I salute RBI deputy governor Mr. K C Chakravorty , in charge of banking supervision who has openly expressed doubt on integrity of CMD and ED of public sector banks. He asked for more consistency in financial reporting of banks. He said yesterday that financial reporting should not be as per minds of bank ‘s chairman . When Bank chairmen change profit tends to fall. Mr. Chakravorty has substantiated his observation by citing example of few banks like SBI, Bank of Baroda .Bank of India and so on. He further said that the issue s not standardization of reporting system but to examine the integrity of information need in financial reporting.
I salute the editor of the valued Newspapers who have given prominent place for such news in edition of 7th June 2011. I am at least not astonished to read the views of RBI deputy governor because I have been writing similar views since long. It is true that views of laymen like me are not published. Since RBI deputy governor has expressed doubt on integrity of CMD of banks, the esteemed newspaper thought it fit publish the same on front page. Anyway I am pleased that there are some few people sitting at top posts who at least realize the bitter truth of corrupt system prevalent in banking sector. I am happy that RBI governor has pointed out the accusing finger towards chief of public sector banks. If he dares to look into ugly shape of various branches of top ranked banks, he will find that the position of branches , at least seven out of ten branches is much more stinking and dangerous for survival of the bank.
I fully agree with the views of RBI deputy governor that financial reporting changes after change of Chairman of that bank. I simply add that bad health of a branch is also visible only when head of the branch changes. It has to be kept in mind that financial report of any bank is nothing but sum total of financial report of its branches. As such when integrity of financial report of a bank is doubtful , it gives the undeniable message that financial report of its branches are doubtful and hence need thorough and inspection and investigation.
Need of the hour as such is to punish the person who promoted bad culture, who indulged in bad lending in banks and who caused huge loss to the bank directly or indirectly even if he or she is retired and at the same time bring sidelined officers back into mainstream to provide safety to ailing bank as soon as possible.
I suggest RBI deputy governor to take stern action against a few CMD of top banks who failed to maintain sanctity of financial reporting , who played fraud with system , who manipulated balance sheet, who indulged in bulk financing to increase credit deposit ratio, who indulged in window dressing in deposits, who did not make adequate provisions for pension and gratuity, who willfully sanctioned huge credit to unscrupulous corporate houses, who promoted bribe led lending by giving verbal and telephonic instruction to his subordinate General Managers and Deputy General Managers, who promoted the culture of hiding bad assets and thus who postponed recovery action on bad borrowers and punitive action against corrupt subordinates officials who in writing recommended sanction of loans to bad borrowers, who promoted bad culture in recruitment , promotion and posting of officers, who gave out of turn promotion to corrupt officers to promote bribe culture, who sidelined good officers or used good officers to clean the branches spoilt by flatterer bad officers, who promoted fraud culture in reporting of financial reporting, who by verbal orders instructed field functionaries to play fraud with CBS system and conceal bad loans to avoid provision for bad loans and to inflate profit etc.
RBI governor has to demonstrate his good intention by taking stern punitive action against Chairman of such banks whose financial reporting has not only tarnished the image of that bank and regulating agencies but also cheated the investors who believed on financial results and put money in shares of such banks. Chief of such banks whose action has caused huge loss to the bank in subsequent years must be brought to task even if he or she is retired from services .
I would like to mention here that every CMD and ED of each bank has a few, not all, general managers around him whose work is to flatter the boss, earn bribe through various ways. Collect gifts from his subordinate Deputy General Manager, assistant general managers while sanctioning loans to such bad businessmen who can afford giving big amount of bribe .It is necessary to point out here that such top ranked officers used phone call to get their evil work done These general managers share such ill earned money with ED and CMD in various ways. It is open secret that any GM, DGM or AGM or any executive cannot dream of becoming ED or CMD of a bank until he or she spends 25 to 50 lacs of rupees in getting the support of various members of interview panel who are empowered to select the person for the post of EC and CMD of a bank in public sector. When corruption is unavoidable at top post it is but natural this corrupt culture percolate the down the line.
