Risky futures that banks Should Avoid
Finance Minister sometimes talk of giving
permission for opening of more and more new banks and some other times talk of
consolidation of banks to compete with International Banks. He sometimes
advises banks to concentrate on core banking activities and some
other time tell them to trade in commodity future which is not core banking
activity.
It is Pathetic that current sickness
of public sector banks caused by huge
bad assets has not opened the eyes and ears of FM. Every year Government has to
infuse capital in banks to keep them in good condition. Neither small banks
like Vijya Bank nor big banks like SBI or PNB are able to save their
profitability and safeguard their assets and capital .It is only by
manipulation and fraudulent method or by relaxation given in CRR that these
banks book little profit and that too by keeping reduced provision coverage
ratio below benchmark fixed by RBI .
Banks officials firstly lend to
unscrupulous borrowers under political pressure and then write them off or
enter into compromise settlement with recalcitrant and willful defaulters under
pressure of the government . Both ways they are weakening not only the banks
but adversely affecting the interest of investors ,customers and that of
working employees too.
Health of banks is moving from bad to
worse and they are surviving the crisis not at their own but mostly by
ventilator provided to them by GOI. Complete lack of control , bad governance ,
bad Human Resource Policy, weak legal system and profuse political
exploitation have already ruined the Public sector banks. Now FM is trying
to further add fuel to fire by advising banks to trade in commodity future.
Finance Minister advised bank in last few days to focus on their
core banking business and try to minimize their involvement in non
banking business like insurance , mutual fund ,portfolio management etc. It is
well known to all that after imposing non banking business targets on banks by
government of India banks in general has already reduced lending to core sector
of farming and industrial development which has resulted in poor GDP growth.
Not only this in want of adequate manpower in branches , bank
officials are unable to attend customer service related to their core business
in a satisfactory way. This has led to exodus of good customers from
these public sector banks to private banks. It is important to note here that
private banks have provided separate and adequate manpower for
banking and non banking businesses whereas PSBs are forced to perform
both banking and non banking business with one or two staff in most of towns.
It is further painful and astonishing too that the same FM who
advises banks to focus on their core activity of lending and accepting deposit
are advising banks to trade in Future in Commodities.
Is he bent upon spoiling the future of bank? There is an old
proverb "A future is enough to spoil the future of an
individual share trader".
Banker who are adequately trained and who do not have enough skill
to do simple banking activity , they cannot be expected to hedge
credit risk by buying commodity future as envisaged by FM while
suggesting banks to trade in Commodity future.
It will not be wrong to say here it is only after introduction of
commodity trading in India, Consumers of the country has to face the pain
of relentless price rise and inflation has gone beyond control
despite all steps taken by clever officials of Reserve Bank of India.
Last but not the least , When profit of banks will be adversely
affected by rising bad assets and through losses in future trading , it will
ultimately be bank staff who will have to bear the brunt of bad policies, It is
staff whose wage are not rising at par with that of central government
employees or state government employees .Poor wage structure of bank employees has also played negative
role in maintaining health of banks , poor customer service and poor growth in
bank's business and finally led to exodus of good performing staff and
rise in attrition rate compared to that in private banks.
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