Thursday, May 21, 2015

Way To Calculate Arrear For Bankers

Circular No.10/VI/2015
May 20, 2015
Camp: Mumbai
Dear Comrades,
·        Understanding reached on financial components of wage revision.
·        7th Joint Note to be inked on 25th May 2015 at Mumbai.
Today, the penultimate round on the current wage revision was held at IBA Office, Cuffe Parade, Mumbai at 2.30 p.m. The IBA team was led by Shri Arun Tiwari, CMD, Union Bank, Shri Ashwini Mehra, DMD, SBI, Shri M. V. Tanksale, CEO, IBA, Shri K. Unnikrishnan, Dy. CEO, IBA, Shri K. S. Chauhan, Vice President, HR & IR, IBA besides the support team of IBA.
Preceding the discussions, there was a preliminary round in which Com. Alok Khare, Vice Chairman, besides the undersigned with the other organizational representatives participated in the exercise.
CEO, IBA while welcoming the representatives of the officers organisations expressed his happiness in the matter of reaching the understandings on distribution of the financial benefits to the officers based on the MOU inked on 23rd February 2015. He emphasized the need to protect and promote the public sector banks image in the eyes of the common man of the country. He also expressed the need to take forward the message of building a sense of belonging to the members of the officers’ community. Shri Arun Tiwari, CMD, UBI was categorical that the work force needs to be satisfied first through whom the image building and the involvement to build the public sector banks would become possible. Representatives of the Four officers organisations responded positively to the observations and expressions made by the members of the IBA team. The agreed load was distributed amongst the pay slip components through mutual discussion and the chart of allocation was signed by the both the parties. The details are as under :
1.    Basic  Pay
Scale I -23700  - 980(7) – 30560 -1145(2)-32850-1310(7)-42020
                                    Scale II-31705-1145(1)-32850-1310(10)-45950
                                    Scale III-42020-1310(5)-48570-1460(2)-51490
                                    Scale IV-50030-1460(4)-55870-1650(2)-59170
                                    Scale V- 59170 -1650(2)-62470-1800(2)-66070
                                    Scale VI- 68680-1960(4)-76520
                                    Scale VII  - 76520-2120(4)-85000
2.    Dearness Allowance - @0.10% per slab above CPI 4440 currently - 33.70%
3.    Addl Stagnation increment - Scale II – 1, Scale III-1, Scale IV-1 (periodicity once in two years)
4.    CCA- Higher Area 4% - 870, Lower Area 3% - 600
5.    HRA- Major A class – 9%, Area I – 8%, other places -7%
6.    Medical Aid - Scale I to III – Rs.8000, Scale IV and above – Rs. 9050
7.    Special Allowance - Scale I to III – 7.75%, Iv & V – 10%, VI & VII – 11%  (it attracts Dearness Allowance)
The approval related to holidays on 2nd & 4th Saturdays is pending with Government Authorities for their approval and notification. Comrades, efforts are taken to give true reflection of the above in the joint note coupled with particulars related to other service conditions too. Various suggestions have been made by officers’ organizations to IBA on these matters.
We shall convey the full details of the joint notes once the same is finally inked on 25th May 2015 at Mumbai.
Yours Comradely,
Below are Links for Calculation of Arrear as Per Xth Bipartite Settlement

Click Here To Calculate Arrear

( Subject to signing of final Joint Official Note)

    (a) Tentative Pay Scales, DA and Other Allowances for Workmen
Our views submitted to IBA onDraft Medical SchemeClick HERE to view


(Registered under the Trade Unions Act 1926, Registration No.:3427/Delhi)
             C/o Bank of India, Parliament Street Branch
        PTI Building, 4, Parliament Street, New Delhi: 110001
                Phone: 011-23730096 Tel/Fax 23719431


Circular No. 2015/24 (Revised)                                                                Dated: 20/05/2015

To All Affiliates/State Units/Members

Dear Comrades,


We congratulate all our members, as we are nearing finality in respect of our tenth Bipartite Settlement, which could not have been possible, without the collective strength of us all. Our members are aware that the challenges this time were many folds, the conditions were not conducive and it would not be an exaggeration to say that there had been resistance even from within, i.e. from some of the constituents, which could be due to different perception. However, after several rounds of talks held between the Negotiating Committee of Indian Banks’ Association (IBA) representing the Managements of banks with the Authorised Representatives of the Officers’ Associations on salary revision and other issues concerning service conditions for officers in Banks, a consensus has been reached over the construction of Payscale, documented and signed today.

By signing of Cost sheet/ Distribution Sheet for 10th Bipartite Settlement covering Payslip Component, clarity has emerged for our future stand and actions.

Salient features of the Cost Sheet/ Distribution sheet signed today with regard to Payslip Component are as follows:

1.  Scales Of Pay:

Scale I -












Scale II -










Scale III -










Scale IV -










Scale V -










Scale VI -







Scale VII -




2. Dearness Allowance:  On and from 1.11.2012, Dearness Allowance shall be payable for every rise or fall of four points over 4440 points in the quarterly average of the All India Average Working Class Consumer Price Index (General) Base 1960=100 at 0.10% of Pay.

3. One additional stagnation increment for Scale II and III payable two years after the   last stagnation increment drawn or from 01.11.2012, whichever is later and one stagnation increment for Scale IV are the special feature of this settlement

4. House Rent Allowance (w.e.f. 1.11.2012)      



Major “A” Class Cities and Project Area Centres in Group A

9 % of Pay

Other places in Area I and Project Area Centres in Group B

8% of Pay

All Other places

7% of Pay


5. CCA: The maximum amount has been raised from Rs. 540 to Rs. 870, Rs. 375 to Rs. 600, for Area 1 and State of Goa and for Rest, respectively, without any change in the percentage

6. FPP: increment component of FPP has been increased from the range of 800/900/1000/1100/1200/1300 to Rs. 1310/1460/1650/1800/1960/2120, plus DA as applicable

7. PQP: raised from Rs. 410 to Rs. 670, and from Rs.1030 to Rs. 1680

8. Special Allowance : With effect from 1.11.2012, officers shall be paid D.A. carrying Special Allowance as under:

Scale I-III    -

7.75% of Basic Pay + applicable Dearness Allowance thereon

Scale IV-V  -

10% of Basic Pay + applicable Dearness Allowance thereon

Scale VI-VII-

11% of Basic Pay + applicable Dearness Allowance thereon

9. Medical Aid:  Officers in JMG & MMG Scales– Rs. 8,000 /-p.a.  
      Officers in SMG & TEG Scales – Rs. 9,050/-p.a.

10. Date of Effect: 01.11.2012

Regarding two Saturdays off, RBI has conveyed its NOC, which has been forwarded by IBA with its recommendations to the Government. Its implementation may take some time due to the technicalities involved. The matter is being continuously pursued by us.

