Tuesday, November 24, 2015

Ability Of Finance Ministers

Finance Minister Shri Arun Jaitley Reviews the Financial Performance of Public Sector Banks (PSBS); asks the CEOs of PSBs to clean-up their Balance Sheet at the Earliest ( News From PIB)
            The Union Finance Minister Shri Arun Jaitley said that the Public Sector Banks (PSBs) have made great contribution in rebuilding the economy of the country. However, the Finance Minister asked the bankers to get rid of their past scars of Non Performing Assets (NPAs) and clean-up their balance sheet at the earliest .The Finance Minister Shri Jaitley also assured them full support of his Government in this regard. He said that the Government will take necessary policy corrective measures wherever required. The Finance Minister Shri Jaitley was addressing the Chief Executive Officers (CEOs) of the Public Sector Banks (PSBs) here today while chairing the Quarterly Review Meeting of the PSBs.

The meeting was attended among others by the Minister of State for Finance, Shri Jayant Sinha, Deputy Governor, RBI Shri Kundra, Secretary (Financial Services) Ms Anjuli Chib Duggal, as well as Secretaries of various other Ministries of Government of India along with senior officers of the Ministry of Finance.

            Earlier Shri Anup Pujari, Secretary, Ministry of Micro, Small and Medium Enterprises (MSME) discussed issues related to MSME sector including financing by banks.  Secretary, Ministry of New and Renewable Energy (MNRE) briefed the meeting about the commitment of Banks to fund Renewable Energy Projects in the next five years and praised the efforts made by banks. SBI was awarded for outstanding achievement. Ms Nandita Chatterjee, Secretary, Ministry of Housing and Urban Poverty Alleviation (HUPA )articulated various issues related to enhancing credit flow to the urban poor and implementation of the Pradhan Mantri Awas Yojana. Secretary, Ministry of Food Processing Industries briefed the participants about the utilization of Special Fund of Rs. 2000 crore set-up to provide affordable credit to designated food parks (including mega food parks) and food processing units located therein. Secretary, Ministry of Textiles discussed the issue of implementation of the programme for Revival, Reform & Restructuring (RRR) package for the handloom sector and institutional credit to sericulture. Secretary, Ministry of Rural Development Shri Mahapatra discussed the SHG Credit Linkage Plan under different schemes of the department.

In addition to the above agenda, and a detailed discussion on various subjects, the following key issues were discussed:

Financial Performance

PSBs discussed various steps being taken to improve credit growth. The issue of passing on the benefit of rate cut was also discussed, with the PSBs noting that their base lending rates had been reduced consequent upon the rate reduction announced by the Reserve Bank. There was a detailed and free flowing discussion on ways to develop core competence and niche banking. The issue of asset quality was discussed in detail and banks described measures being taken to improve asset quality and profitability with special focus on non interest income. The institutional measures being taken to assist Banks in reducing NPAs were also discussed.

Agricultural credit

The meeting took stock of the sectoral profile of the total domestic credit flow of Rs.48.25 lakh crore upto September, 2015 and noted that 58% of the agricultural credit target for the year had been achieved. Finance Minister Shri Jaitley urged the banks to achieve the target of20% growth in disbursement and 15% growth in number of accounts and also attempt to even out regional disparity in such loans. The banks briefed the meeting about various efforts that they are taking in the sector.

Educational loan

Finance Minister Shri Arun Jaitley reviewed the progress made by banks in activating the Vidya Lakshmi Portal, which is a first-of-its-kind portal providing a single window facility for students to access information and apply for educational loans provided by Banks as well as Government scholarships. Banks were requested to enter early into the required agreement to take advantage of new credit guarantee scheme.

Housing Sector

While noting good growth at 18.69% in housing loans, PSBs were also strongly encouraged to achieve growth in priority sector housing loans, which are intrinsically secure loans and which are required to provide a stimulus to overall growth. All bankers reiterated their commitment to focus on these loans.

Pradhan Mantri Mudra Yojana

The meeting dwelt at length on ways to increase the impact of the Pradhan Mantri Mudra Yojana. Finance Minister Shri Arun Jaitley urged the banks to accelerate disbursements as PSBs were expected to achieve a potential of at least Rs 70,000 crore during the current financial year. It was noted that the Indian Banks’ Association had put together a phased publicity plan, to ensure that eligible entrepreneurs were fully informed about PMMY, and thereby enabled to approach banks with their projects. While the banks increased publicity for the scheme, the demand side was being addressed by linking the skill development centers run by various Central and State Government departments, ITIs and SHGs with the banks’ financial literacy outreach. It was noted that the State-wise targets allocated by the banks needed to be reviewed, keeping in view not only the population size, but also the business potential of the state. The financial literacy outreach was being designed to cover both pre-loan familiarization training and post loan disbursal guidance regarding the credit process, repayments schedules and MSME related facilities.

At the end, Minister of State for Finance Shri Jayant Sinha distributed trophies and certificate to the winners in the category of best banks and best bank branch in order to recognise the best performers who made Pradhan Mantri Jan Dhan Yojana (PMJDY) a successful scheme.

During the meeting with Chiefs of Banks, our Finance Minister Mr. Arun Jaitley has discussed various points of importance and stressed on recovery of dues from defaulters to clean their balance sheet. The gross NPAs of public sector banks were at six per cent at the end of June, up from 5.2 per cent in March and there is no doubt that  gross NPA in the quarter ended September 2015 will further go above six percent.. Further ,according to RBI , stressed asset which  is total of gross NPA and standard restructured advances, as a percentage of gross advances moved up to 11.1 per cent as on March 2015 and it has crossed 12 percent in many banks as compared to 9.2 per cent two years ago. 

Public sector banks share a disproportionate burden of these stress. Bankers  highlighted six sectors that were facing maximum stress --iron and steel, textile, power, sugar, aluminium and construction.The Reserve Bank of India (RBI), in its financial stability report, has also cited five sub-sectors that were undergoing maximum stress, which are infrastructure, iron and steel, textiles, mining (including coal) and aviation.

Finance Minister said non-performing assets of Indian banks were at an ‘unacceptable’ level but the situation is expected to improve as the government and the central bank were taking steps to relieve stress in various sectors. He said that the health of the public sector banks was a key subject. The problem of NPA is undoubtedly to some extent  a carried over problem of the past but it continues to persist. And that problem relates to the unacceptable level of NPAs.

The meeting was attended by the Chiefs of the public sector banks as well as Secretaries from various ministries including micro, small and medium enterprises, agriculture, textiles, and rural development.The Finance Minister expressed hope that the reforms announced in the power sector will relieve the problems with the distribution companies. 

