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Growing NPAs

It was reported that 10 bank employees had been suspended after the bank reported fraudulent transactions of more than Rs.11300 crore to stock exchanges. It is like arresting a pick pocket thief and allowing the criminals to go scot free. Always it happens in our country. The State Bank of India on the other hand has declared its December 2017 quarter result and Provisions for bad loans is Rs7,244.55 crore besides it has set aside in the quarter Rs1,400 crore against standard assets that are at risk of turning bad. Gross non-performing assets (NPAs) rose by 2.3% to Rs1.08 trillion at the end of the December quarter from Rs1.06 trillion in the September quarter. On a year-on-year basis, gross NPAs jumped 48.61% from Rs7,2791.73 crore. If you look at the statement of previous Chair Person, Bhattacharya, it is funndy, “ the bank’s numbers will start looking better in the next financial year, once demand for credit revives”. These types of statements are issued regularly for the market sentiments. She when took over as the Chairperson, talked about the quality of assets and liability and arresting of growing NPAs. Unfortunately she was in the limelight in the mass media almost daily, without changing the quality of assets of the bank.

The time has come to dig our past and bring to books the top management officials, who are the real  culprits for the growing menace of NPAs. How was Arundhati was let out without any explanation for growing NPAs during her tenure? Ordinary officers at the lower level are punished without giving promotion or disciplinary action is taken. How come the Chairmen of SBI or PNB are allowed to go scot free? These two banks play a crucial role in our economy,

No credit proposal is cleared by a lower level officer. Even the housing loan is processed at the liability processing cell or credit cell headed by a Deputy General Manager or other top executives. By seeing the growing NPAs, it appears that the bank top executives are happy on seeing “credit intake”, but refuse to take responsibility for growing NPAs. Why there is no soul-searching among top officials, who take credit for all positive results and punish the lower level officers of small drop in branch business. But no Chairman is punished for the growing alarming NPAs of banks, especially SBI.

It is the duty of the government to monitor properly the functioning of SBI before it makes an announcement like the one happened in PNB. The SBI has audit department headed by Deputy Managing Director. Is it not possible to fix the responsibility on audit department for failing to curtail growing NPAs? If they have audited properly each and every branch with integrity and honesty, things would have been different. The audit departments of banks should be independent and should be professionally handled and managed, instead of being the part of Bank under the control of Chairman or CMD.

The second most important department of bank is credit cell. The Credit Department, Audit Department and Business Development seemed to working without any link or collating data of customers. The aim of Credit Department is to develop business through credit enhancement, without seeing the quality of business of the customer. Most of the credit related issues are based on wrong projections, manipulated balance sheets, unverified stock reports and too much of insistence on QTQ or YOY business growth at the branch level. Because of this unrealistic target and the need to get promotion the disease of manipulation starts at the branch level, who wants to impress his regional manager and he in turn wants to be seen in the good books of his State Level authorities and all are interested only to play with figures to satisfy the Chairman or CMD of the bank. The CMD or Chairman wants to be in the good books of Finance Ministry.

Another important factor in public sector bank is bowing down too much before politicians in power. Many politicians are responsible for the mess in public sector banks and fiddle around with the banks. Unfortunately, the Chairman or CMD having reached the top position due to factors other than their merits, bow down to the politicians without caring for investors or citizens. We have heard about Talwar in SBI, who refused to bow down to the wishes of big politicians during his tenure as the Chairman. The time has come to make Chairman or CMD to be held responsible and accountable for mess of NPAs.