Response to Honble FM statement on decline in profits of banks
ALL INDIA NATIONALISED BANKS OFFICERS’ FEDERATION
(Registered under Trade Unions Act 1926)
C/o Canara Bank officers’ Association 216, Royapettah High Road, Royapettah, Chennai 14 Opposite to Hotel Deccan Plaza Tel. Nos. 044- 28112454 Fax:28113151 Email-id: ainbof@gmail.com |
Ref : GS/JAN/FM/2019/002 DATE :04 01 2019
Sri.Arun Jaitley
Hon’ble Finance Minister
Government Of India
New Delhi
Respected Sir,
Sub : Your Statement on decline in profit of banks
*****
We have come across media reports attributing the following statement to you on the subject matter.
“ As per the inputs received from Nationalised Banks, in FY 2017-18, 6,049 officers have been held responsible on account of staff delinquency in NPA accounts and depending on the gravity of the lapses, Minor Penalty/ Major Penalty have been imposed against erring officials. In all the cases, depending on the amount involved, CBI/ Policecomplaints have been lodged.”
Though we realize that it is only a statement made in reply to the question by a member of parliament, it cannot be denied that the tone and tenor of the statement has hurt the sentiments of lakhs of honest officers who are working diligently for the welfare of the country and its citizens.
We wish to bring to your kind knowledge the following instances in which bankers were appreciated by our Prime Minister Shri.Narendra Modi ji.
On the performance of implementing of JANDHAN YOJANA by the PUBLIC SECTOR BANKS, he said
“It gives me great pleasure to have seen the exceptional work done by you all in ensuring the success of the PradhanMantri Jan DhanYojana. The target set for opening bank accounts for all households has been surpassed well ahead of the target date of 26 January, 2015. By opening 11.5 crore new accounts in a very short span, we have achieved a coverage of 99.74% of all households in the country. I congratulate you for your extraordinary efforts.
You will recall that when we started this Mission, many had doubts about our ability to achieve this task in a limited time span of five months. However, you have proved skeptics wrong and achieved what appeared impossible. This feat alone should motivate you, as well as others to work to make our dreams a reality.
This is primarily due to your diligence and commitment. I had urged you to ensure that no one is left behind without a bank account. I always had faith in the ability of our system to rise to any challenge and with your unflinching dedication, sense of purpose and hard work, your results have far exceeded expectations”
The same Honourable PM’s statement, at Panaji, lauded the performance of the Bank officers on the execution of the Demonetisation exercise saying
“I publicly thank all the bank employees. The amount of work which bank employees normally have to put in over a year, they have worked more than that in the last one week alone”.
We also take this opportunity to bring to your knowledge how over the years bankers have been put down despite of their best effort while discharging their duty towards nation.
In his report titled “A Hundred Small Steps”, Sri.Raguram Rajan, Former RBI Governor had also appreciated the performance of the banking sector by stating that
“As a group, Indian banks have done exceedingly well in providing high returns to shareholders, registering the highest regional growth rate in assets, deposits, and ROE as well as one of the highest total returns globally”
“Banks’ contribution to GDP in India is comparable to the ratios in developed and developing world. Significant improvements were made in capital allocation between 2003 and 2007 reducing the share of industries with returns lower than cost of debt from 56 percent to 22 per cent. NPA levels have been cut to about a third during the same period.
Similary World Bank in its Program Document dt.21.08.2009, while processing a loan of Two billion dollars had observed the following.
