Wednesday, July 25, 2012

Mittal Defends His Actions, Says Bankers Have To Come Out Of Lazy Habits


THERE IS NO DOUBT IN IT THAT DURING LAST FEW YEARS PUBLIC SECTOR BANKS HAVE TOTALLY DISCARDED AGRICULTURE LENDING AND CONCENTRATED MORE  ON BULK LENDING TO BIG CORPORATE AND ON RETAIL LENDING LIKE LOAN FOR PURCHASE OF CAR AND HOME.

IF TOP 200 BORROWERS OF ANY GOVERNMENT BANK IS REMOVED FROM BALANCE SHEET OF THAT BANK, THE REAL PICTURE OF LENDING WILL EMERGE AND IT WILL BE PROVED THAT DURING LAST FEW YEARS DISBURSEMENT FOR FARMING HAS COME DOWN AND THIS IS WHY GDP CONTRIBUTION FROM AGRICULTURE HAS ALSO COME DOWN.

THERE IS NO DOUBT THAT VOLUME OF NON PERFORMING ASSETS HAS SEEN UNPRECEDENTED RISE DURING LAST THREE YEARS AT LEAST AFTER THE USE OF SYSTEM DRIVEN MECHANISM TO IDENTIFY ACTUAL NPA.

AS A MATTER OF FACT IN MAD RUSH TO INCREASE PROFIT EXECUTIVES OF BANKS DICTATED THEIR JUNIORS WAYS TO CONCEAL NPA AND TAUGHT HOW TO PUBLISH ATTRACTIVE BALANCE SHEET.

THERE IS NO DOUBT THAT CORRUPTION IN GOVERNMENT BANKS HAS INCREASED AT ALL LEVELS but  IT IS invariably POLITICIANS WHO PROTECT THEM.



I SALUTE FINANCE SECRETARY MR. D K MITTAL FOR HIS RELENTLESS EFFORT TO AWAKEN THE SLEEPING BANKERS AND FOR HIS GUIDELINES FOLLOWED BY MONITORING HAS RESULTED IN AWAKENING BANKERS TO GREAT EXTENT AND THEY HAVE NOW UNDERSTOOD THAT THEY CAN NO LONGER MANIPULATE BALANCE SHEET AS PER THEIR WHIMS AND FANCIES. 

I salute Respected Sri Mittal that he has made it crystal clear to all banks that performance of bank will be judged non on the basis of their growth in deposit and advances but their performance in recovery of bad loans and growth in profit and CASA

Top executives of banks have  TO SERVE COMMON MEN, PARTICIPATE IN SOCIAL WELFARE SCHEMES AND AT THE SAME TIME MAINTAIN QUALITY OF LENDING AND RECOVER MONEY FROM DEFAULTERS 

IT IS FORTUNATE OR UNFORTUNATE THAT MR. MITTAL HAS TILL NOW NOT TAKEN ANY PUNITIVE ACTION AGAINST ANY OF TOP EXECUTIVES. HE HAS SIMPLY PREACHED SERMONS TO BANKERS. LET US SEE HOW FAR HE IS SUCCESSFUL IN FORMING THE HABITS OF BANKERS. 

AS LONG AS THE TOP RANKED OFFICERS ARE not TAKEN TO TASK FOR THEIR CORRUPT PRACTICES IN RECRUITMENT, PROMOTION AND POSTING, NONE CAN DREAM OF ANY CHANGE IN CORRUPT CULTURE prevalent in public sector banks. THIS IS MY STRONG CONVICTION AND INDISPUTABLE VIEW.

QUALITY OF OFFICERS HEADING THE BRANCHES IS SO POOR THAT THEY CANNOT BE EXPECTED TO DO SAFE LENDING AND they cannot be expected of protecting BANK FROM GROWTH IN BAD ASSETS AND FROM DETERIORATION IN CUSTOMER SERVICE. 

As long as seniors are not given their due respect one cannot imagine of any drastic change in deep rooted corrupt culture and to expect phenomenal improvement in bottom line from such guidelines without ensuring execution  will be as good as wondering in dreamland . 

I do not find any logic justifiable to justify the recruitment of officers in upper scale and denial to seniors of  their right of  promotions .

 Young officers promoted to scale IV or V in ten years of service will have far reaching adverse effects and the consequence of the same will be visible in due course. 