The government is also in the process of framing a bankruptcy code which is  aimed to tackle willful default and a draft paper was recently released.Regarding the issue of willful defaulters Finance Minister has  said that the lenders have the required powers and autonomy to deal with them.   And bankruptcy law, when passed, will increase the banks’ abilities to get failed creditors to exit. The government is planning to table the Bankruptcy Bill in the winter session of the Parliament.

In my opinion even if the bankruptcy law is passed , bank management will not be in a position to improve volume of recovery.There are many laws in our existing law books to deal with recovery of dues from defaulters, Banks may file certificate cases in district courts , they may file cases in Debt Recovery Tribunals (DRT) , they may file cases against High Courts and Supreme Court and they may use SERFAECI act to take possession of assets of defaulting companies to recover their dues. But unfortunately all these institutions and laws meant for helping banks in recovery  have proved ineffective . Ineffectiveness may be due to large scale corruption in the judiciary or due to lack of efficient manpower or lack of coordination among various organs of judiciary and administration or it may be due to in adequate manpower and inadequate infrastructure to deal with number of bank cases.

Lacs of cases filed by banks against small defaulters have been pending in various offices of Certificate Officers in various districts for years and decades. Because state government either keep these post vacant or give additional  charge to some other incompetent officers who do not have time and proper knowledge about bank loans to deal with gigantic number of such cases or inefficient and corrupt officers are given charge of such posts who bargain with defaulting borrowers for personal gain and cause huge loss to banks by delaying recovery  on flimsy ground for years together. 

Similarly DRTs all over the country  are not working properly and effectively. In may DRTs, they are not  having Presiding Officers for months and years or officers assigned this duty hold dual charge and unable to discharge duty sincerely and devotedly. There are many such officers in these DRTs who are so much corrupt and inefficient that cases are not decided for years or these officers give orders in favour of defaulting borrowers. 

Similar is the fate of SERFACIE act which is facing huge hurdles in effective execution for the purpose of recovery of dues from defaulters. This is why process of recovery from defaulters is too slow to help banks in reducing burden of bad debts. Majority of high value borrowers against whom banks have  filed cases in DRT or enforced SERFACEI act for recovery have approached High Court to get stay and then got success in managing to defer the hearing for an indefinite period and thus put hurdles before banks in recovery of dues from willful defaulters. 

To add fuel to fire , government of various parties during last three decades have propagated and irrigated bad culture of compromise and writing off of bad loans. Politicians use banks for political advantage and hence they sometimes announce loan waiver schemes and some other time, they build pressure on bank management to reduce burden of bad debts by compromise settlement and thus banks are constrained to sacrifice a large chunk of bad loans to clean their balance sheet, willingly or unwillingly and rightly or wrongly . In course of such exercise, many bad borrowers get success in buying various bank officials and get their loan either fully written off or sacrificed large chunk of dues. In this way they together cause huge loss to bank by writing off of entire loan or by sacrificing major portion of bad loans.

Now FM Jaitley is telling bankers that they are free to devise their ways to recover the dues from defaulters. Such advice seems to me as totally nonsensical. When all hands and legs of bank officials are bound with iron chains, the utterance of freedom become a ridiculous word. Bankers are actually free to give loan to any Tom, Dick And Herry either at their own or under pressure of higher bosses, local musclemen or politicians. Bankers are free to write off bad loans of bad borrowers or sacrifice bank's good money to please bad borrowers. To add fuel to fire , banks are forced to undertake non-banking activities like insurance, stock trading,portfolio management etc. Due to this bankers though earn a few crore of rupees in commission but cause loss to hundreds of crores of loan given to bad borrowers. There is a proverb " Gau markar Juta Dan" which means in english as "Penny wise pound Foolish".

Bankers are free to recruit any person in any post and promote them at any time. But none of these freedom has served bank's interest and volume of bad debts has been consistently increasing year after year. Several Finance Ministers of past government and FM of present government have many times expressed their concern for rising bad debts in PS banks during last ten years and more. Every quarter Ministers and RBI officials promise to take appropriate action to stop rising trend in Non Performing assets and unfortunately volume of bad debts in banks have gone up and up every quarter. Because none of FMs and non of RBI officials ever took the matter seriously . They always thought it easier to infuse fresh capital in ailing banks than to cure their sickness. It is taxpayers money which is easily available and in their control and therefore the use it always to hid sickness of banks and to hide corruption of bank officials and politicians. Politicians in general use taxpayers money as charity to distribute to whom they like , strictly as per their whims and fancies only.

Last but not the least, during last decade , quality of lending has deteriorated year after year and this is why inspite of efforts for recovery taken by bankers during last few years has failed to contain rising figure of bad debts. And there is no doubt that the volume of bad debts in banks will continue to go up and up until bankers are able to ensure quality of fresh lending. It is pity that they recover Rs.100 and by that time Rs.200 or Rs.300 of standard loan turns bad. When loan goes bad , it is easy for bankers to say that it is due to economic recession or global recession. Neither Government of India nor top management ever tried to strike at the root cause of standard advance slipping into NPA. Obviously when they are unable to find out and discover the real nature of sickness, they cannot diagnose the patient properly.  

Health of PSBs will continue to deteriorate and big bosses will continue to make promises for taking care of it. In a country when leaders are unable to say spade a spade , we cannot dream of any transformation or any improvement from current mess in economy. We will have to learn and propagate a culture where guilty are punished without loss of time and performers are only elevated to higher level. We will have to end the culture of flattery and bribery . We will have to inculcate good habits in the childhood of all Indians. 

It means to say that each employees joining in the bank have to be taught the lesson of loyalty to the organisation they serve . We have to stop the practice of worshiping bosses and we will have to end our loyalty to our bosses , our seniors and ministers . This is possible only when power of recruitment and promotion is left with minimum quantity of discretion. It is better to give all an opportunity to serve their organisation and the  country in order of seniority and if he fails even after all persuasion , motivation and training to perform as per expectation of bank, such workers may be shown the exit door without any hesitation and without much delay. 

Here it will not be incorrect to say that only a goldsmith can identify and certify purity of gold. Similarly only honest and good officers sitting in Interview panel can choose meritorious officers. Gang of thieves forming part of  Interview panels set for promotion of officers from one level to higher level cannot choose meritorious officers . This is the root cause why only yesmaen are picked up for promotion and recruitment in banking industry and this has been happening since 1991 when bank management were given power to choose officers of their choice on merit basis.