        Joint Note will be signed on 25th May, 2015. The details of other benefits, allowances etc. will be circulated to you immediately thereafter.

                With comradely greetings,        

                                                                                        Yours comradely,


Dear Comrade,

Please find attached our revised Circular No. 2015/24, advising the correct CCA and Medical Aid figures.  This is for your information and circulation.

Please circulate the revised circular only.

With warm greetings,

Harvinder Singh
General Secretary

Wednesday, May 20, 2015

Revised Pay Structure For Bank Officers


1.        BASIC PAY - SCALE – I TO SCALE- VII - RS.23700/- TO RS.85000/-

2. SPECIAL PAY - REVISED BASIC PAY X 7.75 (UPTO III); 10 (IV & V); 11 (VI &VII)/100






8. MEDICAL AID – RS 7900 (UPTO III); RS 10000 (IV & ABOVE)


Bank Wage Revision 10th Bipartite : Scales finalized – RBI cleared holiday for 2nd & 4th Saturdays
Bank Wage Revision 10th Bipartite : Scales finalized – RBI cleared holiday for 2nd & 4th Saturdays
Bank Xth Bipartite : Scales finalized. RBI cleared holiday for 2nd & 4th Saturdays
Distribution Chart for 10th Bi-Partite Settlement Finalised:
Scales: Substaff- 9560 to 18545 + 8 Stagnation Increments (each after 2 years)
Clerical- 11765 to 31540 + 8th Stagnation Increments (1st to 5th- each after 3 years, 6th to 8th- each after 2 years)
8th Stagnation Increment w.e.f . 01.05.2015
D.A.: 0.10% Per Slab
HRA: 10%, 9% & 7.5%. Only 3 Areas will remain (Last 2 Areas will be clubbed)
(45 lacs and above: 10 % ; 12-45 lacs & Goa : 9 % ; other centres : 7.5 %)
Special Allowance: 7.75% of Basic Pay with DA
Transport Allowance: Upto 15th Stage of Scale- 425, 16th Stage & above- 470
Medical Aid: 2200
Officers’ scale is going to be finalized shortly today (20/05/15)
RBI has cleared the proposal of IBA to declare 2nd & 4th Saturdays as holidays. The clearance has been sent to the Government for approval.
The joint note likely to be signed very soon, Most probably on 25th May 2015. Be with us for more news soon !



Tuesday, May 19, 2015

AIBEA Briefs On Revised Wage Structure

Dear Bankers
Central Office: “PRABHAT NIVAS” Regn. No.2037
Singapore Plaza, 164, Linghi Chetty Street, Chennai-600001...

Phone: 2535 1522, 6543 1566 Fax: 4500 2191, 2535 8853
e mail ~ &

Today, the distribution chart has been signed between IBA and our Unions covering the allocation to various heads. Payscales and Allowances are as under:
. Pay Scales: from 1-11-2012
Clerk: 11765 – 655/3 –815/3 –980/3 –1145/7 –2120 –1310/1– 31540 – 1310 x 8 = 42,020

 Substaff : 9560 – 325/4 – 410 /5 – 490/4 – 570/3 – 655/3 – 18545 – 655 x 8 = 23785

Stagnation increments: 8 : Substaff: 8 x 2 years ; Clerk : 5 x 3 years + 3 x 2 years

. Dearness Allowance: 0.10 % per slab of 4 points over 4440 points

 . HRA : 45 lacs and above: 10 % ; 12-45 lacs & Goa : 9 % ; other centres : 7.5 %

 . Transport Allowance: upto 15th Stage : Rs. 425 and others : Rs. 470

 . Special Pay:
i) SWO-B: 820; Head cashier: 1280; Spl. Asst. 1930

 ii) Armed Guard/Bill Collector: 390; Daftary: 560; Head Peon: 740; Driver: 2370; Electrician/AC Plant Helper: 2040, Head messenger in IOB: 1630
. PQP : Rs. 410, 800, 1210 , 1620, 2010

 . FPP : Clerk: Rs. 1310 / 1580, 1570, 1550, 1550 / 1450

                                 Substaff: Rs. 655 / 790, 890, 780, 780 / 730

. Medical Aid : Rs. 2200 per year

 . Special Allowance ( new allowance ) :

 7.75 % of Basic pay; DA is payable on this allowance

The full Settlement is under preparation and is expected to be signed on the 25th May, 2015 (Monday).

 Flash: Yesterday, RBI has given its in principle ok for implementing Full holidays on 2nd and 4th Saturday. Matter is being expedited with the Government now

Signing of 10th BPS by 23rd May 2015 May Not Happen In view of Acceptance of Writ of WE BANKERS and Ignoring the Issues of Retired Bankers by IBA and UFBU-By Rajesh Goyal  -20.05.2015

By now all bankers are aware that the 90 days period sought by UFBU and IBA is coming to an end in next 5 days.   As the BPS has already become overdue by over 30 months, and pressure in social media has tremendously increased, UFBU is in a great hurry to sign the BPS.  However, they are not disclosing the details to anybody and in view of lack of trust towards IBA and UFBU, they fear this BPS will be the worst.

