Wednesday, May 18, 2016

Truth Of PSU Banks Getting Exposed

Inspite of continued and repeated claims made  by various Ministers of various govrnments as well as by bankers of various banks during last one decade and more, that health of banks is not alarming and within control , one after other PSU banks is booking losses and losses are breaking all past records of banking industry. Even strong banks like PNB and BOB have created record in booking losses and in increasing volume of  bad assets in total credit. Still Government as well RBI says that banks are safe.

If SBI also dare speak the truth and if SBI shows courage to book all bad assets as NPA  , I think it will break all records and book maximum loss and create another history in banking industry. I think loss booked by SBI and total volume of NPA will not be less than aggregate of all PUS banks. It all depends on honesty of banks in identification of assets and recognition of income as per RBI norms.

No power can stop public sector banks moving from bad to worse even in coming years . 

Officers from top to bottom at powerful positions are birds of the same feather.They think more  for their welfare on priority and less for bank they are associated with. 

Unfortunatley and strategically  good officers are always posted by these clever top officials at critical places so that their voice is unheard and they loss their stamina to fight against corrupt officials and corrupt politicians. 

Politicians add fuel to fire and they leave no stone unturned to damage health of banks..They also think for their vote bank and use banks as milching cow for their family and friends.  None of them think for good of Banks. They are more often than not, selfish and corrupt.

NPA as such will continue to rise and rise. Politicians and top bank officials will always make promises to correct the health in forthcoming quarters. They are master in delivery of lectures in seminars and before media. But this will never happen that health of banks will start improving . 

We have been witnessing continued deterioration in health of banks for last three decades. Only manipulation and fraudulent methods are used to show banks as shining. Unless and until , purification starts from top and from their heart, I at least cannot imagine of improvement in health of banks or any fall in bad assets in near future .

Respected Sri Vinod Rai will almost fail in its target of cleaning and improving the health of ailing banks in the system he is supposed to work. 

While in audit, he used to submit report on sickness, iregularities, frauds and scams. But now he has to rectify them and to stop them which is not as easy as it is visualised by Government of India. . It  is a hard nut to crack because political leaders as well as bank officers are concerned more with their career and their position in power and in wealth and least bothered about health of banks and that of economy.

RBI Governor Mr. Raghuram Rajan has been making his best efforts to clean banks. But politicians will not allow him to move as freely as he wishes. Further it is not always good to say spade a spade.

It is also true that It is RBI which failed in discharging its duty to regulate public banks. In seventies and eighties , RBI officials used to inspect branches of various banks and there used to be a fear in the minds of bankers. Since 1991 , in the name of freedom, in the name of reformation , in the name of privatisation and lierlisation , RBI has left everything free  and Bhagwan Bharose.

After losing all, RBI has come to senses in last one  year or so and only 150 bad accounts pinpointed by RBI has brought almost all banks in red. You may imagine what will happen if all loan accounts are honestly scanned and categorised in appropriate category by bankers. 30 to 40 percent of advances will be found in the category of  NPA. And governmnt will be left with  only one alternative , that is to provide capital to save its image.

Are NPA-hit bank stocks worth investing now?

Banks are happy that they buy Certificate of Good Health from Team of Chartered Accountants every year. And Government is Happy that they get certificate of good health of banks from  Chief of  each bank. Let people of India suffer and taxpayer bear the brunt of their corrupt and ill-motivated moves.
WE did not take lesson from Satyam Computer fraud, from Harshad Mehta or Ketan Parikh scam and neither from ever increasing cases of frauds and misappropriation of bank's fund.




Financials Indicate True Health Of Banks ?

This is my blog written day before yesterday.