If sons and daughter in a family do not respect their parent and consequence of such indiscipline may be guessed by any prudent person and unbiased 
assesor.

What Wrong Finance Secretary Mr. Mittal IS Doing?


This refers to editorial published Today the 27th July 2102 in Economic Times  titled as “Leave Banking Be”.

It is true that Mr. Mittal has issued many guidelines in last few months against the tradition of his predecessors who were silent spectators of all right and wrongs of bankers.

http://jaindanendra.blogspot.in/2012/07/what-wrong-is-finance-secretary-mr.html


Financial Services Secretary DK Mittal defends repeated directives to banks

NEW DELHI: DK Mittal, the finance ministry official whose detailed instructions to banks have drawn rebuke

s from Reserve Bank Governor Duvvuri Subbaraoand his predecessor YV Reddy, has strongly defended his actions on the ground that his intention was to jolt state-owned banks out of their "lazy banking" habits and force them to lend more to farmers and small businesses. 


In the last 12 months, the department of financial services in the finance ministry has sent as many as 36 directives to state-run banks, setting new rules as well as reiterating old ones, leading to accusations of micro-management. 

But the man responsible for the blizzard of directives, Financial Services Secretary DK Mittal, refused to comment on the criticisms while sticking to his guns in an interview to ET, arguing that banks need to lend to sectors such as farming, which the government considers a priority, rather than focus only on large companies.

State-run banks, according to Mittal, are merely raising bulk deposits from large businesses and lending the money back to them. "Some banks were raising high-cost deposits and lending out at high interest rates. How would they compete with private banks if they are lending at 14% when private banks are lending at 11%," he asks. 

Mittal recently sent a directive to state-run banks capping the bulk deposit they can raise so that they would have to raise deposits from retail consumers and diversify their lending. "Public sector banks have to realise that loans to education, agriculture, housing, and small and medium enterprises will always be a priority for our country," he says. 

The secretary is also critical of the NPA management by banks, asserting that the new system set up by the finance ministry has helped recover money. "We have achieved recoveries of around Rs 5,000 crore, the highest ever. In the first six months when there was no such system, it was only about Rs 1,500 crore," he says. 

Mittal says for long, the state-run banks had not seen the larger picture and someone had to drive them. "Somebody has to examine with a dispassionate view and see what is our national priority. Certainly, integration between 26 national banks is a difficult task and somebody has to take care of that as well," he says, adding that the banking regulator cannot do this given its regulatory functions. 

Mittal is convinced that all these are not short-term measures but ones that will be the base for the next level of reforms. "So it is a unique combination when regulator regulates and we push the banks towards achieving the common goal which is in the larger interest of the country," he says, justifying his decisions, some of which could be seen as stepping into the regulatory domain. 

One such decision was to give a push to electronic payments to reduce more costly modes such as cheques. A circular to banks said they should migrate to electronic transactions and asked them not to charge anything for NEFT transactions up to Rs 1 lakh, pegging the cost of cheque-handling at Rs 8,000 crore a year for all state-run banks. A deputy governor of RBI was not convinced of the idea, but Mittal says the system is ready for electronic transfer. 

"As a country, today we are ready for electronic benefit transfer," he says, adding that all banks, including regional rural banks, are on the core banking platform and inter-bank operability is in place. 

But how does he react to the criticism of listed, board-run companies being run by the finance ministry? 

"Occasionally, there are concerns over the government exercising its ownership rights not through the established channel, which is the board mechanism, but outside of board," RBI Governor D Subbarao had said without citing specific cases, but it was clear he was referring to directives from the finance ministry to banks. His predecessor YV Reddy has echoed Subbarao's criticism. In an interview to this paper on July 17, Reddy said such micro-management was against the spirit of reforms. But Mittal says all directives are issued after full consultation with banks. 

Of late, insurance companies have been on his radar for competing among themselves even as they run up huge losses. 

The finance ministry has asked insurance companies not to compete with each other in loss-making businesses, reduce commission, prune their loss-making foreign operations, and switch to electronic policies to cut costs. "We are just saying that be prudent and do not chase each other's customers and in the name of competition kill yourself," he says.


Public sector banks need to be more cautious: D K Mittal

If there is no corruption in agriculture lending then there is no reason that why it should go bad. If proper follow up is done, banks will be able to recover fully because the poor man has no choice. Here he is getting loans at 3%, while the other choice is a money lender who will charge 24%. 

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