health of Bank

Government is constrained to infuse capital in PSU banks year after year to salvage sinking banks or to boost up their capital adequacy ratio. Even World Bank is contemplating to infuse capital in selected banks in India to strengthen these banks. This reveals that PSU banks are actually growing weakness year after year and their balance sheets are nothing but result of window dressing in the style similar to which Satyam Computers applied to boost up image of the company.

PSU Banks are facing continuous erosion in their capital due to dirty policies of the government, politically motivated steps taken by the government and constraint in implementation of good policies. Inter bank interest rate competition, waiver of loan culture, financing based on political compulsions, constraints in recovery of loan from willful defaulters, undue delay in legal proceedings in want of proper judicial reforms, unhealthy HRD policies resulting in promotion of corrupt officers and demotivation of good officers etc are a few reasons which are causing great loss to banks and which has made the bank’s health poor and ultimately which forces government to infuse capital in banks.

It is to be noted here that when politicians take advantage of public money held in banks by resorting to loan melas or waiver of loan culture, bankers take it easy while lending to public. Bankers too do not hesitate in lending to improper companies and individuals with doubtful integrity just for their personal gain. There is no doubt bankers have inculcated wrong practices of flattery in banks. Executives, Branch heads, Regional Heads, Zonal Heads, EDs, CMDs focus on their personal status , personal earning by way of underhand dealings and indulge in flattery to their bosses, ministers, officers in banking divisions. They do not hesitate in taking malafide decisions just to please their bosses. Financing to wrong persons and taking gifts or money in return has become a common feature in banks at all levels.

If bankers do not earn illegal money they cannot please their bosses, government offices and even their juniors. Such honest officers cannot dream of promotion and good posting. As such earning money in credit delivery and sharing the same with bosses has become inevitable for survival in banks with dignity. Those officers who are not versed in this tact or modern art of survival or those who protest wrong financing are either posted at remote places or punished. Such genuinely loyal officers can never imagine of promotion or good posting. This is the main reason that bank officers holding key posts indulge in corrupt practice without caring for health of bank’s assets and this is the reason that intrinsic health of banks in general is not sound and banks always need financial support from government to survive.

But the million dollar question is who will bell the cat when Charter Accountant, officers working in rating agencies, officers in vigilance departments, officers working in bank’s own audit offices, advocates, key regulators all are birds of same feather.
23rd June 2010