Saturday, February 02, 2013

Are Banks Really Safe ?

Most of the bankers are officially or unofficially and  openly or secretly have resorted to restructure of bad loan accounts to keep them standard and to avoid load of provisioning. For last ten years and more ,these corrupt bankers have sanctioned loans to only those persons or companies who used to offer them handsome amount of bribe and offer valuable golden and diamond gifts from time to time.. 

It is undoubtedly true that Bankers have been consistently earning bribe money and precious gifts from loan seekers without caring for future of these loans. To add fuel to fire these corrupt bankers have booked false profit , distributed unjustified dividends at the cost of tax payers money and got elevation in their career by ill methods. And ultimately it is as tax payers’ money which is infused in these sick banks in the name of capital infusion.

Even if   loan accounts became bad , such bad accounts were not considered bad by bankers during last ten years . It was the habit of top bankers to punish officers  who insisted for treating bad loan accounts  as Non Performing asset as per prevalent RBI prudential norms for recognition of income and for classification of assets. Officers not listening to oral advice of top bankers to treat even bad asset as Standard assets were transferred to most critical place and never promoted in promotion processes. Many senior officials have lost the hope of good career in banks and passing their bad days somehow or the other.

It is undeniably true that corrupt bankers never applied prudential norms honestly and never applied proper monitoring tools sincerely to keep their loan portfolio in good condition.

Each ED, CMD, GM, DGM and top ranking other powerful officials including that from RBI and Ministry have become wealthy and banks managed by them have become poorer year after year. Owners of big Corporate houses are billionaire but the loans sanctioned to them are bad in the books of bank accounts of banks. If Income tax authorities are asked to verify the assets of these powerful bankers, at least of all EDs and CMDs , the true story of large scale corruption will be exposed.. But it is not possible for IT officials or Ministry of Finance or Government of India because they are all participant and beneficiary of evil works of bankers directly or indirectly.

It is now when entire exercise of recognition of assets is being done by online CBS technology , bankers are constrained to declare their decade old bad accounts as Non Performing Assets. However clever bankers continue to resort to unofficial restructure of loan to conceal bad accounts in various branches .There are many branches where more than 25% of their total loans are truly NPA and at many branches even more than 50% to 75% of their total loan portfolio is bad . Even RBI officials do not want to read the truth and they become satisfied only getting a certificate of health from corrupt bankers.

This is the reason that slowly and year after year , quarter after quarter volume of NPA in public sector banks  and that of restructured loan accounts in these banks have been increasing despite tall claim made by Government of India that banks in India are safe.

It is to be understood that if new guidelines of provisioning is implemented in true spirit , banks will be required to make addition provision amounting to Rs.15000 crore as per rough estimate of CRISIL . It means there are at least Rs.300000 crore ( 5% provision is needed on restructured loans as per RBI guidelines ) valued bad loan account hidden in the system using restructuring or are on the verge of restructure of loan or likely to slip into NPA category. 

Debt recast norms may push banks’ provisioning up Rs 15,000 cr

The Reserve Bank of India’s (RBI) draft guidelines on corporate loan restructuring, if implemented in the current form, would increase banks’ provisioning requirement by Rs 15,000 crore in the next two years and lower their profit around 7 percent.
According to the draft proposals from the RBI, banks’ provisioning on loan restructuring has to at 5 percent, a sharp increase from the present requirement of 2.75 percent. The deadline for the implementation is April 1.
Crisil, however, sees two positives from the guidelines: withdrawal of regulatory forbearance for restructured loans from April 2015 and the tightening of the process of restructuring.
“These stipulations will enhance the confidence of stakeholders in banks’ asset quality and discourage large-scale restructuring activity,” it said in a press release.
The rating agency had earlier projected loan restructuring to reach Rs 3.25 lakh crore by March 2013.
The cumulative loan restructuring from April 2011 touched Rs 2.25 lakh crore by December 2012, it said.
It expects loan restructuring to continue over the near term, albeit at a slower pace.
The provisioning requirement of Rs 15,000 crore has been arrived at by taking into account the combined impact of higher provisioning on existing stock of restructured loans and expected incremental restructuring.
It sees a greater impact on public sector banks as they account for around 85 percent of the total loan restructuring.
The cumulative loan restructuring from April 2011 touched Rs 2.25 lakh crore by December 2012. Reuters
The guidelines also provide an adequate transition period for banks to adapt to the new regulations.
“The continuation of asset classification benefits to banks for their restructured under-construction infrastructure project loans beyond March 2015 provides them with some breathing space,” Suman Chowdhury, director, Crisil Ratings, was quoted as saying in the press release.

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