Corruption case: Court jails PSU bank official, three others-Hindustan Times 24.11.2015

A senior official of Union Bank of India and three others have been sentenced to varying jail terms of two to four years for cheating and causing a loss of Rs 1.5 crore to the bank by a Delhi court, which said plunder of public exchequer cannot be permitted at any cost.
The court said any attempt to cause wrongful loss to the public exchequer has to be dealt with sternly as public money was not for looting.
“A clear message is to be sent to the society that plunder of public exchequer cannot be permitted at any cost as the said money belongs to people of the country and is meant for development of the nation and any attempt to cause wrongful loss to public exchequer has to be dealt with sternly,” Special CBI Judge Harish Dudani said.
The court awarded four years jail term to the bank’s former branch manager M C Aggarwal and Chetan Sharma, the proprietor of Delhi-based M/S Royal Sales Corporation. It also sentenced convicts Vipin Sharma and Pawan Kumar Aggarwal, proprietors of two more private firms, to two years in jail.
The four convicts were held guilty for various offences including cheating, cheating by impersonation, using forged documents as genuine and criminal conspiracy under the IPC.
Read full news in following link
It is reported in newspaper that rickshaw-pullers, hawkers and slum dwellers have been  made directors in many companies which had opened accounts in Bank of Baroda branches and have commited forex scam amounting to thousands of crores of rupees in Bank of Baroda scam. 

A  person who sells vegetables on his cart in North Delhi has been made director of a company. Last year, he became the director of a company overnight without even knowing it and his remuneration was Rs 10,000 per month. He is not the only one who became a pseudo entrepreneur but there are 59 like him, living in slums, like rickshaw pullers, vendors, drivers, household workers, who were approached by black money hoarders and made the Directors of 59 companies in the Bank of Baroda Rs 6,172 crore money laundering scandal. 

The CBI and ED are probing  the said biggest trade based money laundering. This is now  referred to as banking-hawala scandal. CBI  is also surprised that low-income citizens were used by the exporters/importers to send their ill-gotten money to the foreign countries. It all started in May last year. 

The businessmen  behind the transfers to Hong Kong and Dubai, after conniving with the Bank of Baroda officials  approached these slum-dwellers with a lucrative offer. The drivers, vendors etc were asked to just provide their voter ID cards for which they were offered Rs 10-15,000 per month. The amount was irresistible for people with poor background and they had to just give their document.

On the basis of voter IDs, their PAN cards were  prepared by the accused persons and then current accounts were opened in the BoB branch in the name of fake companies. Some names in these companies - Directors and partners - were almost same and companies were shown registered at fake addresses. Similarly, shell companies were opened in Hong Kong through their contacts. Once the accounts were opened, the process of transferring money through dummy companies belonging to exporters/importers began.

 As part of the modus operandi, the exporters, in order to get extra money from the duty drawback, overvalued the exports. In a release last month, ED stated that "for such overvaluation, such exporters require foreign exchange in the foreign country equivalent to overvaluatio. Similarly, the importers, who are importing the items where the custom duty is high, undervalue the imports in order to save the custom duty, and they require availability of foreign exchange in the foreign country to pay the difference. The imports of dry fruits, pulses and rice were shown to be done in these 59 companies having accounts in BoB but no imports had been done actually. 

It is  found that Rs 6,172 crore was deposited in these 59 accounts between August 2014 till August this year mostly in the form of forex remittances and transfer through other banks. The suspects used another set of persons in the transfers. It is  said that 'entry operators' found in Old Delhi area, mostly Chandni Chowk, were approached by exporters/importers to transfer cash in these 59 current accounts.

Here I would like to say that process of account opening as narrated above is not surprising and new in public sector banks. It happens in almost all public sector banks  . Officers working in these banks are given target for opening accounts and clever officers apply their mind to open either fictitious accounts or without carrying out due diligence, they open the account of any Tom, dick and Herry whoever comes to bank to open account.

Bank Officers are more concerned about their career , their closeness with their bosses, their promotion, their greed for gifts which  usually distributed by clever businessmen to get their work done hassle free and in brief for their personal wealth and position. 

Bank Officers  are least bothered about the quality of work they do. Window dressing has become the established culture at all levels and in all PSU banks. Bankers are well versed in inflating deposit figure at the end of quarter by window dressing , they know the art of inflating credit portfolio without actual lending, they are expert in booking even recovery in bad accounts without actual receipts of cash from defaulters and similarly they are expert in opening accounts without completing set norms. 

Even ministers, RBI and other agencies want achievement of target and growth in figure by hook or by crook. None of them focus on quality , all focus on quantity. Value of Non Performing Assets in PSU banks is many more times what comes in public domain and what is declared in their annual balance sheet. Even Auditors, inspectors, RBI officials , Chartered Accountants and all concerned authorities are bought or forced to sign certificates of good health . It is open secret and everyone from top to bottom knows it but can do nothing. This is well established culture.

It is now Bank of Baroda which is exposed, many more banks were exposed in past by Cobra post and  all bank will be exposed in future too. Since none of  actual culprits have been  punished in the past and since only such manipulators are elevated to higher post, the culture of manipulations have got strong roots at all levels and it is not easy to change it . 

If bank management and Government of India really want real reform , they will have to focus on quality and change the habit of forcing targets on juniors. They will have to punish guilty offices, guilty politicians, guilty promoters of the companies, guilty CAs, guilty persons who provide fake certificates , thing will start moving in right direction. They will have to ensure hundred percent compliance of rules and guidelines as it is done in developed countries like USA and UK. Country cannot book real growth only by fraudulently inflating figures 

Once they start focusing on quality, real performers will come on the forefront and they will get elevation instead of flatterers and manipulators as hitherto. And sooner , the number of real performers will start increasing and there is no doubt that volume and quantity will also get boost up as it is happening in private banks.

If there is a will, there is a way.

Read full news in Times of India 

My Observation on Bank of Baroda Forex Scam: ------

Bank of Baroda is in news for last few days due to alleged forex scam valued Rs.6000 crore. It is reported that thousands of transactions took place from one branch of BOB and huge fund amounting to about Rs.6000 crore were remitted to Hong Kong in the name of  various companies as advance payment for so called import. Bank is charged with allowing money laundering .Though huge cash and inter bank transactions have taken place through hundreds of fake or genuine companies within a period of one year  ,  it appears to me, bank is not likely to suffer any substantial  financial loss.