The time of writing this article is 19th May 2015 (Night),  Since morning, we have been receiving different messages which are contradictory in nature.
In morning one of the message received from some authentic source read as “Wage revision talks with IBA progressing steadily and we expect to conclude entire process and sign anytime between 21st and 23rd May”.
Then I came across a news from Kanpur, wherein it is reported that WE BANKERS have been able to get an order from High Court.  This news has also been published in local newspapers, cutting of which is pasted below.    Although final orders have not been seen by me but it appears HC has asked the CLC to settle the dispute raised by WE BANKERS within six months.  This order is yet to be placed before CLC.   WE BANKERS are hopeful that now IBA and UFBU will not be able to sign the 10th BPS till they are also heard by CLC.  
At the same time, UFBU and IBA has antagonized the retired bankers as they have reported to have excluded the demands of retired bankers from talks and they are not likely to form part of the 10th BPS.   This Group too is looking for ways to stop the signing of 10th BPS till their demands are also considered and form part of the 10th BPS as has been the tradition in past BPS.
Thus, a group of bankers seems to be of the strong view that IBA and UFBU will not be able to sign the settlement immediately as one of the groups will bring stay order.
All the above has raised confusion as to whether the 10th BPS will be really signed by 23rd May, 2015.  Even if signed, will they be able to implement the same before a Court stays the same?
However, UFBU has started a campaign, in the hope to sign the BPS latest by 25th May 2015,  to release various types of charts through their local units which give you a broad overview of the things that are likely to be signed.   However, nothing is confirmed and all that is being circulated is tentative  and is subject to change even at the last moment.   
Based on the past trends, I personally feel it will be quite difficult for WE BANKERS and Retired Banker associations to stop the signing of 10th BPS as IBA with money and muscle power is likely to push this through as it suits them.   By showing the threat of Court stay IBA is likely to create a fear among UFBU who will now be ready to sign on the dotted lines as they do not have time to think and discuss it further.   Thus, the end result will be that 10th BPS may be signed as per wishes of IBA and may be kept in abeyance for few days, if any of the above two organizations are able to bring the Court stay. 
After studying some of the Charts in circulation, it seems now IBA has sticked to its stand of 2% increase in Basic Pay but agreed to introduce Grade Pay / Special Pay, instead of loading the remaining 13% in HRA and transport only.  The circulars now going around show that even DA will be payable on these Special / Grade pay.  It seems because of the hue and cry generated by the exposure of ABS in its articles about merely 2% increase in BP, UFBU and IBA came on backfoot and thus agreed to introduce Grade Pay / Spl Pay.  It is a good sign.  But the question arises, why IBA was still interested to keep Basic Pay low and allow separate Grade Pay with DA?   There must be some hidden agenda which we can comment only when final agreement is signed and put in public domain.
I have a gut feeling that there will be some surprise element, which can be extremely detrimental to a group of the bankers.   Will the Grade Pay and DA on this will form part of “Pay” for the purpose of calculation of superannuation benefits like Pension, Gratuity, commutation etc.   If UFBU agrees that any of these will not be accounted towards superannuation benefits then the bankers who are retiring by 2017 will suffer the maximum.  We know there is maximum retirement by 2017.   If this is the agreement, then it will amount to cheating with the senior bankers and it will bring lot of resentment, which will then be reflected in the growth of the banking till 2019 or so. 
Thus, as on late night of 19th May or early 20th May, 2015, things are still in fluid state and we have to wait for another 48 hours till we hear something concrete on this issue. 



RBI gives banks provisioning leeway for reporting frauds on time-DNA
Rising number of frauds especially on high value corporate loans has forced the Reserve Bank of India (RBI) to dangle a carrot to banks in order to report diversion of funds on time.

If banks report frauds on time, they can stagger the provisioning in four quarters, providing 25% each quarter. When the account is declared as fraud, banks have to immediately set aside money as buffer equivalent to the loans extended to the borrower. But if not reported on time, then banks will have to provision 100% at one shot.
For instance, if a bank has lent Rs 100 crore to a borrower who is declared fraud, then the bank has to set aside Rs 100 crore as provision immediately, and if it is reported on time, they can stagger the repayment over four quarters, that is in this case Rs 25 crore a quarter.
A senior RBI official said, "We are incentivising banks to report frauds so that they will be encouraged to report fraudulent cases faster rather than brushing it under the carpet. We were forced to declare REI Agro a fraud case as some banks were classifying it as non-performing asset (NPA) standard while some banks declared as an NPA account."

Some of the bank loans to REI Agro (Rs 4,000 crore), Winsome Diamonds (Rs 3,500 crore), Electrotherm India Ltd (Rs 434 crore) have already been listed as frauds.
The central bank has meanwhile asked banks to undertake a forensic audit on Winsome Diamonds. Last year, the company was referred to the special corporate debt restructuring cell but failed to get special package from banks as some of the banks were not convinced with the submission of the management that receivables from customers for the diamonds exported failed to come through, resulting in the company defaulting on payments.

A senior banker with a public sector bank said, "The problem for bankers is that once the case gets handed over to the investigating agency, the needle of suspicion begins from the bank. They will first come up with a conspiracy theory saying that they may have been a connivance with the bank officials. So bankers desist from reporting the frauds. Often bankers are caught and the promoters would be absconding."

The Kolkata-based REI Agro, which specialised in Basmati rice exports, was declared fraud by the central bank after some banks classified it as a fraud. Bankers allege that the company may have diverted the money overseas.

Just last year, 20 banks lent REI working capital finance of Rs 4,000 crore under the Joint Lenders Forum (JLF) to work out a corrective action plan for the financially-stressed company. The company defaulted on its payment to certain lenders, which even led to a winding-up petition filed by the United Bank of India in the Calcutta High Court.

A senior RBI official confirmed that the account has been declared a fraud for alleged diversion of funds, and the Central Bureau of Investigation (CBI) is investigating after some banks handed over the case to CBI. This is the only bank loan that has been declared as a fraud by RBI and have asked all lenders to classify it as a non-performing asset even if the promoters are repaying the money.

Central Bank of India handed over its exposure to the Ahmedabad-based Electrotherm for an alleged fraud. CBI came out with a report in August last year that it had registered a case against the directors of Electrotherm for entering into a criminal conspiracy and cheating the bank to the tune of Rs 438 crore.

Is RBI downplaying the bad-loans problem? 

Bad loans of Indian banks are seen rising to their highest levels in nearly 14 years, India Ratings has warned. 

The ratings agency further said that it estimates total impaired loans at 13% (of overall loan book) for FY16. 4.9% of this would be gross non-performing loans and the rest would be restructured loans, etc. 

Three out of the five big banks in India have reported a hike in non-performing assets for last fiscal. Crisil, too, has highlighted the bad loans problem and pointed out that the total amount of assets gone bad and restructured to hit Rs 5.3 lakh crore this year. NPAs are likely to be at Rs 4 lakh crore, up by Rs 60,000 crore from last year. 

In January this year, shares of ICICI Bank and Bank of Baroda plunged as their bad-loans provisions saw a jump. 
Bank of Baroda's provisions grew by 66% for the last quarter of the year and ICICI Bank increased its cushioning by 41%. 

As recent as in April this year, shares of ICICI Bank tumbled further as the bank posted low profit as its gross non-performing assets grew to 3.78% from 3.03% as against the same period a year before. 

Moreoever, India Spend, in February reported that bad-loans rose by 20% from April to December 2014 in public sector banks that account for over 70% of India's commercial lending. 

Gross NPAs, it reported, rose to Rs 2.73 lakh crore and if combined with restructured assets, the number stood at nearly Rs 5.5 lakh crore. 
RBI data shows that as on March 31, 2015, gross NPAs stood at 4.45%. That is, for every Rs 100 given as a loan, Rs 4.45 is lost in bad assets. 