Sri Vinod Rai and his team in Bank Board Bureau (BBB) appear to be trying for cleaning balance sheet of public sector banks in particular and banks in general. RBI Governor Mr. Raghuram Rajan has also been engaged in cleaning of finacials of PSU banks for last two years. Prior to that Mr. Suba Rao also tried a lot to clean Balance sheet of PSU banks. Mr. Arun Jaitley Finance Minister and Mr. Jayant Sinha Dy Finance Minister are also sincerely trying their best to improve health of banks. Mr. P Chidambram and Mr. Pranab Mukherjee also appeared to think of best for banks.
public sector banks report cardBanking sector: More bad news expected



But the fact is that no improvement has actually taken place  at ground level during last three decades  in culture of lending , in position of recovery and in habit of negligence in monitoring in PSU banks. Situation has rather been deteriorating year after after. Top ranked Officers who are clever in manipulating balance sheet come out with shining balance sheet and get elevation through their mentor Ministers and RBI officials. But sooner or the later, in some quarter or the other , each bank has to book bad results and make false promises that they will deal with problems and try to reduce stressed assets in forthcoming quarters.



In fact ,Officials are in general busy in falsely glorifying their bosses. A Branch Manager glorifies a Regional Head,  RH glorify  Zonal Head , General Managers glorify ED and CMD and finally CMDs are busy in glorifying Finance Ministers and RBI officials. Most of them are fittest Yesman than real performers. They are good speakers to hypnotise ministers and bank staff both. They are more loyal to their sources of wealth and power than to their bank.



Bank Officials take care of their bosses more than thier banks. They are loyal to their bosses and their clients who make them richer and powerful . They in general do not take care of quality of loans they disburse and do not bother of monitoring loans sanctioned by their prdecessors or in matter of recovery of dues from bank loan defaulters. They are more often than not, busy in extending red carpet welcome to their bosses, their CMD, ED and other senior officials to earn their blessings, to cover up their evil works in lending and finally to get quickest promotion and choice transfers . They learn the art of gifting and polishing auditors for getting a certificate of good health of loan accounts in their bank.



Officals who are not apt in flattery and not expert in earning bribe are languishing in insignificant and critical places . Inefficient officials in general are ruling over efficient officials.  Inexperienced are ruling over experiened ofgicers. Majority of branches of each Bank is headed by either corrupt officers or inefficient officials or these branches are facing acute shortage of staff or they are working under prssure of higher bosses or local mafiamen. It is always  easier for them to compromise quality to survive in the corrupt system than to assert their knowledge and values.

Politicians are busy in boosting up credit growth in all banks by hook or by crook. They want to see rise in credit figures and they are least bothered whether the loans disbursed are going in the hands of good borrowers or bad borrowers. They are not aware whether considerable  chunk of loan amount is distributed in officials, middlemen, CAs and political leaders.

Poltiicans in general  want to gain political advantage by announcing one after other loan disbursal schemes and loan waiver schemes . They want that each bank and each branch disburse loans and achieve the imposed target .They make new schemes year after year and allow open loot in the name of achievement of targets fixed for various schemes. Quality is not their headache. They care for reserved and not for deserved.

Politicians  are not going to understand that every area and every town is not blessed with same potential for growth. They do not agree that each officer of bank do not have same quality and same knowledge. They do not understand that process of loan sanction is a time consuming process in the same way as it is developing love with opposite sex. They are not ready to accept that understanding credentials of loan seekers is not everybody' s cake.

In such situation and in such an environment where majority of officials from top to bottom are busy in flattery and bribery , where administrative and judicial officers are inefficient and corrupt and where politicians are crazy for enrichment of their vote bank , learned , intelligent and talented Sri Vinod Rai cannot hope for success in real cleaning of balance sheet , neither of PSU banks nor that of private banks. There is however no doubt in honest, integrity, sincerity and loyalty of Sri Vinod Rai.

It is remarkable here to say that it is lastly people of India who will have to face the brunt of falling and ailing banks . It is they who will get lesser interest and lesser dividend on their investment in these banks . On the contrary bad borrowers will get more and more loans at lower and lower interest and more and more discount when their loan account is considered as Non Performing Asset by lending bank. Bad borrowers will get more acceptance and good enterpreneurs will face so many hurdles in getting loans from banks .Dream of better GDP growth will get shattered in hands of evil minded care takers.

Vinod Rai and his team and Finance Ministers Mr. Arun Jaitley appears to be convinced that health of banks is not alarming . They are too much positive minded or they are inclined to appear to be positive minded to save country's image and ratings.