The said Bank simply in greed of business allowed transaction without making adequate due diligence. Bank officials working in such branches normally become victim of precious gifts distributed by such ill-motivated rich customers. Ill-motivated business men know the art of motivating bank officials and politicians. There is no doubt in it that such a large value of transaction must awaken the sleep of top officials of the bank also and for such negligence some of top officials may also be punished.

But the real question is why and how RBI, Government of India  and Custom department could not smell the stink when such huge volume of foreign exchange was going out of the country through banking channels. Why RBI failed to notice huge cash and inter bank transfer of funds taking place from one bank to other. It is reported that  only 10 percent of entire transaction was in cash and rest was through fund transfers from 32 other banks. None of 32 banks could notice the irregularity going on in banks. It shows how the system in bank has rotten and how false picture is depicted by top officials to please their bosses in RBI and GOI.

There is a system of reporting of suspected transaction to head office of the bank and then to RBI along with a report on all cash transactions exceeding Rs.10.00 lac in a day.  Why so many banks failed to notice the ongoing fraud. After all, it is precious Indian money going abroad without any valid reason. If transactions in hundreds of crores go unnoticed in banks, how banks can curb lacs of such irregular transactions taking place in each bank each day. It is to be assessed whether banks are making mockery of entire KC norms and anti-money laundering Act. or is it due to political pressure.

It is also  true that the matter though belated ,came to light only when some officials of the same bank reported to RBI for investigation .

Keeping apart the said alleged scam of BOB, I would like to know what has happened to another Rs.350 crore bill discounting fraud detected in the same Bank of Baroda a fortnight ago which may cause a loss of Rs350 crore and more to bank.

Bills worth Rs 350 crore were discounted but the payment has not come. The concerned person has been reportedly suspended and an inquiry has been initiated .

Bill discounting is a transaction under which a firm sells its accounts receivable at a discounted value to banks or a factoring company. Selling of account receivable at a discounted value helps a company to meet its working capital requirement without resorting to borrowing. In such transactions, a fraud can take place when there is mala fide intention of buyer and seller, and the transaction is not honoured. 

I would like to know  how such huge value bills are  discounted and allowed to remain unpaid and unnoticed for such a long period. Banking system faced a similar problem a couple of years back when a large diamond exporter went on exporting to his sister concerns and relatives in Dubai and the (export) bills were discounted by banks in India. No money came to the banks, whose exposure to this company was pegged at ₹4,000 crore.
Some questions in this regard need to be answered.
  • How one after other bills are discounted even after occurrence of default in payment?
  • How head office of the bank remained silent on frequent defaults and how auditors failed to notice the irregularities perpetuated in the branch?
  • Why the report pertaining to bill discounting were only filed and not properly monitored.?
  • Was any credit report and due diligence report was carried out and kept in record on buyers and seller of products for which bill was raised and discounted by the bank?
  • Why branch officials were not aware of real nature and volume of business of the company who pretended to buy goods and who appeared to be seller?
  • Why and how branch officials got promotion out of turn and was there an nexus of such branch officials with top officials of the bank?
  • Why one after other fraud takes place and RBI or the concerned bank always fail to nip in the bud and fail to  punish the erring officials and if punished , why they do not publish the name of such fraudulent offices to alert others?
  • RBI use to carry out audit from time to time. Statutory Auditors use to certify closing statement of branches every quarter or half yearly or annually depending on volume of business of  a branch. And these auditors are mandatorily required to make their comment on high value transaction, on bill discounted, on overdue bills, on temporary faculties or overdraft allowed by Branch Head . How they failed to notice such irregularities in the branch and if they mentioned irregularities in their audit report, why audit department failed to take cognizance of it and why did they fail to take corrective step? 
  • Is it not a fact that  these auditors are normally  influenced by Branch Head and ill-motivated customers who please them by giving  costly gifts and dinners?
  • Concurrent audit use to take place in high value branches. Why did these auditors not mention the irregularities  or fail to notice such high value irregularities?
  • Internal audit use to take place in each bank. Does these auditors also work usually under influence of some rich clients or the other or that of branch officials ?
  • And so on-------------These basic facts needs to be ascertained to know the root cause of the rotten system . It is not enough to issue guidelines ever now and then and then go for deep slumber.

In some cases, there are genuine reasons like product defect and financial crunch but in recent past many frauds have also surfaced leading to rise in bad loans of the bank. It should also be looked into who were those senior and top officials in the bank during last five years who failed to notice the bad culture or who promoted or initiated the bad culture of discounting of fake or fabricated bills.

Here it is important to point out that 
he government had appointed Sri S S Mundra, as Chairman and Managing director of Bank of Baroda (BoB), a deputy governor of the Reserve Bank of India (RBI) In August 2014. Mundra took charge as chairman and managing director of BoB in January 2013 said to be the second strongest bank . Prior to his elevation, he was the executive director of Union Bank of India. All so called strong banks in the eyes of RBI and GOI are getting exposed slowly and gradually and still regulators and GOI not appear to be that much serious as they should be in view of gigantic nature of bank fraud and bank credit and its growing volume and day by day increasing intensity.

It is also to be seen whether Mr. Mundra failed in his role as CMD of Bank of Baroda to inculcate good culture or he was promoter and initiator of bad culture of bill discounting in above alleged fraud or forex remittance scam exposed in last few days. Because such huge volume of transaction invariably occurs with concurrence of head of the bank and such huge valued transactions are invariably submitted to table of CMD in every bank. 

If accusing finger goes towards Mr. Mundra also , then it should also be investigated who were Ministers who had recommended for elevation of Mr. Mundra from the post of ED Union Bank to CMD of BOB and then from CMD to Dy Governor of RBI.

Mundra has been preaching sermons after exposure of Rs.6000 crore forex scam. We should know his reality too. When he joined as CMD of BOB in the year 2013 he had  indicated that its restructured loan book stood at Rs 22,617 crore for the year ended March 2013. And as long as he was CMD of the bank , NPA was not allowed to go up , may be , by using tool of restructuring and ever greening of bad advances. When he left BOB , NPA of the bank went up sharply.

In the first quarter ended June, BoB saw its asset quality worsening with GNPAs at 4.13 per cent as against 3.11 per cent a year ago. Net NPA level declined to 2.07 per cent from 1.58 per cent. Fresh slippages in the quarter stood at Rs 1,685 crore from Rs 1,881 crore a year ago. It restructured Rs 147 crore worth of accounts in the period.

As such reality of top officials has also to be peeped into. As long as top officials are ill-motivated  in any bank, none of juniors will have the courage to dream of sticking rules and going against the will of Super Bosses.