However, none of this is shaking Reserve Bank of India's (RBI) chief Raghuram Rajan's belief.  He maintained that these bad assets won't lead to a financial crisis. He acknowledged that improvements in credit quality is going to be slow but ruled out the issue ballooning into a crisis. 

The RBI governor, on May 15, categorically denied that India isn't in danger of a financial crisis. 
NPAs, as India Ratings, suggest, are on the rise and may hit a 14-year peak if corrective action isn't taken. 
With the slow economic recovery, this seems a tall order. 

PTI has reported, "The stressed assets ratio, which includes NPAs and restructured loans, of public sector banks has risen by an alarming 131 bps to 13.2% or over Rs 7,12,000 crore, in FY15 with their gross non-performing assets touching 5.17%. This is nearly 230 bps more than that of the system, according to the RBI data."

Rs 11k-cr loan to Reliance Infra discoms could be in jeopardy-Financial Express

Tussle between Delhi govt and bureaucracy stands in the way of loan disbursal to Reliance Infra discoms

Delhi chief minister Arvind Kejriwal had opposed the appointment of Shakuntala Gamlin, principal secretary for power, as acting chief secretary of the state, alleging that she was lobbying for LoC on behalf of the discoms.
The tussle between Delhi government and its bureaucracy could jeopardise the Rs 11,000-crore loan approved by a group of lenders led by state-owned Power Finance Corporation (PFC) to Reliance Infrastructure’s power distribution companies (discoms) — BSES Yamuna and BSES Rajdhani — in the capital.

The final disbursal of loan is subject to a letter of comfort (LoC) to be issued by the Delhi government to the lenders as it holds 49% stake in the discoms and a third one run by a Tata Power subsidiary in the national capital region.

Delhi chief minister Arvind Kejriwal had opposed the appointment of Shakuntala Gamlin, principal secretary for power, as acting chief secretary of the state, alleging that she was lobbying for LoC on behalf of the discoms. “The two companies are joint ventures, where the Delhi government has a 49% shareholding. BSES companies are managed by board of directors, where 4 out of 9 members are nominated by the government and are senior IAS officers,” BSES wrote to Najeeb Jung, lieutenant governor of Delhi, clarifying its position in the aftermath of controversy concerning the LoC. It added that the LoC has been sought by PFC and not by Reliance Infra.

In another letter reviewed by FE, BSES has written to the principal secretary of finance on March 30 with details of the loan and had asked issuance of a ‘strong’ comfort letter to PFC.

“…PFC sanction alongwith the scheme of proposal, terms and conditions and proposed utilisation was duly considered and approved by the board of directors (including GoNCTD nominees) of BRPL and BYPL in a meeting on  March 26, 2015,” it wrote.
The advances will enable the two discoms, under stress due to delays in monetisation of regulatory assets, to retire existing debt of half the size from a 19-bank consortium led by State Bank of India and pay the dues to the generation and transmission companies. The new loan will come with an interest relief of 1.5-2% that could bring down the cost of power by 13 paise per unit.

The Delhi government has been no stranger to issuing LoCs on behalf of the power companies in the past. It had issued LoC to NTPC in December 2011 to ensure that power supply remained uninterrupted. In May 2014, an LoC was granted to PFC and REC for raising short-term loans of R1,000 crore to pay power supplier dues in compliance of orders of the Supreme Court.

Of the R11,000-crore loan, about R5,000 crore will be disbursed by PFC while the rest will be available from other lenders in the consortium, a PFC source told FE. The tenure of the new loan, if approved, could be for a period of seven to eight years and the interest savings for the BSES firms would translate to about R250 crore annually.

RInfra will be pledging its entire 51% of shareholding in BSES discoms to the PFC-led consortium to avail the loan.

The discoms have been urging the state government since early January for a LoC for the loan approval. The Arvind Kejriwal-led government, which has ordered a CAG audit of the three Delhi discoms (Tata Power Delhi Distribution and the two BSES discoms), is yet to give any commitment on this.

Monday, May 18, 2015

Unconfirmed Revised Pay For Award Staff

Sri Kamlesh Chaturvedi informs on Facebook as follows :---

We Bankers has created history. On the one side Government of India, IBA, All the Unions and Dy.CLC were pleading and on the other hand We Bankers strongly raised the voice of Aam Bankers. You all are aware of the developments emanating from filing of the Dispute on Birthday of Netaji Subhash Chandra Bose on 23rd January, avoidance of CLC to intervene in the matter by referring the Dispute to Dy. CLC. (C) Kanpur, subsequent inaction by Dy. CLC and its only when an email campa...ign was launched that Dy. CLC opened up to say that as per Section 36 of the ID Act only unions registered under the Trade Unions Act can raise dispute.

We Bankers has successfully proved his stand and accordingly High Court has directed Dy. CLC to decide the Industrial Dispute raised by We Bankers with in a period of six months.
Now a basic question would be raised by a section of extra ordinary brilliant employees about the impact of this order on present negotiations. For them we wish to make it clear that apart from Demands of equality and parity by bringing bank employees under the purview of Pay Commission, one more important point is with regard to authority and competence of retired leaders to negotiate on behalf of bank employees. As per our policy of transparency we will post full dispute for perusal and understanding of aam bankers.

For the time being we salute all those brave companions who showed their rock like solidarity and their monetary contribution and moral support without which it would not have been possible. We devote our efforts in the feet of these brave companions. We place our thanks to Sri Ganapathi Subramaniyam who checked dispute prepared by us and has been instrumental in getting blessings of great legendary leaders of yesteryears Sri K. N. Shenoy. Above all this writ petition had the blessings of my Govind and His preachings through Bhagwad Gita.
We appeal to all the groups who have been criticising the UFBU in a scattered manner to come together to write down the history of revolution in the Trade Union Movement of Banking Industry

New Pay Structure For Award Staff From Unconfirmed Sources (Unreliable)

Sunday, May 17, 2015

Troubloe In Government Banks

RBI has advised bank boards to do detailed scrutiny of their quarterly and annual financial results during board discussions. It appears to be nothing more than ridiculous and a clever step by RBI to put the onus of correctness and genuineness of financial result on bank boards .

 It is the duty of RBI to ensure correctness of financial results announced by various banks including private banks to avoid repetition of stories like that of Satyam Computers. It is the duty of RBI to carry out random checking of bank financials and internal working from time to time to create good culture and to stop fraud and manipulation in banks. RBI officials used to audit in seventies and eighties but gradually they  stopped this culture because they are also not adequately manned to cope with the work load needed to properly audit thousands of branches .It is therefore not surprising they too shake hands with clever bank officials and indirectly favour culture of manipulation. Even politicians do not like exposure of bad health of banks .They all are birds of same feather.