They appear to be busy in dealing with bad assets of banks, but in fact slippages increases faster than upgradation of bad assets almost in all banks . Some banks are considered strong banks in their opinion and some other are weaker in comparision. But their ideas and perception about a bank will continue to change and fluctuate from quarter to quarter. Some time bank 'A' will appear to be strong and some other time same bank 'A' will look like weaker.

I howevr observe that banks like PNB, BOB, IOB, OBC, SBI which were considered as strong banks are having the highest volume of bad assets concealed with the help of technology  and several tools of restructuring and evergreening and it is their cleverness that they are exosing their bad debts in slow and gradual manner. Banks which were considered weak two to three decades ago are still weak and their weakness has grown in valuecand volume . No sign of improvement is visible in real sense though government has been making efforts for more than three decades.

Fact is that each and every PSU bank is weak and their weakness have been growing relentlessly. Only point to be appreciated is that they are expert in hiding or exposing bad debts. It is completely their whims and fancies which works in taking decision on helath of a loan account. If they like they can conceal a bad accounts for years and treat it as Standard asset . When their evil works goes beyond control or when some of recalcitrant auditors or some of media men expose the hollowness of a company , these bank officials decides to treat a bad asset as bad asset. None of junior officers otherwise have courage to say spade a spade.

Window dressing in deposits, advances and recognition of bad assets has become the deep rooted culture in all banks and regulating agncies have no option other than to accept the inflated , manipulated and fabricated figures. There are many lames excuses like economic recession, global slowdown and natural hurdles to save their skins.

Government will have to do a lot of hard work for years and decades to get rid of sins of past officials and past politiicians who silently and brilliantly looted banks for their self interest and to gain in wealth and power for decades . It is not as easy to clean them as Mr. Vinod Rai and Mr. Arun Jaitley appear to visualise.

It will take very long period in real cleaning of banks and changing of deep rooted culture of bankers and politicians because still GOI and BBB are collecting opinion and views of those officials and politicians who promoted loot and evil culture of flattery and bribery . Thieves and looters cannot disclose their evil ideas to police . They can be good speakers and expert in flattery to bosses . They can be master in managing bosses . But they cannot give valuable ideas which may translate into real transformation and reformation in health of banks. 

For real change, Vinod Rai will have to work personally for a bank for years and then only he will be in a position to understnad ground reality. It is easy to make good policies but it is difficult to execute them in true spirit.

Public sector banks that declared their results till date in general reported quarterly losses. or sharp erosion in profit , as non performing assets (NPAs) continued to pile on after the Reserve Bank of India's (RBI) asset quality review (AQR).

Bank of Baroda, Central Bank of India , Allahabad bank, UCO Bank and Dena Bank reported a loss for the second consecutive quarter. Union Bank of India was the only exception reporting a small net profit in the quarter ended March 2016, though down 78% from a year ago. Bank of Maharashtra and Vijya Bank also reported little profit.

In near future , we will witness more devastating results from other public sector banks. Hollowness of so called strong banks will also be exposed, if they truely stick to strict prudential norms fixed by RBI for identification of assets and for  income recognition. Biggest bank is said to be SBI. I hope sooner or the later this bank will also tell the truth of bank . 

A day will come when FM and PM as also BBB will accept the truth and then they will take more effective steps to brighten future of banks.


 I have full faith in leadership, caliber and talent  of Mr Narendra Modi Prime Minister of India and his team associated with the task of cleaning these banks. I have full faith in ability , knowledge,potential and capability of sri Raghuram Rajan rbi governor.


I hope ,sooner or the later, thing will improve because they all are sincerely working on it.


