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Impact of ABS's  War on Titanic Defaults  - Finance Ministry forced to Issue Instructions for Review PSB Loan Process

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Rajesh Goyal 



On 23rd October, 2012, we have uploaded an article under the title :  Titanic Defaults" Are Likely to Do Irreparable Damages To Indian Banking Industry - Forget About Decent Wage HikesThe article was widely acclaimed by our readers and it is reported that it sent ripples in the banking circles and MoF.


The news item which appeared in ET today (29/10/2012), and some other media report  indicates  that our above referred article has the desired impact.   The news under the heading "Increasing Corporate Defaults Force Finance Ministry to Review PSB Loan Process"  shows that GoI is now forced to review the process of sanction of such huge loans without sufficient collaterals.  Similarly, it is reported that FM has issued statement  saying that PSU banks take huge exposure without collateral whereas private banks ensure adequate safeguards.  I feel these steps are in the right direction and we have been able to bring to the centre-stage the issue of Titanic Defaults which are likely to make a huge impact on the working of PS Banks. [Some may not agree that this is the impact of our article as Government never agrees that it caved in to the public pressure].



I must admit here that we have not revealed much new in the above article.    Each and every banker in senior management and above was well aware of the above facts.  Even most of the media houses are in full knowledge of such irregularities, but no one either in the banking circle or in the media wanted to highlight the same as it could have impacted either their job or the revenue they get in the shape of advertisement from such big PS Banks.  We decided to expose this nexus and open the can of worms so that it is discussed thread bare and general public becomes well aware of the corruption at the top level.


I feel what we did was something like what Kejriwal did in case of Vadra (certainly it is at a much  much smaller level) .   In case of Vadra also, full media was aware of the facts but they used to write in hushed tones (or were afraid to highlight the same)  so that it does not have the desired impact.  However, Kerjriwal decided to bring the same to limelight by holding press conferences etc.  I do not have the following or resources which Mr  Kejriwal, (who is really doing yeomen's service for rooting out corruption) enjoys.  We do not have any investigation teams.  Thus, we work on the basis of what appears in the newspapers and what is shared with us by our readers.



The report published in ET inter alia reads "A former bank Chairman said if the finance ministry is serious, it should also shield banks from pressures.   There are calls on behalf of promoters from the top level, he said 'and when politics takes precedence over banking, the result is a spurt in bad loans' ".   This is an important statement as it is coming from a former Chairman.  The cat is out of bag, though every one was aware that there is cat in the bag!!     This is a clear indication of corruption in sanction of loans - admission by a former Chairman.



Another paragraph in the same report reads "while admitting some irregularities in certain cases, state run banks are worried the review ordered by the finance ministry may turn into a witch hunt.   If the economy would have been doing well, there would not have been defaults...." said Chairman of a bank.


The above appears to be a foolish statement and I am shocked that it has been given by a Chairman.    First it admits about irregularities and then it talks about witch hunt.    This Chairman wants that let them commit brazen irregularities and there should not be any action as it will appear to be witch hunt.   Great statement from corrupt people.    Moreover, anybody with basic knowledge of Risk Management is well aware that such  risk management policies are designed to meet adverse eventualities which happen only during bad times.    Why banks  take collaterals? Will they need these during hey days of the business?  Even a clerk in bank knows that they are meant  only to  be looked into in bad times.    Chairman needs to visit the basics of credit. 

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I am fully aware that such ripples are likely to be soon forgotten and the extremely rotten system is able to digest such criticism as people in power are master manipulator.    Poor Kejeriwal's protests and spending nights in the open at Sansad Marg were easily side-tracked by deep silence of the political class.    Frustrated, he had to abandon the protests at Sansad Marg.   


Similarly,  even the ripples created by ABS's articles  will be difficult to sustain,  BUT  WE  WILL  CONTINUE  OUR EFFORTS  and hope that with the support of the bankers and general public,  we will be able to  bring at least some awareness / changes - beginning is always better than complete silence.



I am NOT asking my readers to contribute money for this cause, but  I wish they spread this message and keep on visiting our website from time to time to keep the flag high.  I am sure you will contribute to this cause at least supporting us.




You can give your feedback / comments about this Article.   Please give only relevant comments as irrelevant comments are waste of time for yourself and our other readers.



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