Tuesday, April 24, 2012

Restructure of Loan


Banks to restructure loan worth Rs 2 trillion by March 2013: Crisil

Anita Bhoir, ET Bureau Apr 24, 2012, 06.28PM IST
http://articles.economictimes.indiatimes.com/2012-04-24/news/31392600_1_crisil-loan-banks
MUMBAI: Restructured loan portfolio of banks is expected to touch Rs 2 trillion by March 2013, said Crisilthe rating company. A sizeable proportion of the restructuring comprises large-ticket corporate exposures; total restructured loans will account for 3.5 per cent of the banking sector's total advances as at March 2013,'' it said
GTL Infrastructure, a telecom tower group; microfinance company BASIX; and Deccan Cargo and Express Logistic, founded by Captain Gopinath, Bharati Shipyard are among companies whose loans have been restructured this year, document from the CDR Cell shows. Other companies like Hotel Leelaventures, HCC and Lavasa await banks approval to be admitted to CDR cell.
"The nature of restructuring in 2011-12 and 2012-13 is qualitatively different from that in 2008-09 and 2009-10. The loans restructured in the earlier phase were smaller and represented the small and medium enterprise (SME) accounts. In the current phase, the loans being restructured are large corporate exposures; over two-thirds of the loans restructured till December 2011 had a ticket size of over Rs1000 crore, reflecting a high level of concentration,'' said Ramraj Pai, president, Crisil Ratings.
Bank's gross NPAs are set to increase to 3.2% of advances by March 2013, from 2.9% as at December 2011. The large quantum of restructuring reflects the prevailing stress on corporate India's credit quality because of lower profitability, weak demand, and tight liquidity.
'Nearly 30% of the restructuring is expected in the power sector. The other
sectors to be impacted include aviation, construction and engineering, steel, textiles, and telecom infrastructure,'' the rating company said.
Such a large quantum of restructuring will help restrict the increase in banks' reported NPAs - the gross NPAs are expected to marginally increase to 3.2% as at March 2013 from 2.9% at the end of December 2011 said Crisil. The increase in NPAs reflects the expectation of slippages in the agriculture and SME portfolios. The large ticket size of the restructured loans, slippages of even 20%, similar to that witnessed in the past, could lead to further increase in gross NPAs by over 50 basis points over the medium term, the rating company said.


If RBI inspects all branches, real exposure of bank's fraud will surface. Exposure of fraudulent activities comes in the open only by one out of thousand inspecting officers because most of the inspecting officers are also birds of same feather. Top officers of bank have during last one decade have run the bank purely to loot, it is in recruitment, in promotion and transfer and in lending and purchase of high value goods or in contractual work like furnishing of a branch .

In the name of reformation UPA government led by Manmohan Singh has given unprecedented freedom to bankers and this is why most of banks concealed voluminous NPA for years and decades. 

It is only due to application of Core Banking Solution and due to effort of a few RNI officials that banks were forced to identify NPA online through CBS . Under CBS regime, restructuring only is the tool by which  NPA can be concealed , profit may be inflated and finally bank officer may become a close associate of ministers and get out of turn promotion.


Restructuring of bad loan account year after year and now quarter after quarter has become a fashion to conceal their misdeeds and finally transfer the blame from one officer to other. They know very well that there is none in India who cannot be bought by wealth, wine and woman.. Exceptional few honest and bold officers are as usual posted in critical areas where his value becomes insignificant. 

Power of transfer and power of rejecting an officer  in interview vested with top officers is the root of growth of NPA and all types of malady in public sector banks.After all who will bell the cat?

RBI finds deficiencies in loan restructuring by banks

24 APR, 2012, 04.22PM IST, PTI 
NEW DELHI: The Reserve Bank has observed certain deficiencies in compliance of its guidelines onrestructuring of loans by state-owned banks during annual inspection, the government today said.

Some of the deficiencies observed during the Annual Financial Inspection (AFI) by RBI of the public sector banks include repeated restructuring and non-classification as per record of recovery, Minister of State for Finance Namo Narain Meena said in a written reply in the Rajya Sabha.

Besides, banks do restructuring of loans without proper viability studies, he said.

In another question, Meena said, "higher interest rate is one of the several factors contributing towards non-performing assets (NPAs) of the banks."

As on March 31, 2011, the share of the gross NPAs in total advances of the scheduled commercial banks has declined to 2.3 per cent from 2.5 per cent a year earlier, he said.

In order to adjust the policy rates to levels consistent with the current growth moderation, he said, the RBI in its latest annual monetary policy statement has reduced the repo rate by 0.5 per cent.

The repo rate has accordingly dropped to 8 per cent from April 17.

He also said that the banks are independent to determine their actual lending rate on loans and advances with reference to base rate.

2 comments:

Danendra said...

Real guilty top ranked officials of banks who passed on instruction to field functionaries on phone will never be caught . Real guilty have already retired or promoted to high rank. But juniors who obeyed telephonic instruction of bosses and carried out restructuring of all loans in 2007 2008 and onwards will face the music if any inquiry by RBI or CBI is instituted. Undoubtely seniors will escape from punishment

majji js murthy said...

Verbal / telephonic instructions have cost the public sector banks dearly in terms of falling profitability, increasing NPAs, increasing frauds. Junior level officers, branch managers and some times even regional heads have to bow down to the verbal instructions of their higher ups and in case any of them put on record that the work is under verbal instructions from so and so, their life is made a hell and their future in the bank is sealed. How long can the PS Banks can afford to let lose the loot by the so called higher ups. It is high time the Finance Ministry should come out with a solution to this rot. In inquiries also, only innocent are punished and even if the poor officer appeals, it is only the internal officials who take decisions on appeals also. We don't have a tribunal like Central Govt. Officers where an imaprtial tribunal takes decisions on facts. It is time that Finance Ministry should constitute a Tribunal for Banks to look into departmental inquiries and complaints which to some extent encourage honest officers who are still existing in public sector banks. Other wise honest officers in PS Banks will be a vanishing tribe which requires protection like protection given to vanishing animals / birds under wild life protection bill. To save the PS Banks from becoming bankrupt, Finance Ministry should take stringent measures and punish the guilty - if necessary with life imprisonment if they are found guilty. Otherwise only god can save this rot from further spread.