My View on "Calling the bluff":
If clients like King Fisher Airlines continue to stall the efforts of banks in recovering their dues - recent one is getting a stay on banks from taking over the corporate office of KFA at Mumbai- it is no wonder, the banks will also continue to bleed with mounting NPAs. The RBI never wanted to investigate whether banks had violated basic tenets of banking while sanctioning loans to KFA and such big ticket clients. If media reports are to be believed, most of the banks have extended the loans without adequate collateral security to KFA. Is it not malafide and it is not clear why bank managements have been allowed to go free by the RBI. The sermons of the Deputy Governor Mr Chakrabarty will remain just sermons as he does not want to offer solutions to take action against such bankers who violated basic norms of lending. Again as media reports mention that those senior bankers who secured very low marks in the interview for the post of EDs of PSBs, and when they become CMDs later, what better banking will one have in our country? -
- S.Santhanam
1 comment:
I am not sure what purpose Dr K.C. Chakraborthy wanted to serve with his anguish at the writing off of lakh and odd crores of NPAs arising out of corporate lending as opposed to a mere INR70000cr for agricultural lending by the Government. It is the government that helped write off and not the banks. In the case of the former, all such write offs are reported quarterly to the RBI with full details. If the decisions were wrong why did not the RBI pull them up and shape up things? Why should a Dy. Governor vent out his anger at the malaise in public? This is a sad commentary on the regulator more than the erring banks.
I have mentioned in these columns sometime back that the due diligence processes of banks has been bartered away with outside credit rating institutions. Banks turning to group approach to credit sanctions as ordained by the Government of India, most corporate credit decisions stand at the doorstep of management and not of the supervisory Board, if there is any. The accountability for credit decision has got diffused. Credit risk management has been on continuous dilution when it came to big loans to corporates while it became stringent for the Micro, small and medium enterprises where recourse to guarantee is available. Even at the CGTMSE thresholds the banks insist on collaterals and make the productive sector suffer. Debt restructuring even under very well deserving cases for the MSME sector rarely takes place while for the corporate CDR is scrupulously followed. The CDR devolves on the Bank as full blown bad debt warranting write off as during the CDR the little available collateral gets eroded as several banks slept over their collateral.
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