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Comments by AllBankingSolutions.com :
In our continuous fight to expose the NPA mess in the Banking industry, we give below a letter sent by Mr. S Ramachandran,
former General Manager at Bank of Baroda. The letter mentions about the recent
notification by the Supreme Court on providing the list of defaulters owing an
amount above 500 Crores. We are uploading the full letter as sent by him to Ms. Anjuly Chib Duggal, Secretary, Departmental of Financial Services. Readers
should also add more points which they are aware so that this current situation
be analyzed effectively, and not brushed under the carpet. We feel all our
readers will share this article to help spread this message.
Letter
Transcript
Subject: SUPREME
COURT SEEKS LIST OF BIG DEFAULTERS LIST FROM RBI ON TUESDAY THE 16-2-2016
MS ANJULY CHIB DUGGAL,
SECRETARY, DEPARTMENT OF FINANCIAL SERVICES,
MINISTRY OF FINANCE,
NEW DELHI.
17th FEB,2016
MADAM,
I am extremely happy to read the news that yesterday the S.C demanded the list
of big defaulters who OWE more than Rs. 500 crores to PUBLIC SECTOR BANKS AND
FINANCIAL INSTITUTIONS from the RBI to act tough who have defaulted in repaying
the loans. The bench of CHIEF JUSTICE SHRI T.S.THAKUR and CHIEF JUSTICE
R.BHANUMATHI AND U.U.LALIT took a strong exception to prevailing banking
atmosphere where "big corporate house owners have defaulted repaying thousands
of crores of rupees taken as loan yet, enjoying the lives personally."
It wondered how Public sector banks and Financial institutions could advance
such huge loans without clauses in the contract to ensure that the loan amount
could be recovered easily in case of default.
The court appears
to share Dr. Rajan's concern when he said "The public believes the large
promoter makes merry because of sweet deals between him and the banker".
The question comes "who pays this (writing off debts?) - clearly the hard
working savers and tax payers of this country. As just one measure, the total
write-offs of loans made by commercial banks in the last five years Rs.
1,61,018 Crores, WHICH IS 1.27% OF GDP. Ofcourse some amount will be
recovered after lengthy legal fight etc, but given the size of the stressed
assets in the system there will be more write offs to come."
You are aware that bad loans of RS 1.14 LAC CRORES written off between financial
years 2013 and 2015 are much more than the preceding nine years:
Bad debts written off in 2015 by two banks is alone as under
STATE BANK OF INDIA RS 21,313 crores
Bank of BARODA RS 1,564 crores
Bad debts written off in the last three financial years by the above two banks
are as under
STATE BANK OF INDIA RS 40,084 CRORES
BANK OF BARODA RS 4,864 CRORES.
AND MANY MORE LACS OF CRORES WILL BE WRITTEN DURING THE FINANCIAL YEARS
2015-2016 AND 2016-2017
THE most damaging tragedy is that banks constituted to lend to promoters and
entities that were highly leveraged and even some who did not have a good track
record of repayment. Crony banking is the only way to describe this. Here banks
take 100% of the blame. According to a July 2015 report from UBS, loan approved
to potentially stressed companies have reason 85% since 2011-2012 as banks
continued to lend to such borrowers despite deteriorating cash flows and
increased debt on their balance sheet. BANKERS MUST BEAR THE CROSS. The good
news is that the clean up has started. The bad news is that it may not be over.
You must be aware that RBI deputy governor SHRI S.S.MUNDRA made a
presentation recently in which he showed that the asset quality review conducted
by the Central bank had revealed malpractices ranging from funding of "SATELLITE
ENTITIES" round tripping of funds by companies ,repayment of short term loans
through overdraft facilities and incomplete evaluation of viability of projects.
This observation you will agree with me is very serious and appreciate that such
bankers must be brought to books without any delay and strong disciplinary
action must be taken ,but unfortunately the big boys like CMDs, EDs, and GMs
they get out of this without any action and after retirement they are absorbed
as director of some banks and companies which is a sad commentary.
I therefore request you to take necessary action against such CMDs, EDs, and GMs
etc so as to avoid such things in future.
WITH KIND REGARDS,
S. RAMACHANDRAN
Former GM BOB, CHAIRMAN & CEO OF SANGLI BANK LTD (NOW TAKEN OVER BY ICICI BANK)
SOCIAL WORKER
Disclaimer: [The articles written by author contains only the academic view of the writer and purely for discussions and updation of the knowledge of the bankers. The views expressed in the articles may not at all be subscribed by the organisation where the author is working and / or AllBankingSolutions.com]
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