Regional Head or Zonal head of a bank has liberty to pick and choose officers of his or her choice for posting at various bribe-potential branches, he has the power to whimsically promote an officer to higher scale or reject an officer in promotion process, he has the power to sideline honest officers to remote places when there is chances of such officers raising voice against corrupt activities of regional head. In such environment it is but natural that officers tend to become number one flatterer to his boss .Every officer in bank knows very well that if flatters to his boss and share his ill earned money (earned through bribe) honestly with his boss, gives costly gifts to his boss and his family and if he extends red carpet welcome to his boss during his visit to the branch, his promotion and good posting is guaranteed. On the contrary he also knows very well that performance is not the weapon which can ensure elevation in career. This is why flattery and bribery culture is spread in Public sector banks like cancer.
It is not an exaggeration to say that just like CMD and ED of a bank each Regional Head or Zonal Head or Circle Head has a few Branch manager say five out of ten who have got Doctor degree in art of earning bribe in sanctioning of loans, in contractual work, in supply work, in recruitment, posting and promotion of staff and in all financial transactions. Such corrupt branch managers and senior officials are master in art of speaking and toeing the line of bosses and extending all unwarranted services to even family members of Regional Head. These junior level officers earn money through lending and purchase deposit from government officials. If a branch manager is ready to pay a few thousands and a few lac to government officers he can get deposit in crores of rupees. When deposit increases he can sanction loans and earn bribe without any objection from controlling offices, vigilance officers and auditors. Because such corrupt officers know the art of managing Chartered Accountants, Internal Auditors, RBI inspectors, CBI officials, vigilance officers and all who are potential danger to his corrupt deals.
It is not that financial reporting of a bank changes after the change of CMD or Ed of a bank. True fact is that fate of most branches changes when head of branch is changed. Bad advances sanctioned by such corrupt officers are not treated as Non Performing Asset as long as he remains posted in that branch or as long as regional head of the branch who is also beneficiary of bribe directly or indirectly is changed. Financial report of such branch changes after change of branch manager. This is why NPA reported by such branches exhibits quantum jump in ratio when corrupt team of officials are transferred to other states. Even then team of corrupt officers sitting at central offices try their level best to protect such corrupt officers and leave no stone unturned to close the files against such corrupt officers containing serious charges of lapses and corruption against erring officers Rather they choose some level junior officers to clean the malady accumulated by corrupt officers and ultimately such junior officers are made scapegoat .This is the culture of public sector banks.
It is not therefore surprising that quantity and ratio of NPA in each bank has been rising every quarter. Profitability of every bank is at stake in the hands of such crooked officers who are holding top posts. There are numerous branches in each bank where NPA percentage is more than 20 percentage to more than 50 percentage of total advances of that branch. Heads of banks are saving their image by resorting to bulk financing at the fag end of each year or by selling their NPA to other financial institution or AMCs. How long such manipulation in financial data will help in keeping bank alive, only God knows.
I submit following questions for RBI and lastly submit a few suggestions too.
· Is there shortage of goof officers in bank that few officers are getting extension after extension for the post of CMD?
· You have already seen and experienced how CME of State Bank, Bank of Baroda, Bank of India, Indian Bank, Corporation Bank, Vijaya bank etc have been caught on wrong footing either by CBI or RBI of CVC or by other regulating agencies. Still you prefer praising previous SBI Chief or keeping existing CMD of other banks for undesirable longer period. It is worthwhile to mention here that as per policy of the bank it is desirable that Branch Head of a branch is changed every three years so that bribe led lending or under pressure lending may be minimized.
· Is there anyone who can assess the financial data of other banks at least after bitter taste of SBI result and also that of SBI at least now when RBI has seen the quarter four result of state bank of India?
· Have RBI learnt any lesson from SBI result or simply given a press release to safeguard its own image?
· What corrective steps has RBI taken to stop recurrence of such drastic spurt in NPA or sharp fall in profit in other nationalized banks or in cooperative banks?
· It is better known to RBI that legal tools in the hands of bankers are too weak to recover money from willful defaulters.
· Don’t you that Regional heads and central heads of banks are getting personal advantage not only in fresh sanctions of loans but also in compromises or write off settlement with willful defaulters?
· Have RBI inspecting officials thought it fit to reform their practice of inspection ,introspect to find out why they failed to stop drastic fall in SBI profit and why did they fail to ensure adequate provisioning before new CMD of SBI did. Are teams of Chartered Accountants who certified Bank’s quarterly and annual results in previous quarters and previous years not responsible, accountable and punishable for their fault? don’t you know that it CAs blindly sign on balance sheet of the branches if they are extended red carpet welcome by branch and bank officials and given costly gifts?