RBI is therefore bent upon avoiding owning the responsibility of fraudulent games played by CEOs of banks in hiding bad assets. RBI officials understand very well that huge volume of stressed assets in Public sector banks is concealed by bank officials in nexus with team of Chartered Accountants who certify the correctness of financial results, correctness of profit , provision and bad assets.

RBI also knows very well that volume of bad assets will continue to rise every quarter and no power on earth can stop it , can reduce the speed of assets turning bad until there is change of hearts and change in attitude of credit officials of banks, change in mindset of dirty politicians who are least bothered of quality of assets but more concerned about vote bank and lending and until there is change of heart of officials and magistrates sitting in various administrative offices, courts, police department, DRTc etc.

Here it would like to add here that it is the team of Charted Accountants who are supposed to be more intelligent and talented and who are the competent and legal bodies to certify the correctness of financials of all companies and banks, certify bad assets as standard assets in nexus with bank officials and in lieu of some costly gifts and red carpet welcome extended to them by bank officials..

It is CAs who guide banks how to conceal bad advances , how to lend money to bad borrowers, how to manipulate financials to inflate profit and reduce provisions against bad loans. It is team of CAs who guide business men how to evade tax and how to use black money in real estate or in business itself. It is team of CAs who sign on balance sheet of branches of banks blindly or in greed of some valuable gifts. It is team of CAs who sell their signature at every point of business , at every point of compliance and certification. Gift culture at all levels make the case of certification easy .

Bank officials have been in habit of concealing bad asses to please their bosses, A Branch   Manager of a branch try to please his Regional Head,, a RH may try to please his Zonal Head and all try to keep the Chief of Bank in good mood and for this purpose they all have to conceal bad assets .If any officer or any team of CAs dare declaring bad assets as bad asset truly, their career is sure to be doomed. O the contrary officers and CAs who are clever in concealing bad debts are promoted and their career is brightened.

 Every quarter bank Chiefs promise that the health of bank will improve from next quarter . They book good profit in one quarter and show drastic fall in profit in next quarter.  This clever hide and seek game of figures has been continuing for last ten years and specially after from the period when bank became technology friendly .

The bitter truth is that neither RBI , nor bank officials, nor team of CAs and nor politicians want to say spade a spade . They all are so called positive-minded and it is their compulsion to show banks as healthy so that evil works are not exposed. It is their compulsion to conceal bad assets and to book more and more false profits and projects banks as prosperous so that investors and customers of banks do not lose trust on PS banks.

If a NPA of a bank rises, investors will avoid investing in share of such banks, business men will not like to park their fund in such banks and will not like to borrower money from such banks, RBI officials will have to face the awkward position before ministers, and finally politicians will have to face the anger of common men whose hard earned money will be at stake in case of bank going weak and finally sink.

It is therefore wrong to believe that bank board will be able to find out or detect the fraud game played by CAs and clever bank officials . After all , if they say bad assets as bad , it will  tantamount  to digging own grave. When protectors become looters, none can save us from disaster. When team of CAs can be bought , when bank officials are bought, when legal officials are bought ,when politicians are bought and when every good certificate of good health can be bought by every officer , RBI should not expect correctness of financials of any bank in particular and any company in general  .

Similarly art of Tax evasion taught by CAs to business community help in creation of black money in the system in nexus with tax officials, Hence it will be wrong to blame business community or any individual for tax evasion or for buying a landed property at higher rate but registering at lower rate using black money. It is a well established culture in India and to stop the same  is nothing but  hard nut to crack . Even politicians cannot survive without black money , how others will stop playing with powers of black money. Culture of flattery will end as soon as culture of dishonesty is stopped. None will like it from core of their heart . All want others to be his or her yesman .

If RBI officials , to begin with ,make a through scrutiny of all accounts of all borrowers who have been enjoying credit facility of more than 100 or 50 crore , the bitter truth of bad debts will come to surface, provided however that bank officials are kept miles away from the place where scrutiny  is taking place and provided talented team of CAs are not allowed to talk to any borrower and any bank officials during the period of audit and inspection and entire task is conducted before CCTV and financially expert team of media men.

If RBI does not have enough manpower even to make scrutiny of Rs.100  crore borrower, they may start the task with scrutiny of books of best five banks . If it is proved that banks considered as best performers are best only due to best manipulation and fraudulent placing of figures only , it will become crystal clear to all concerned that the crisis in public bank is more deep rooted , bad culture is imbibed in DNA of all concerned and to stop the culture of manipulation in PS banks is nothing but wondering in dreamland.

It is worthwhile to mention here that proposals of loans and advances of Rs.50 crore or Rs.100 crore and above are sanctioned by none other than bank boards . It is bank boards which are supposed to monitor the health of high value loans . How it is then possible for such  bank boards to doubt financials certified by CAs ? It is just like asking a thief to investigate the act of stealing and punish the culprit. There is invariably an unity among dishonest and corrupt officials . They all try to save each other in their mutual self interest. It may be kept in mind that each bank board is manned by RBI directors also.

If a Branch Head says that loan sanctioned by his predecessor is bad due to bad lending or bribe led lending, he will have to face the same precarious situation when his successor joins his branch after his transfer. As such each officer thinks it better and safe to hide bad loans by hook or by crook to save his colleague from punitive action and to avoid rejection in promotion processes. This culture is well established at all  levels of management.

RBI says bank boards to do detailed scrutiny of financial results-Business Standard-15.05.2015

RBI said bank boards should look at financial reports and their integrity, including NPA management
The Reserve Bank of India (RBI) has said bank boards should do a detailed scrutiny of their quarterly and annual financial results in their board discussions. According to seven critical themes prescribed by the P J Nayak committee, instituted by RBI that reviewed bank boards’ governance, the latter should look at their financial reports, including non-performing assets (NPAs) management and reported NPA and provisioning integrity.

In the first bi-monthly monetary policy statement of 2015-16, RBI had proposed to do away with the Calendar of Reviews and replace it with the seven critical themes. These include business strategy, financial reports and their integrity, risk, compliance, customer protection, financial inclusion and human resources.

RBI said it has been observed that the Calendar of Reviews uses considerable board time and, as a result, the board might not be in a position to give focused attention to matters of strategic and financial importance. The committee had also recommended that discussions in the boards need to be upgraded and greater focus should be given to strategic issues.

According to RBI, business strategy would include development of new products; competitiveness of individual businesses; business reviews in relation to targets. Risks would include policies concerning credit, operational, market, liquidity risks; assessing the independence of the risk function.

Compliance would include regulatory requirements; adherence to the RBI and Securities and Exchange Board of India norms; observations from the annual financial inspection by RBI, among others.

