery culture for their mutual personal greed.
There is acute shortage of manpower at many branches and on the contrary there is undue pressure from administrative offices to handle more and more business.
Legal system to recover money from defaulters is too weak and inefficient due to which money is not recovered from willful defaulters even after lapse of ten to twenty years of filing of suit in courts or DRT or certificate offices.
There is unbearable political interference in lending, in compromise and in write off and also undue pressure from top bank management for taking quick decisions on lending, on compromise and for waiver in cases of their interest.
No punishment is awarded to person who defaults in repayment of loan availed by him from any financial institute. And no punishment to corrupt officers is given who is indulged in bribe led lending.
There is a culture of giving promotion to corrupt officers and transfer to good officers to remote and critical places which demotivate good officers and ultimately result in poor monitoring of advances.
Recovery culture has been vitiated by greedy politicians by frequent announcement of write off to enlarge their vote bank.
Lastly there is no fear of law in any citizen and hence violators of laws go unnoticed if the person is at important post.
As such, bank management in nexus with RBI has been willfully and consistently concealing bad assets and taking credit for good financial results. If honest rating is done, rating of many more banks may be downgraded.
Rise in Gross NPA means good money is locked in bad hands and there is need for making more and more provision. This put pressure of capital adequacy and ultimately need capital infusion from government.
Our learned Finance Minister blames present head of SBI for making provisions in March 2011 quarter and for sudden fall in profit knowing very well that loan asset of SBI became bad not overnight but due to wrong policies adopted by his predecessor Mr. Bhat only.
I therefore feel that instead of rebuking present CMD of SBI or cursing Head of rating Agency for downgrading of rating of SBI, Finance Minister should like to know the quantum of irregularities existing in banks and try to take remedial measures.
Pathological test reveal diseases and Doctor is constrained to prescribe proper medicine according to test report to save patients. If caretaker of patient starts rebuking doctor or lab staff for speaking about the disease and do not allow patient to take medicine, patient cannot survive for long. Similarly our learned FM is trying to rebuke and punish the person of rating agency who carried out pathological test on SBI and who courageously exposed the symptom of disease. It is not at all praiseworthy therefore on the part of FM to rebuke SBI head or rating agency officials. Rather it is desirable that our FM collect learning points from downgrading of SBI and act thereupon to safeguard future of banks in general.
Willingly or unwillingly, government has to stop flattery culture in promotions and transfers and make all possible steps to reduce the level of corruption in government departments. Government has to make judiciary active and effective to create fear of Law. There is no way out if government wants real development, good governance and judicious distribution of fruits of growth among majority of Indians. Purification should begin from the top. Politicians have to restrict their greed and create healthy practice. And so on