Real diagnosis lies in striking at root cause of the sickness of the bank and not surgically removing a part of the body i,e, by making a few junior officers as scapegoat for each big scam and allowing top officers a safe exit or quick promotion despite their indirect involvement in each high value scam or high value NPA or high value write off.

Bank of Baroda Detects Rs 350 Crore Bill
Discounting Irregularity: Report-NDTV

State-owned Bank of Baroda has detected Rs 350 crore bill discounting irregularity and initiated an investigation into it.

"Yes, bills worth Rs 350 crore were discounted but the payment has not come. The concerned person has been suspended," said a senior official of BoB. 

RBI to tighten bill discounting norms-Hindu Business Line

With increasing cases of fraud coming to light, especially in the gems & jewellery and textiles sectors, the RBI is likely to tighten guidelines relating to bill discounting for banks.

The restrictions could include setting tighter limits on clients’ counterparty exposure and prescribing third-party verification of clients’ buyers.

The trigger for revisiting the bill discounting guidelines could be the ₹350-crore fraud reportedly committed by one of Bank of Baroda’s clients in Ahmedabad.

Based on references about bill discounting frauds from banks, the CBI, over the past few years, has registered cases against senior public sector bank (PSB) officials and other individuals for entering into criminal conspiracy and fraudulently discounting false and forged bills drawn on ‘buyers’ based in the country or overseas.
A senior PSB official said the bills need to be properly linked to the chain of inventory and invoices; otherwise it is a case of “accommodating” the customer.

“Mostly what happens is that the customer’s client (buyer) on whom the bills are drawn may be his own sister/related concern, but not on record. So, the customer keeps ‘supplying’ goods and getting the bills discounted. Possibly, no goods are supplied.
“That is why the banks normally do not undertake this (bill discounting) transaction unless it is a reputed client. If somebody needs to be accommodated, this is one of the ways in which the customer influences the bank to accommodate him,” explained the banker.

The official further observed that the banking system faced a similar problem a couple of years back when a large diamond exporter went on exporting to his sister concerns and relatives in Dubai and the (export) bills were discounted by banks in India.
No money came to the banks, whose exposure to this company was pegged at ₹4,000 crore.
Contingent liability
When it comes to accounting, bill discounting is a contingent liability for the customer.
Normally what happens is that when a banker does ratio analysis, the contingent liability is not really taken as a part of the customer’s finance.
“So, this is also one way they try to fudge and present better accounts and better financials for the company.
"Sometimes a gullible bankers are taken for a ride,” said a PSB official, adding that though there are established norms for bill discounting, they are often given the go by.
Checks and counterchecks
Where bill discounting is done, checks and counterchecks are routinely made.
When a bank takes an exposure on a particular customer, who is supplying goods to 10-15 buyers, there is a prescription that the exposure to each buyer should not exceed a particular limit. Thus, certain risk management practices are in place.
The discounting facility should be given only to “good” customers and not just anybody, said the PSB official.
“Today, power has been delegated at the lower levels in banks. So, there are cases where they (officials) start accommodating the party…

“Once you are in the trap of the customer he exploits you. He will threaten not to pay unless discounted,” the banker said.


Sunday, October 4, 2015

Predicted DA From November 2015

30 DA slabs i.e. 3 % increase is expected in November 2015 as per July and August 2015 CPI - Ashwani Rana, NOBW

Following RBI's decision to cut its repo rate by 50 basis points from 7.25 percent to 6.75 percent on Tuesday, many banks have decided to pass on the benefits to customers by cutting their base rates.
So far, nine banks both public and private including the largest lender of the country State Bank of India, have joined this club. The above chart  provides with quick information on the new base rates of these banks.

Pannvalan had forecasted DA on August 31
On 31.08.2015, I had forecast that the anticipated hike in D.A. for November, 2015 is 3.00%. At that time, only the consumer price index for July, 2015 was out. Now, the index for August, 2015 has been published (only this morning - not yesterday, as per the advance release calendar). For July, 2015, the index was 263 and for August, 2015, it has touched 264. So, my forecast of 3% hike in D.A. for Nov.2015 may become true.
However, let us remember that the Index for Sep.2015 will be known only on 30.10.2015. So, until then, this is only a forecast.

Medical insurance scheme clarification by Sh Hariharan DGM united insurance HO. Chennai

Attended a meeting organised by AIBOA (Maharashtra) to discuss the health insurance scheme for retiree employees . The gathering of retired employees was addressed by:

 1. Shri Hariharan, DGM , United India Insurance, HO, CHENNAI
2. Shri Manek Dastoor of Dastoor & Co., advisors to IBA.

Take-away from the discussions included:
1. The scheme is to be implemented from 01.11.2015.
2. Even though the banks have stipulated cut-off date for exercising option, a time window of 90 days (from the date of implementation) will be available for a retiree to exercise his option in case he failed to do so within the cut-off date.
3. Once an employee opts out of the scheme, he/she will not be eligible to be covered under the scheme.
4. Spouse of a deceased retiree is eligible to be covered under the scheme.
5. Even though the scheme talks of "dependent" spouse, it was clarified that there is no income restrictions. Spouse is covered.
6. Sum assured cannot be increased by individuals.
7. In case the retiree expires, the spouse will be eligible for coverage under the scheme till his/her death.
8. All types of retirees are covered under the scheme.
9. Pre-existing diseases are covered.
10. In case both husband and wife are in the bank(s), both can opt for the scheme. For each of them coverage will be for the spouse also. Total coverage for the two together
will be the sum of their eligible coverage.(if both are officers, total cover will be Rs 8 lacs.
11. No age limit for being eligible for the scheme.

Sri From:  Ramachandran Suryanarayanan

 Ref: GS:127 23rd September, 2015

Shri R.R. Mohanty,
General Manager (HR),
Union Bank of India,
239, Vidhan Bhavan Marg,
Nariman Point,
Mumbai - 400021

Dear Sir,
Sub: Implementation of Medical Insurance Scheme for retired Officers / Employees – Staff Circular No. 6243 dated 18/09/2015
We invite your kind attention to Staff Circular No.6243 dated 18th September 2015 issued by you on the above subject. We had, in the recent past, demanded that the Retirees should not be burdened with the payment of premium and to meet the same out of allocation for Retirees from Staff Welfare Fund. We reiterate our demand and request you not to insist payment of premium by the Retirees, as all of them have been burdened with galloping inflation, falling interest rate on deposits and the spiraling medical expenses. However, we welcome this initiative and thank you very much for the same.