Customer protection would look at mis-selling, particularly third-party products; laying down the appropriateness of products to different customer segments; understanding the broad trends among others. Financial inclusion would look into review of priority sector lending; payments for the disadvantaged; deposit mobilisation from weaker sections; support to microfinance institutions; and other issues.

The theme human resources would look at appointments and approvals of directors, perks and perquisites for employees, incentive schemes for employees, promotion policies for employees, training and skill development of employees.

Bad loans may not have peaked yet: Raghuram Rajan-By Anup Roy --Livemint

Central bank working with lenders to recognize and resolve non-performing assets, says RBI governor
The quantum of bad loans in the Indian banking system may not have peaked yet, Reserve Bank of India (RBI) governor Raghuram Rajan warned, echoing the concern of analysts and bankers.
Rajan’s comment comes a day or two after rating companies Crisil Rating Ltd and Moody’s Investors Service warned of more pain for the Indian banking system. Crisil on Tuesday said the gross bad debt of the banking system will likely rise to 4.5% of total assets from 4.3% at the end of March 2015. 
Moody’s India sovereign analyst Atsi Sheth warned that India’s sovereign rating could be affected if banks do not repair their asset quality.
Rajan, speaking at a news conference after the central bank’s board meeting in Goa, said the central bank was working with lenders to recognize and resolve these non-performing assets (NPAs), news agency Reuters reported.
One such measure the central bank has already taken is introducing a term-loan facility for infrastructure projects where loans can be reset every five years. Informally termed 5/25 for stretching a project loan to 25 years with a reset every five years, this scheme is expected to ease pressure on infrastructure companies.
Since such schemes ease the load on promoters to pay back, it is also a good way to keep banks’ balance sheet healthy. But technically, it is also a good way for banks to hide the bad debt numbers, Crisil fears.
The 5/25 scheme alone could mask bad loans of at least Rs.80,000 crore in fiscal 2015-16, according to Crisil. If banks manage to hide more, the bad debt situation on paper will look healthier than that in 2014-15, Crisil said.
Out of 39 publicly traded banks in India, 29 have reported fourth-quarter earnings so far and the bad debt numbers show no sign of improving, although the pace of accumulating bad debts may have slowed a bit.
In the quarter ended 31 March, gross NPAs of these banks grew 28.8% to Rs.1.81 trillion from Rs.1.4 trillion in the year-ago quarter. They grew 3.3% over the third quarter ended December. Interestingly, slippages, or good loans turning bad in the quarter, came down for some banks.
Banks continue to restructure a large number of loans, though, an analyst said. “This shows the stress is far from over,” said Abhishek Kothari, an analyst with Quant Capital, adding that he expects bad assets to peak in the next two-three quarters.
At least 15% of restructured assets soon fall back to the NPA category.
Infrastructure logjam
According to RBI’s annual report released in June 2014, six sectors account for the majority of bad debt in Indian banks: infrastructure, metals, textiles, chemicals, engineering and mining. The six account for only 30% of the total credit, but 36% of the total bad debts in bank books.
Bankers attribute this to the slower-than-expected recovery in the economy and cheap import of commodities and steel from countries such as China and Russia.
“Domestic companies can’t produce at a cheaper rate than the cheap imports. How can you expect our companies to generate positive cash flow when there is no demand and, at the same time, countries like China dumping finished goods like steel?” asked Bank of Baroda ’s managing director and CEO Ranjan Dhawan, while presenting his bank’s results on Tuesday. “We have only one exceptional client in our bank who wants to set up a power plant, but otherwise I haven’t seen a single greenfield project coming up. Who will want to expand capex in this environment?.”
Moody’s managing director for corporate finance, Philipp L. Lotter, said in an interview on Wednesday that infrastructure projects would take time to generate cash flow even if the government’s efforts to improve coal and gas availability show results.
Issues related to land acquisition, fuel availability and environmental approvals held up projects, but the National Democratic Alliance government that took over in May last year has tried to address some of the issues. However, several analysts and executives maintain that there has been no change on the ground.
RBI’s hand
That may require RBI to play a hand, say analysts.
“Token rate cuts will not help. We need to see at least 100-150 basis points cut from the RBI because interest cost has become a major drain for companies in the infrastructure and manufacturing sectors,” said Vaibhav Agrawal, vice-president (research) at Angel Broking Pvt. Ltd. “Take a manufacturing company with a debt-to equity ratio of 3:1, servicing its loans at a minimum of 12-13%. Now factor in project delays and multiply the cost for a few years more. The damage done by high interest cost will be evident. Now that inflation has fallen and commodity prices have fallen sharply, RBI should take the risk of cutting rates drastically,” Agrawal said.
Agrawal does not see asset quality improving in the next six to nine months at least, but expects companies in metals, power, and minerals to show some greenshoots of recovery in a year’s time as positive reforms in these sectors take effect in the coming months.

Union Bank’s asset quality may deteriorate over next 2 quarters: Reliance Securities-Financial Express-15.05.2015

Union Bank of India reported profits ahead of both our and street estimates driven by higher treasury and core fee income.

Union Bank of India reported profits ahead of both our and street estimates  driven by higher treasury and core fee income. Treasury income grew by 123% y-o-y and 14% q-o-q to R430 crore led by higher profit from bond portfolio. This helped  the bank to report 60.9% y-o-y and 4.7% q-o-q growth in pre-tax profit. However,  Pat declined by 23.4% y-o-y to R440 crore due to tax write-back of R180 crore in Q4FY14 versus tax pay out of R200 crore in Q4FY15. Asset quality has also witnessed  improvement as fresh slippages ratio improved to 2.5% in Q4FY15 versus 2.9% in  Q3FY15 and 3.4% in Q2FY15. We recommend buy on the stock.

Amidst the challenging interest rates and macroeconomic regime, Union Bank of India has been delivering reasonable operating and asset quality performance. The management has guided that fresh NPAs is expected to further moderate in FY16e.  However, we expect negative surprise on asset quality front in next two quarters,  due to relatively slower pace in economic recovery. Management has also guided  that H1FY16e will remain challenging on asset quality front. As a result, we have  assigned lower price to book multiple of 0.7x FY17e adjusted book value (earlier 0.9x FY17e ABV) and arrive at revised target price of R204 from R264 earlier.
RBI tells banks to deliberate on 7 themes prescribed by PJ Nayak panel -Economic Times
MUMBAI: The Reserve Bank of India on Thursday directed bank boards to deliberate on seven critical themes including business strategy, risk, financial report and their integrity, customer protection, financial inclusion and human resources as prescribed by the P J Nayak committee. The central bank in its first bi-monthly monetary policy statement had proposed to do away with the calendar of reviews and instead, replace it with the seven critical themes.