Click Here To Read How CMD And ED are Selected And Officers Are Promoted


Also Read This blog


Bank of Baroda

It posted a loss of Rs 3,230 crores almost repeating its December 2015 performance when it announced a record Rs 3,342 crore loss.
For the full fiscal year ending March 2016, the bank posted a record loss of Rs 5067 crore.
The bank set aside Rs 6,857 crore as provisions, up 3.5 times from the Rs 1,817 crore in March 2015. Provisions included Rs 1,564 crore for pension liabilities and Rs 300 crore for NPAs in the bank's branches in UAE.
Gross NPAs increased to 9.99% from 3.72% and in actual terms crossed the Rs 40,500 crore mark up from Rs 16,261 crore in March 2015.
UCO Bank

It reported a record loss of Rs 1,715 crore because of a near 2.5 time rise in provision to cover for NPAs. The loss was higher than the Rs 1,497 crore loss the bank had reported in the preceding quarter.

Gross NPAs of the bank doubled to Rs 20,907 crore from Rs 10,265 crore it reported last fiscal.

Total provisions more than doubled to Rs 2,283 crore compared with Rs 1,018 crore a year ago hitting profit.

This is the second consecutive quarterly loss for the lender after the RBI directed banks to recognise some loans particularly linked to the infrastructure and metal sectors as NPAs.
Allahabad Bank

Bank reported a loss of Rs 581 crore for the March quarter, compared to a profit of 203 crore a year ago as provisions rose to Rs 2,487 crore.
The bank's gross NPA ratio rose to 9.76% from 6.40% in the preceding quarter and 5.46% a year ago. In absolute terms, gross NPAs rose to Rs 15,385 crore at the end of March from 8,358 crore a year back.
Union Bank of India

This Bank's net profit fell to Rs 97 crore in the quarter ended March 2016 from Rs 443 crore a year ago. However, provision for NPAs increased to Rs 2008 crore from Rs 833 crore a year ago.

Gross non-performing assets (NPAs) rose 85.49% to Rs.24,170.89 crore at the end of the March quarter from Rs.13,030.87 crore a year ago

The bank's gross NPAs rose to 8.7% in March 2016 from 4.96% in March 2015. Net interest income falls 1.71% to Rs2,084.69 crore, gross NPAs rise 85.49% to Rs24,170.89 crore, while provisions jump 55% to Rs1,564.67 crore
Central Bank of India
Bank reported Rs 898.04 crore loss as gross NPAs doubled and provisions rose four times to Rs 2,287 crore from Rs 617 crore a year ago.
Dena Bank
This bank slumped to a loss of Rs 326 crore in the quarter ended March 2016 compared to a net profit of Rs 56 crore a year ago. Gross bad loans almost doubled to Rs 8,560 crore versus 4,393 crore a year ago.

Vijaya Bank

Bank's Q4 net drops 26% on higher provisioning.
Gross NPAs as a percentage of advances rose to 6.64 per cent from 4.32 per cent in December quarter. Similarly, the net NPA ratio for the March quarter was up 4.61 per cent.
Provisioning during fiscal 2016 rose 62 per cent to Rs 1,390.51 crore from Rs 859.13 crore in the previous year.
For the year-ended March 2016, Vijaya Bank posted a net profit of Rs 381.80 crore, down 13 per cent, over Rs 439.41 crore in the corresponding period last year.

Bank of Maharashtra

Bank's Q4 net loss at Rs119.84 cr.For the entire 2016 fiscal, the bank’s net profit also saw a fall of Rs. 100.69 crore in comparison to Rs. 450.69 crore in the same period previous fiscal. Total income however, stood marginally higher at Rs. 14,072 crore against 13,671 crore in the previous year.

Gross NPAs and net NPAs stood at 9.34 per cent and 6.35 per cent, respectivel. The stressed accounts portfolio declined to 13.29 per cent from 13.47 per cent during the financial year.

Indian Bank

Bank has posted a 59 per cent drop in its net profit to Rs 84.5 crore for the quarter ended March, from Rs 206.1 crore in the corresponding quarter last year.


The bank’s gross non-performing assets (NPAs) rose to Rs 8,827 crore, from Rs 5,670.4 crore.


In percentage terms, it rose to nearly 6.6 per cent, from 4.4 per cent a year ago.


Net NPA rose to Rs 5,419.4 crore from Rs 3,146.9 crore. In percentage terms, it was increased to 4.20 per cent from 2.50 per cent.

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