While on the subject, we note that Retiree Officers have to pay annual premium of Rs.7493/- and Retiree Award Staff members to pay Rs.5620/- per annum. We have today received a communication that the Board of Directors of Punjab & Sind Bank has approved a similar scheme with subsidized premium of Rs.3750/- for Officers and Rs.2760/- for Award Staff members. We, therefore, request you to kindly consider substantial reduction in premium payable by all the Retirees indicated in Staff Circular cited above. It may not be out of place to draw your attention that in terms of Khandelwal Committee recommendations, 25% of the funds allocated for Staff Welfare activities should be ear-marked for Retirees. With the introduction of Medical Insurance Scheme, the allocation of Staff Welfare Fund for Retirees will be very meager and the Bank may, therefore, consider subsidized premium for the Retirees, if not, altogether waiving payment of the same.

After carefully going through the Circular, we have observed that you have advised the retirees to submit the consent letter to join the Medical Insurance Scheme to the AGM (HR), Terminal Benefits Division, UBIREMAS, Central Office, Mumbai so as to reach his office latest by 20th October 2015. You may kindly note that not even a month’s time has been given to the reitrees to join the scheme. We may bring to your notice that many of the Peer Banks who have introduced similar scheme in their respective banks, have given 2 months time for the Retirees to join the scheme.

You may realise that retirees of our Bank, numbering several thousands, are scattered all over the country, some being placed in remote villages. Further, many retirees stay abroad with their children. Most of the retirees normally do not visit their pension drawing branches; since they are in a position to draw money through ATMS of our Bank and other banks situated near to their place of residence. As such even if the Circular is displayed in the Bank’s notice board, many retirees may not have a chance to see the circular.

In the consent letter to join the Medical Insurance Scheme, the retiree is required to declare that he has gone through the terms and conditions of the Joint Note dated 25.05.2015 on Medical Insurance Scheme extended to the existing retirees. This is untenable as the retiree is not expected to know all the terms of the Joint Note dated 25.05.2015, in view of its non-availability to the retiree.

In the staff Circular referred above, Branch Managers have been advised to bring the contents of the Circular to the notice of all the existing retired officers / employees of our Bank. However it is our experience that the compliance of such advices has been found to be far from reality, especially, in view of various practical and operational reasons.

Further we note that as per Staff Circular in question, the Bank will be debiting the retirees’ account for the amount of annual premium along with service tax decided by the Insurance Company as and when due / demanded, without any prior intimation / information to the Optee. In this connection kindly note that retirees are aged persons who may not remember correctly the due dates for renewal of the policy. Moreover, the amount of premium with service tax may vary from year to year. Therefore, we request that the retirees may be given prior intimation about the renewal date and also about the amount to be maintained in the account.

Taking into account all that are stated above, we request you to consider the following options in the matter.
(i) Extension of date of submission of consent letter, at least, up to 22nd November 2015
(ii) Arrangements to be made by branches to send a copy of the Staff Circular No.6243 (with annexure) dated 18th September 2015 to all retirees whose addresses are available with their pension drawing branches.
(iii) Giving prior intimation / information / notice to the retirees about the renewal of the policy and the premium due in every year.
(iv) Provision may also be made for the Retirees to send the consent letter duly signed, electronically, with photographs of the Retiree and his/her spouse scanned.
Thanking you,

Yours faithfully,

Friday, September 25, 2015

Rate CUT And Competition In Banks

I fully  concur with opinion of RBI governor Mr. Raghuram Rajan who says that reduction of interest or giveaways to corporates are not the only tools for Credit Growth or for growth in economy . There is limit for RBI or for any Government to give relief to business houses in interest and if we go beyond it, or if we cross the limit , it will be disincentive to silent savers and it will have adverse affect on savings and investment environment in the country . High value savers have already shifted their savings from banks to other pockets like real estate, gold, stock markets , commodity market or in Swiss Banks. 

But the bitter truth is that business houses are not leaving any stone unturned to build pressure on RBI for lowering of interest rate. Politicians of all colour and creed who do not understand the intricacies of the economic principles or who do not want to understand it wilfully to serve their political agenda are time and again putting pressure on RBI to lower interest rate. Finance Ministers during UPA rule or now in NDA rule are thinking in the same fashion that only lowering of interest rate may cure the sick banks and may give a boost to economy. As if interest is panacea for all ailments.

Politicians do not try to understand that if banks are forced to reduce interest rate on loans and advances, they will have to lower interest rate they pay o deposits which they receive from savers. And if savers particularly pensioners or person whose livelihood depend on interest will face greater difficulty if interest rates are lowered on their savings. They will be forced to put money for higher interest with local money lenders or Chit fund companies or NBFC . This will definitely erode the deposit base of lending banks and hence deplete their lending capacity. When their resources will shrink, they will naturally will not lend or try to borrow money from RBI or other costlier sources. This will further cut their capacity to lower rate or cut their net interest margin and finally cut their profits.

Further , continuous rise in bad debts is causing banks greater pain and erosion in their interest income. Volume of bad debts has been consistently increasing in all banks due to various reasons. Banks are constrained to write off loans and interest . Again their profit and capital gets eroded. If their profitability get eroded further by interest cut , health of banks will further deteriorate.  RBI Governor is therefore perfectly right in not lowering interest rate . He is right in saying that only Stimulus to business houses cannot help in giving a boost to economy.

After 2008 financial crisis is USA , India claimed that US crisis had not impacted Indian economy. Still the then UPA Government gave away hundreds of crores of rupees to Corporate houses in various forms of subsidy.  Government advised banks to give all relief to business houses without ascertaining  the fact whether the business houses were affected by US crisis or not. GOI allowed Public Sector Banks to give interest concessions as per their whims and fancies and allowed them to restructure bank loan if the same was irregular to stop slippages in NPA category.

Previous Government inculcated a wrong culture in minds of bankers who used this tactics to conceal all bad loans . This is one of prime reasons that ratio of gross NPA and that of stressed assets in PSBs have grown to such a large extent. Stimulus allowed by banks and GOI to corporates after 2008 crisis were as good as Jugaad tools used by UPA government , but they did not yield an fruitful result , rather they damaged the sound economic health of the country. This happened despite opposition by the then RBI Governor Mr. Suba Rao.

It is good luck that RBI Governor Mr. Rajan has understood the main problem public sector banks are facing and hence he is trying to prescribe proper medicine and not sticking to 'Jugaad' tools as suggested by clever politicians .He does not believe in temporary solution and neither does he believe in artificial or manipulated growth of banks. He does not want window dressing . He does not want bankers to book higher profit by window dressing . He does not want that banks should hide bad loans , he does not want banks to reduce provisions by fraudulent measures and he does not want banks to boost profit by fraudulent methods.

