Thursday, July 9, 2015

Banks threatened with huge NPAs

There is a report in First Line that a Collector from Amravati threatened action against bankers for not reaching agricultural loan targets in a quarter under IPC. This is sheer arrogance on the part of the District Collector who does not know his job. There is another report of the UBS on the mounting NPAs in the Live Mint of 7th July 2015. Reading together becomes necessary.
UBS Report has been contested by 'Yes Bank.' while the other banks chose to ignore. The fact remains that the corporate debt today occupies major portfolio of banks. There is excessive interference from the administration in public sector banks.
Take for instance, the story of Maharashtra Government where one of the district collectors audaciously threatened the banks for not achieving the targets in farm lending as per his dictate just a couple of days ago. The news appeared in First Line. The banks in the coordination forums - District level Consultative Committees of which the Collector/DM is the chairman, have never pulled up the district administration for failing to provide reliable land records, for failing to provide the credit related infrastructure for farm schemes to succeed and they mention in their Annual Credit Plans and NABARD in its PLP for the administration to respond adequately. The Administration never adequately responded.

When the 20-point programme was introduced initially, District Collector, Guntur reacted similar to that of Maharashtra District Collector threatening with criminal action for failing to reach the targets under the programme in 1979. The entire banking community walked out of the DCC asking the Collector to go ahead. The then Secretary Planning Govt of AP had to counsel the Collector to behave!!
Thanks to the Live Mint for the chart.

Such interferences do not mean so much as unseating the top executives for not lending to the corporates or for taking any action on the NPAs of delinquent corporates that today reached unsustaining levels. The action on the top executives range from transfer from the portfolio handling to transfer out of place. These are taken without demur as no person would like to be at the risk of his career. The obliging top executives and Chairmen get the plum posts. Such games from the Banking Department should stop. Narasimham Committee -1 recommended in 1991 in its maiden report itself, that the time had come for the banking department of the GoI be wound up and stop regulating banks. This recommendation should be revisited by the GoI in the interest of healthy reforms to the financial sector. .