· Was RBI also involved in process of making of less provision not only in SBI but also in other Public sector banks to give false image boost up to PSBs as also to save its own credentials?
· Is RBI willfully giving frequent extension to a CMD to correct the financial data or to serve the personal interest of particular minister or VIP corporate house?
· Do you dream that mere change in data will cure the sick bank and change the corrupt system overnight?
· Are you and your officials partner in corrupt system?
· Don’t you agree that sudden fall in bank’s profit or sharp rise in gross NPA of a bank is not only the result of manipulation and fabrication of data at one office but sum total of same unethical job carried out in most of the branches?
· Don’t you feel guilty that total NPA of Public sector banks has increased by more than 100% during last three years and crossed the level of one lac crore? If hidden NPA is also declared as NPA honestly by bank management, I think gross NPA figure will cross three lac crore mark.
· Don’t you know that most of the branches are committing fraud with the CBS system to conceal NPA so that they have to make lesser provisions before finalizing annual result?
· Don’t you understand that by concealment of NPA banks are willfully avoiding and postponing recovery of banks amount from selective willful defaulters? Top officials earn money not in sanction, but also in postponing action against defaulters and finally in compromise and write off?
· Don’t you realize that PSBs are focusing more on bulk financing ( in hundreds of crores of rupees)such as finance to real estate sector , top corporate house , diamond industry , micro finance institutes to maintain credit deposit ratio as also to reduce gross NPA ratio?
· Don’t you agree that proportion of lending by PSBs to agriculture sector and small borrowers is hardly five percent of bank’s total lending in a year?
· Don’t you know that GDP growth contributed by Agricultural sector has been coming down year after?
· Don’t you agree that banks are achieving target under priority sector lending and agriculture lending only by reclassifying Non priority sector to priority sector and non agricultural finance to agricultural finance such as treating finance to MFIs as lending to agriculture.
· Don’t you agree that majority of high value NPA accounts are the consequence of bribe led lending done by top ranked officials through verbal instructions to junior credit officers and branch managers?
· Don’t you agree that such junior corrupt officers are in turn awarded in promotion and posting?
· Don’t you know that banks are nowadays picking credit officers as per their whims from the market and keeping twenty to thirty years old experienced officers of the same banks away from mainstream?
· Don't you agree that bank officers who have neglected in promotion process and who have to earn under junior executives are not taking adequate care to safeguard bank’s interest?
· Don’t you feel moral responsibility that when you choose corrupt General Manager of a bank for the post of ED and CMD of any other bank you give rise to corruption in PSBs? When top ranked officers are corrupt they naturally give recruitment, promotions and posting based on the quantum of gifts they get from field functionaries?
· Lastly I suggest a few answers for your kind consideration:
· You have to realize that root cause of all types of corruption in banks and other government department is flattery and bribery based recruitment, promotions and postings and take corrective steps as soon as possible.
· You have to inquire why only a few contractors are given work of construction of order for supply of various inputs are given to same firm or individuals year after year.
· You have to inquire who are directly or indirectly responsible for High value NPA accounts and punish them to demonstrate that corrupt bankers are not spared even after their retirement.
· You have to punish those bank officers who have contributed only bad loans and finance made by him turned sub standard within a period of one to three years.
· You have to punish corrupt vigilance officers who after taking bribe closed the files of corrupt top ranked officers.
· You have to punish top executives of bank who promoted unhealthy HR policy by recruiting office in scale III and scale IV in preference to more talented officers having twenty to thirty years experience.
· You have to tell the bankers what action you have taken against eight top ranked officers caught by CBI in bribe led lending in various financial institutes such LIC housing, SBi, PNB etc
· You should know why banks are unable to afford payment of pension to its own employees.
· You should punish CAs who blind certified balance sheets of bank’s branches and by their such unholy certification they cheated faith of investors .Banks profit fall, their share value fall and it is investors who are to suffer huge loss .
· And so on----
· RBI can demonstrate their good intention only by punishing bad officers and not merely by announcing one after other policy without ensuring honest execution of existing policies.