The banks would as part of bus ..
Bank cannot afford wage hike of bank staff but can afford loss in lacs of crore of rupees caused by unrecoverable  bad debts and loss incurred due to frauds. Work culture in public sector banks is moving from good to worst due to misuse of banks by politicians. Chiefs of Banks make excuse that they do not have seniors but in fact they do not have respect for senior officers . Only flatterers bribe earners and manipulators have prosperous career in bank. Neither top bank officials nor politicians have any place for merit in their mind.

Government is trying to appoint best officers for the vacant posts of Executive Directors, Managing Directors and CEO or Chief of bank but could not get success . Many banks are without ED and CMD. Bank without head of bank will suffer in many parameters, there is no doubt in it. But if branch runs without Branch Head or with poor quality of officers , volume of loss is bigger and wide spread. History of promotions which took place during last one or two decades will prove that merit is of no use for getting promotions to higher scale and higher post. One needs backing of some VIP and / or need  to arrange some bribe for seniors to get elevation in career.

Top officials on the other hand complain of crisis of senior officers  for key posts, In my opinion , this excuse is absolutely false and unbelievable. Even now, each public sector bank has many senior officers and senior clerks and this is why average age of public bank is far more than that of private banks. Bitter truth is that talented seniors have been forced to work in junior posts and  have been forced to work under the leadership of incompetent and inefficient officers sitting at higher post. This is because only flatterers and bribe earners are promoted to higher scale and posted at higher post. Incompetent and inefficient officers are getting promotion every two or three years whereas officers with experience of two to three decades are working on insignificant post. Good performers think do not participate in Interview because they know that they will not be promoted.

To add fuel to fire ,Government has been imposing various non-productive and economic non-viable works to public sector banks for last few decades. Present government too has imposed additional various schemes on banks which  will further destroy future of public banks. Top officials are inclined to please Ministers and for this purpose , they have advised all subordinate officers to focus on quickest completion of task of insurance as directed by FM and PM. As a result , regular customers of bank who provided good business to public banks are being ignored by bank staff. to please their immediate bosses. Self interest is prime objective of bank officials than that of the bank they serve. Outcome will surely affect business adversely, increase volume of bad assets and destroy standard of customer service and finally business will be taken over by private banks.

Government does not think it necessary to assess whether banks have adequate quality manpower . Government has forced banks to indulge in non-banking activities like insurance, demat, stock trading , portfolio management etc which has adversely affected banking activities and bank's profitability . It is true that banks earn a few crore of rupees as non-interest income by doing non-banking jobs like insurance , but it is also true that by such avoidable work, management of bank have caused loss to bank amounting to  hundreds and thousands of crores of rupees every quarter due to rise in bad assets and rise in frauds.

I therefore appeal to learned Finance Minister and matured Prime Minister to study in depth the reality of  public banks and then impose work like opening of accounts , linking of account to insurance, selling of insurance products etc . It is not prudent, justified  and desirable  to be "penny wise and pound foolish". There is a proverb " Gau Marker Juta Dan" Bank assets worth lacs of crore of rupees is at stake and bank officials are made busy in works which will further add fuel to fire and which will aggravate the miseries of sick banks. Banks are already burning and government is carelessly sprinkling oil on it.

Branch expansion undertaken by banks during seventies and eighties under the pressure of the then government , banks had to incur heavy losses .Now in the name of financial inclusion , banks are undertaking reckless expansion of branches and ATM and thus causing direct loss to bank.  During nineties, in the era of reformation, banks were advised to earn profit and compete with private banks . But government did not take any step to change culture of bankers and politicians did not stop misuse of banks for vote bank. As a result, sickness of public banks grew unabated and it will continue to move from bad to worse.

Government banks could expand their branch network or could spread its ATM network . Mere expansion can help in increasing business for some short period but ultimately it affects profitability of bank in the long run if the expansion takes place without perfect planning and without perfect supporting infrastructure and quality manpower planning. Unfortunately  clever bankers could not do real business as private bankers despite disproportionate expansion.

However, to cope with adverse situation, clever bankers manipulated books of account, concealed bad assets , avoided provisions , curtailed staff benefits and did a lot of unfair acts to inflate profit and business by window dressing. But the volume of sins committed by them have been exposed by Technology . Now these banks are facing crisis due to bad debts and due to bad officers. For last five years and more, volume of bad assets and stressed assets and frauds in each public sector bank has been increasing every quarter despite all efforts appear to have been taken by top officials and government of India.

Government will have to strike at the root of sickness and try to cure from the root instead of making surgical operation on the surface by changing ED or CMD of bank or by bifurcating the post of CMD. Bankers who are clever accuse interest rate for poor growth in credit or for poor asset quality and it is funny that even RBI and FM  accept their fake excuse wilfully and strategically  made to conceal  evil deeds of bankers and politicians.

It will be important to point out here that FMs like Pranab Da, Manmohan Singh  and Chidambram damaged the fundamentals of public bank during ten years rule f UPA by forcing bankers to use short term fund to use in lending to infrastructure projects, power sector and high value industries of bad corporate houses. They damaged the culture of repayment by waiver schemes and by forcing bank to compromise with bad borrowers. Present government is affecting banks badly by engaging their services in non-productive services like zero balance accounts and insurance activities. It will be better if government declare that public banks are not profit entity and will be used  to accomplish social welfare schemes only and there will be no target for profits. And then , it  will be also justified to give a good wage hike to bankers to make them loyal and devoted workers in line with employees of central government.

The human resources crisis at public sector banks-LiveMint By Tamal Bandyopadhyay