“the PSBs achieved their social objectives through targeted lending to designated priority sectors, such as agriculture, micro, small and medium-enterprises, self-help groups, and targeted groups in government-sponsored programs” (Pg -21)
“India’s banks are well capitalized, asset quality is good, and they have recorded impressive levels of profitability. The recently concluded Financial Sector Self Assessment declares that the banking system is robust and, over the last decade or so, there has been a significant improvement in the financial performance and condition of banks in India….” (Pg-27)
“The Indian banking sector is well managed and efficient. The Government has set clear objectives and targets for the PSB, as illustrated in the annual Statements of Intent, and holds their top management accountable for results. These efficiency measures and good management practices have resulted in credible profitability performance. The banking sector has become increasingly profitable…” (Pg-34)
“In consonance with the objective of enhancing efficiency and productivity of banks through greater competition, there has been a consistent decline in the share of public sector banks in total assets of commercial banks. Nevertheless, public sector banks appear to have responded to the new challenges of competition, as reflected in their increased share in the overall profit of the banking sector...” (Pg-50)
“Overall Assessment of Banking Sector in India - The assessment of the Indian financial system during 2007-08 indicates that the banking sector in India continues to be healthy, sound and resilient. The profitability of the banking sector, which has shown remarkable resilience in the last few years, improved further during the year.
Their capital position is also strong and they are less leveraged than they were a few years ago. The performance indicators such as operational efficiency, asset quality and soundness indicators of the Indian banking system currently compare well with the global standards. (Pg-61).
From this position of strength in the near past how the PSBs went wrong within a span of a decade is a point worth pondering and the anwers lie in the same World Bank report itself.
“India’s corporate sector, which had relied heavily on foreign financing that suddenly was no longer available, was the first to feel the liquidity stresses in the financial markets.
This resulted in a shift to the domestic banking sector to fill funding needs. This substitution in their sources of funding put pressure on the domestic money and credit markets. At the same time, the foreign exchange market also came under pressure, just as corporate entities needed foreign currency to meet their external obligations.
Financing and substitute financing needs of corporate borrowers will remain high over the near term. The entry into the domestic borrowing market of the larger corporate enterprises, who had been borrowing abroad, has put pressure on local small and medium businesses and made borrowing domestically more difficult for them”. (Pg-39, 40)
The role of development financial institutions was taken over the commercial banks mainly in the interest of the nation’s economic growth in the aftermath of the 2008 global crisis. This fact is also recorded by the World Bank stating as below;
“There is a risk that the quality of lending will deteriorate faster than projected. This risk is associated closely with the depth and duration of the broader economic slowdown.
However, it also depends on the ability of the PSB not only to maintain lending to support economic activity, but also to do this without a sharp deterioration in the quality of their portfolios. Often, the incentives to push lending are greater than those for managing credit quality.
Government owned banks in many economies, while capable of quickly supporting national plans for economic growth and macroeconomic stimulus, often find themselves suffering from financial distress a few years later due to poor underwriting and risk management standards applied to loan portfolios.
The Government of India has shown over the past years the ability to include social policy lending in its PSB, while at the same time pushing for high quality loans. The incentives are much the same today. However, there is likely to be an increase in NPA as a result of corporate and consumer distress. (Pg-.47)
The plight of the banks were accentuated by the strict prudential and provisioning requirements including provisions for standard assets. While the restructuring of advances was thrust on the Banks for the benefit of the corporates and industries delaying timely action, Asset Quality Review hastened the deterioration of asset quality leading the banks to losses and bringing them into the ambit of Prompt Correcting Action, the sudden withdrawal of restructuring schemes has pushed the Public Sector Banks to the brink. It can be fathomed from the above that the Public Sector Banks are made the sacrificial goats for carrying out the policies of Government of India.
Even on earlier occasions also, bankers were never appreciated for the good work they do for the cause of small industries, nation building and entrepreneurship development and women empowerment.
It is a bane that only the bad things gets highlighted submerging the good. The same fact is reciprocated by your own words uttered in the Annual General Meeting of Indian Banks Association "Banks are heart and soul of economy. As we expand and grow the role of banks will increase. Banks support individuals companies and contribute to nation building. Regret only controversies make news; a lot of the good goes unnoticed."
As per your statement, the number of officers penalized is 6049 which is a minuscule percentage when compared with more than 4.5 lakhs officers in the Banking system.We sincerely request to you issue a clarification suitably so that the lakhs of the honest and diligent bankers especially youngsters are motivated to perform better.
Thanking you,
Yours sincerely
G V MANIMARAN
GENERAL SECRETARY
Comments
Post a Comment