Let us see how far Mr. Rajan gets success in his Utopian ideas. I say Utopian because I know the nature, attitude and character of Indian politicians.

Also read my Blog "RBI Governor Does Not like Jugaad"

Why Raghuram Rajan Believes Low Rates Aren't the Only Growth Pill-NDTV-20th September 2015

When it comes to interest rates, mum is the word for any central banker ahead of the credit policy. And the RBI Governor is no different.

But he is one central banker who is known to speak his mind. Every word he says makes policymakers sit up and take notice.

"I know these cameras are here not to see me speak on core competencies but on interest rates - so let me offer my standard disclaimer," RBI Governor Raghuram Rajan told a hall packed with industry captains, economists and mediapersons while delivering the CK Prahlad Lecture in Mumbai today.

"For any hints of what we may do in the upcoming policy, please read the guidance in our last policy."

The timing of his lecture today was key for two reasons - the RBI Governor was speaking hours after US Federal Reserve Chief Janet Yellen decided not to hike interest rates, coming as a relief to economies like India that have seen stock markets rallying as a response to Fed's decision. Plus, ten days from now the RBI has to take a call on whether or not to cut interest rates at a time when inflation in India has touched historic lows and pressure is mounting from all sides to deliver a rate cut to boost growth.

Despite his assertion not to draw any veiled inferences from the contents of today's speech, he did give three useful insights into why he thinks low interest rates alone cannot spur the growth of any economy. And why he believes sustainable growth needs a lot more that just low rates and giveaways for the industry.

For one - he says, reforms (and not rates) hold the key to India's sustainable growth. "We have to expand the sustainable growth potential. That means continuing to implement reforms that government and regulators have announced that is the only way to get sustainable growth potential up," he said. A crystal clear message to the government - walk the talk, implement the reforms.

His second assertion was to learn from the experience of Brazil - an economy that was delivering an impressive 7 per cent plus growth rate just a few years ago and is now likely to shrink over 3 per cent. He says Brazil's central bank was "pressed to lower rates" fueling a credit spree that now overburdened customers are struggling to pay.

Third, the Governor today made a key distinction between the interests of the "vocal borrower" and the "silent saver." So while low interest rates benefit borrowers - be it individuals or the industry, we forget that they hurt the depositors. The Governor felt it was important to keep the silent saver in mind while taking a call on rates.
"For us at RBI, key task is to keep inflation low - not just today, but well into the future so that we get nominal modest rates that satisfy not just the very vocal borrowers but also the silent saver," he said.

Click Here To Read My Blog of 13th June 2015 Interest Rate is Not medicine to cure sick banks

 Many of his critics will strongly disagree with his views arguing that if historically low inflation rates don't merit a rate cut, then what does? Shouldn't we be worrying about "deflation" rather than "inflation" as the Chief Economic Adviser Arvind Subramanian so clearly articulated recently.

But Dr Rajan's message is clear - he isn't succumbing to any pressures and will lower rates only when he feels the timing is right.

What's true is that Dr Rajan can be credited with putting India on a much stronger footing in his two years of Governorship. The Fed decided against a rate hike, but today India was far better prepared and a much stronger economy to deal with any global shocks than it was two years ago when he took over as the RBI Governor. In 2013, the taper tantrum sent Indian markets and the rupee into a tizzy putting us among the worst performing markets worldwide. Today, as Dr Rajan himself says - "India is an island of calm in an ocean of turmoil."

Dr Rajan, we're not taking any hints from today's speech. But for those who are taking a September rate cut for granted, be prepared for some surprises.


What Type of Competition It is?- I ask
Following is my opinion

It seems ridiculous to me when RBI or Government of India or any other economist or writer or any banker talk of competition in banking industry. What type of competition after all it is? In the recent past ,Reserve Bank of India and Government of India have given license to many business men for opening of new banks, differentiated banks or payment banks, or opened Mahila Bank or Mudra Bank and claiming that these banks will create competition among banks.

About 100 year old public sector banks or you may say that four decades old nationalised banks are said to be competing with new generation private banks , banks which took birth about two decades ago. Giant PS banks with old infrastructure, with mind set of secured government job and with responsibility of shouldering the task of social welfare agenda of government are competing with private banks run by perfectly new generation technology, by youth crazy of jobs and afraid of loosing jobs and run with absolutely profit motto without taking care of any social objective. What type of competition it is, God knows.

There are 28 public banks and they are competing with each other. One PSB is taking over business of other PSB giving interest concession or by giving relaxation in service charges. One PSB sacrifices interest or processing charge to snatch credit business from other PSB and offer higher interest rate on deposits to snatch deposit business from other bank. Is it called competition?

One PSB losses and another PSB gains. Such types of competition is like hand of a person is competing with other hand, one leg is competing with other leg , ears of the same persons are competing eyes of the same person. You may imagine .the fate of a body when different parts of the body competes with each other, act against each other and work in conflict with each other. Or you may say that there is no harmony among different parts of the same body. Perhaps government is forcing such competition on various public sector banks and causing loss ultimately to people of India, to taxpayers and to investors in different PS banks. Number of weak banks has been increasing year after year and talk of merger and consolidation to hide weakness of banks is going on for last three decades and more. Government has to infuse thousands of crores of rupees to these banks to survive and to compete with private banks . Not only this, PSBs have already sacrificed lacs of crores of rupees in writing off of bad loans or in compromising with bad borrowers. This is the cost of competition for PSBs have to bear and still their shares are not choice of investors. In other words, one may that Private banks are allowed to spoil the future of PSBs in the name of so called competition..

Secondly, Different PSBs are competing with private banks like Axis Bank, HDBC bank or ICICI bank as if normal trains are competing with Metro rail. Normal and old chain of trains are to carry an number of passenger running from village to village causing discomfort to all whereas Metros are meant and designed to serve passengers of big towns and confined to big cities only. Fare of normal trains cannot be increased  keeping in view  the pain of poor people even though quality of service get eroded and deteriorate day by day.