If the govt isn’t able to identify the chiefs of those banks where the top positions have been lying vacant for months, by end-June, corner offices of seven public sector banks will turn vacant
C.V.R. Rajendran, chairman and managing director (CMD) of Andhra Bank, retired on 30 April. V.R. Iyer, CMD of Bank of India, will retire by the end of this month and M.S. Raghavan, IDBI Bank Ltd’s CMD, will retire at the end of June. If the government, the majority owner of the public sector banks (PSBs), is not able to identify the chiefs of those banks where the top positions have been lying vacant for months, by end-June, corner offices of seven PSBs will turn vacant. Four other banks that do not have occupants in their corner offices for months now are Bank of Baroda, Canara Bank, Punjab National Bank and Syndicate Bank.
A few months back, the government split the top position in the PSBs. It was decided that here would be a non-executive chairman to guide the board of such banks while the day-to-day management would be looked after by a managing director (MD) and chief executive officer (CEO). In sync with this, the new heads of PSBs who have been appointed in past few months (at United Bank of India, Oriental Bank of Commerce, Indian Overseas Bank and Vijaya Bank) are called MD and CEO. When Indian Bank CMD T.M. Bhasin’s term ended last month, he got an extension (as he is not 60 as yet) but his designation has changed.
Top positions at three large banks (Punjab National Bank, Bank of Baroda and Canara Bank) have remained vacant and two more will fall vacant in the next two months (Bank of India and IDBI Bank) simply because the government has not been able to find suitable candidates to fill the vacancies. In other words, there are no serious takers for such posts—not a very happy omen for the PSBs, which have a roughly 70% market share in the Indian banking industry’s assets.
Making a deviation from the normal appointment process, where executive directors are promoted to head banks, being picked up by an appointment committee of the finance ministry, the government is scouting for talent from the open market for the chiefs of the so-called category 1 banks, which have a balance sheet size of at least Rs.3 trillion each.
However, the search is not yielding the desired results. Initially, the government looked for candidates not more than 55 years old and with at least three years of board-level experience, but since the response was muted, the government has relaxed the eligibility criteria. While the age limit has been increased to 57 years, the mandatory board-level experience for the applicants has been reduced to one year. I am told that many junior executives of PSBs who have board-level experience by virtue of heading regional rural banks applied for the top posts in the first round and the government had no choice but to relax the criteria in search of the right candidates. An external head-hunting agency—Hay Group—is believed to be involved in the recruitment process.
The vacuum at the top is the proverbial tip of the iceberg. The talent crunch is evident across the spectrum and, to make matters worse, there will be a large-scale retirement of senior employees over the next few years. Junior finance minister Jayant Sinha, in a written reply in the Rajya Sabha, the upper house of Parliament, recently said that about 25% of the staff would retire by 2020. Going by a 2013 McKinsey and Co. report on the Indian banking structure, 87% of general managers of PSBs will superannuate by 2016-17 and between 60% and 90% of deputy general managers will hang up their boots by that time. General managers, who are placed two levels below the level of the managing director, are a very critical cog in the wheel of the decision-making process in PSBs. The Reserve Bank of India (RBI) has termed 2010-20 as the “decade of retirement” for public sector banks.
These banks went on a recruitment overdrive in the 1980s after they were nationalized but once the massive balance sheet clean-up drive was launched in the mid-1990s following the introduction of income-recognition norms, there was a blanket ban on new recruitments. And, on top of that, early this century, about 125,000 bank employees were shown the door through a voluntary retirement scheme after these banks embraced computerization, albeit reluctantly. New recruitments have started, but they have not been able to keep pace with the growth in business and retirement of old colleagues.
How are the banks filling in the vacancies at senior level? Most have fast-tracked the promotion process and senior executives are now being produced on a conveyor belt. In the absence of proper grooming, many among the over-promoted executives are just not equipped to meet the business exigencies.
Meanwhile, the government has constituted a panel, headed by RBI governor Raghuram Rajan, to select non-executive chairmen in PSBs. Other members of the panel are Usha Thorat, a former RBI deputy governor; Hasmukh Adhia, secretary of financial services in the ministry of finance; and N. Vaghul, former chairman of Industrial Credit and Investment Corp. of India Ltd, the erstwhile financial institution. The panel will prepare the eligibility norms, such as maximum age, qualification and tenure, as well as identify the candidates. Let’s hope and pray that retired bureaucrats do not end up hijacking the posts.
In the second half of the last fiscal year, the entire public sector banking industry threw its weight behind the Pradhan Mantri Jan-Dhan Yojana (PMJDY), the flagship financial inclusion programme of the National Democratic Alliance government, which saw a record 140 million bank accounts being opened. The bankers are once again busy linking health insurance and pension schemes to PMJDY to ensure flow of money into such accounts. When will they have time to recruit staff and groom them? I am also curious to know whether appointment of bank bosses features on the government’s priority list.

Editorial: Bank of trouble-Financial Express-16.05.2015

RBI Governor warns that NPA-hike cycle still has legs

RBI Governor Raghuram Rajan’s warning, that the bad loans cycle has not peaked, should come as a surprise only to those who haven’t been following the sector. Indeed, while the earlier set of loans going bad were those of big companies, even small firms with very large exposures are finding their loans looking dicey. A combination of reckless lending—ambitious revenue targets and poor collateral—and poor government performance in terms of making clearances available on time, for land as well as for fuel supplies from PSU-monopolies, made it obvious that NPAs still had a way to go before they peaked.

In the case of sectors like electricity, the poor financial condition of most SEBs is the problem; in areas like steel, the collapse in global prices suggests that a lot more loans will get stressed in the months ahead. As a recent Crisil report points out, as much as 40% of assets restructured between 20011 and 2014 have degenerated to NPAs—this is a dramatically higher number than the 15-20% assumed by most while discussing the stress levels in Indian banks.

Crisil estimates that around R80,000 crore of stressed loans will get restructured under the new 5/25 rule of RBI during FY16—while it is not clear how much of this will turn bad, the result of the 5/25 restructuring will be further camouflaging of stress levels in banks. And, based on its estimate of loans going bad from earlier restructuring, the credit rating agency estimates NPAs rising by R60,000 crore in FY16, taking the total to R4 lakh crore, or 4.5% of bank advances.

This has various consequences since, in the absence of the government being able to capitalise banks—Crisil estimates they will need R2.6 lakh crore in the next 4 years—PSU banks will grow at a much slower pace than their private counterparts as a result. Crisil says their growth will be around half that of private banks over the next 4 years. This is quite serious and, given its larger implications, the government has to seriously consider privatising several PSU banks.

While there is little that can be done about the loans going bad, the government has to ensure the earlier hurdles, like not having enough debt recovery tribunals, hinder the banks from getting closure on their legal suits. Also, banks have to be encouraged—now that Sebi has changed its rule on converting debt to equity—to take up higher stakes in projects and use this to sell off companies.

 A good place to begin will be the Dabhol power plant where, till now, the Maharashtra government was not allowing the gas terminal to be hived off and sold. And, as has been seen in the case of the sale of Kingfisher assets, the fight between various government arms—in this case, the taxman and SBI—is only hurting the banks. RBI also needs to move fast to put in place its proposed ceiling on bank exposures to large groups. From around 55% of tier-1 funds right now, the central bank has proposed loans to a single group be limited to 25%—putting this in place is important since the group risk for banks is very high; this will also force companies to move to the corporate bond market. What is unfortunate, however, is that while the group norms are being tightened, banks get more headroom to lend to individual corporate—it is, of course, true that banks also need to exercise prudence, the job cannot be just that of the central bank.