Further Private banks are set up purely to earn profit whereas PSBs are made to serve social agenda and national agenda of the country. Competition imposed on PSBs  is like competition between government hospitals and private nursing homes. Private nursing homes charges are extraordinarily higher  and theyvhsve option to choose patients and charge as per their whims whereas charges of government hospitals cannot go up and cannot be discriminatory keeping in view the possible protest from common men and from politicians of opposition group. Competition is like that between private schools and private colleges for higher educations on the one hand who charges lacs of rupees as tuition fee per year from student with government run schools and colleges on the other hand which cannot increase tuition fee to that extent. Similar is the quality of teachers in government schools and that of Doctors appointed in government hospitals. On the other hand Doctors appointed in private nursing homes or teachers in private colleges are of high quality and have scope to earn much higher income compared to their counterparts in public hospitals and public schools. Appointment , promotions and transfer in public banks takes place based on flattery and bribery whereas that in private banks based purely on merit and quality of performance and potential of  the worker.

Obviously if PSBs with different supporting hands and infrastructure are forced to compete with entirely a different set of supporting staff and infrastructure , it will cause much damage to former only . Private banks will not take any such step or undertake any project for lending which may cause loss to them in future whereas officials working in PSBs can cause all losses to their bank only to achieve the target or to please their bosses or to please their political masters. There is heaven and hell difference between the two sets of bank and between two set of workers. As such the idea of competition is totally unjustified, deceptive and suicidal .

During last few months , RBI has given license for opening of new private banks like Bundhan Bank or IDFC bank , given license for opening of payment bank or for opening of banks to deal in small and micro finance . RBI says that these new banks will further increase competition among banks. Such competition is like a Adult or matured person is said to compete with a newly born baby. Or more clearly you may say that a passenger train is forced to compete with Rajdhani train and inviting accidents and losses to passengers. To make it crystal clear, such type of competition is likev asking a boy admitted in extremely poorly maintained village level school to compete with a boy admitted in high standard costly private school.

I am unable to understand what type of competition these newly born banks will create or generate for old generation public banks. But one thing is certain  to me that these newly born private banks, payment banks or small finance banks will grab quality business of old PSBs and cause erosion in business volume and cause loss to existing banks. PSBs will have to pay a lot and face huge damage in competing with these new generation banks and obviously such losses  accumulated together will lastly come on the shoulder of Government of India and that on people of India only.

It is true that as number of new banks increases, customers will get new option of banks and they may get better option of services in some towns and cities Rich customers who can afford paying higher service charges may shift to best serving private banks or new generation banks. But there is no doubt that old set of PSBs will gradually grow in weakness and turn from bad to worst , become non-performer or less performer and will slowly be thrown in waste box by new generation youth .WE have seen how Regional Rural Banks during last two three decades have been growing weakness and gradually they are merged with parent bank. We have seen how various cooperative banks are sitting on bomb of bad debts and facing chances of closure. Similarly few PSBs have become too weak to survive and government is contemplating to merge them with stronger PSBs. Government is unable to change the wine , but they are changing bottle frequently . But it is sure that Government cannot increase the sale of wine by changing bottles only. One stock of old bottles will go in the back racks and new set of new bottle may be keep in front rack . Ultimately it is the quality and cohesive policy which work for long period.

Until contents changes, sale of bottle cannot increase. New generation banks which have fresh and quality materials to serve in their banks will grow and old banks which are constrained to stick to old contents and old tools cannot dream of increasing their sale.

To conclude , I may say that entire talk of competition in bank is farce, ridiculous, deceptive and harmful too. And last but not the least, I am unable to understand what purpose is going to be served by such mismatching and ill-conceived competition. It is absolutely unimaginable that PSBs will be getting good outcome and better results in competing with private banks. As a matter of fact , even various branches of the same Public bank cannot dream of competing with other branch of the same bank. This is because each branch has got some locational advantages and disadvantages. A branch situated in remote village cannot dream of competing with a branch situated in a town or in metro city. Not to speak of branches at various location, even branches situated in same town cannot dream of competing with other branches of the same bank in the same town because each mohalla or ward has some merits and some demerits.

A branch situated in the premises of a good school, or a good college or good PSU or a reputed institution can capture business in hundreds of crores of rupees in a year without making any special effort. On the contrary a branch situated in remote village, or in a critical area, or in a naxal affected area or even in dry industrial area cannot dream of capturing good business or earning considerably good profit at par with that in a town or in a city. There are some places in Industrial areas, where credit expansion in hundreds of crores of rupees is possible every year whereas in some other places , it is difficult to increase credit even by a crore or two in a year.

Potential of business for any branch or for any bank in any area depend on many locational factors such as local area, local politicians, local inhabitants, business potential , administrative support ,infrastructural support in the area, local climate ,availability of natural resources ,quality and quantity human resources etc . As such the very thought of competition among various branches or various banks is faulty and misleading.

I want to ask a question to all  , are such competition meant for giving better service to customers or for earning higher profits?

Are such competition to fulfil task of the social objective and completing social welfare plans mooted by GOI with available resources , building better infrastructure , growing more and more crop, manufacturing best product, increasing exports and increasing comfort of common men or ..........for giving an opportunity to private banks to earn greater profit at the cost of that of Public sector banks?
People of India, politicians ,great economists and planners of the country have to ponder over it and assess what type of competition is going on in banking industry and what type of it is necessary to save sinking banks. Banks in public sector are meant to distribute charity or to earn profit only.

Is Government forcing competition among looters of banks to loot maximum in the name of business or in the name of competition?

Bankers are freely giving credit ,freely writing off loan and then again giving fresh loan and again writing off and so on . Sometimes they hide bad loans by restructure and sometimes by selling to ARCs and sometimes by writing off them. This is an open secret that public sector banks are competing with each other in increasing stressed assets , in increasing Gross Non Performing assets, in writing off loans , in causing loss due to frauds and in boosting the size of balance sheet by manipulation and by fraudulent methods.

Is it the purpose of competition suggested by RBI and GOI?

Banking industry to brace itself for competition-DNA 23.09.2015

The banking industry landscape is set for a salutary change. So far the industry has endured the public sector banks’ patchy performance interspersed with the recent breezy spell of private banks’ entry on a limited scale. The Reserve Bank of India is aiming to foster competition and innovation in order to promote efficient service delivery to end-users.
In June-July this year, the RBI gave licenses to IDFC Limited, a non-banking finance company (NBFC) and Bandhan Financial Services Pvt Ltd, an NBFC-cum-microfinance institution (MFI), to carry out banking services across the country. Subsequently, in August, licenses were granted to 11 payments banks which are ‘niche’ or ‘differentiated’ banks with the common objective of advancing financial inclusion. The RBI announced its ‘in-principle’ approval to 10 applicants for setting up Small Finance Banks (SFBs).

Read in detail by clicking on following link