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Window Dressing in PS Banks and Its Culprits :  Will Modi Government  Be Successful in Reining This Malpractice?



Rajesh Goyal 

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Today (5th June, 2015)  when I saw an article under the heading India to tighten screws on banks' 'window dressing' of accounts in Times of India (Source Reuters),  it reminded me of my active days in service.   At the same time it reminded me of numerous statements issued by RBI, Govt of India, Bank Managements during last over a decade, pledging that they will curb this menace.  However, none of them have ever taken any serious steps to curb this growing trend, rather behind the curtains they have encouraged window dressing to get promotions and show that banking sector in India is growing consistently and is healthy state.    In reality, banking sector was becoming weaker and weaker and now we have reached a stage where financial stability of PS Banks is at precarious condition, and there are dangers of collapsing the same.   In recent wage revision discussions, Banks (through IBA) have admitted that a number of banks are not even in position to give a reasonable wage hike to serving bankers and meet the pension liabilities of the retired work force.   This shows the double speak of Bank top management, RBI and GoI,  wherein they talk of no serious threat to banking system when they talk of growth of banking sector, but cry of weak financials when a reasonable wage hike / pension is asked by employees.

Now once again there are statements from Government circles that they intend to  curb this practice of window dressing.    It is doubtful that this is a serious statement and will be followed to logical end.   Even if GoI intends to do so, whether manipulative bankers, right from Branch Managers to CMD,  will allow this to happen.  A large number of these people have got promotions and reached top positions,   purely based on their manipulative skills in window dressing.

Although I have limited experience of window dressing, yet I have experience to watch these / asked by higher authorities to manipulate these  at branch level, regional level and HO level.  Once you are close to financial year end,  we see all around discussions as to how to meet the targets by manipulating the accounts.

In 2012, we have uploaded an article at under the heading : Window  Dressing in Banks  -  Dishonest Officers Get Promotion; CMDs and EDs Get Monetary  Benefits BUT  Honest Officers / Staff Get Lower Salary Increases”.    


This three year old article is not only still valid but situation has worsened in these 3 years and banks have become financially  more precarious as top management has milked the banks more during these three years to serve their vested interests and get promotions and jobs after retirement, rather than curb such malpractices.



What is Window Dressing ?


In simple words, we can say Window dressing is a technique used by management to manipulate financial statements and reports to show more favorable results for a period.  As per the present practice, the financial status of banks is evaluated every quarter (March-end, June-end, September-end and December-end), but the major targets are evaluated at the end of the financial year for which CMDs have given commitment or sometimes even MoU to GoI to achieve such targets.  Thus, towards the end of the financial year, there is maximum pressure on all officers of the bank to ensure that targets are met by hook or crook.  Thus, at the point of evaluation i.e. end of financial year, all banks try to boost their deposit, credit figures through artificial means.   At the same time, officers are cajoled, threatened to ensure that NPA are suppressed.  Based on the art of manipulation, the officers of banks get promotion and top brass is able to earn lakhs as incentive.

What is the status of Window Dressing in Banks in India :

Window-dressing in India is now almost known  to everybody.   It is an open secret.  All PS (some private banks too) banks indulge into window dressing not only at year end but also at quarter ends.     Only difference between banks is that the degree of window dressing vary from bank to bank.   It has now become so deep rooted that  all analysts accept even the audited figures of deposits, credit and NPA of banks in India  with a pinch of salt.   Nobody is ready to believe that these figures are the true reflection of the bank’s growth or stability. 

Broadly speaking, there are four main areas for window dressing :-


(a)  Deposits

(b)  Credit

(c)   NPAs

(d)  Manipulation of provisions to boost profits

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What is the Extent of Window Dressing At Present :

Frankly speaking, it is impossible to find out what is the extent of real window dressing as Banks in public take a stand that they do not indulge into any window dressing.   However, the comparison of the various figures as on 31st March of a year and a fortnight or a month later shows as to how much they have manipulated.  However, on certain parameters like NPA and profits, the window dressing remains under the carpet for long times.

In the above referred report, Reuters has given a peep into the effect of window dressing by banks in India in March 2015.   The report says :

       (a)Some Rs 2,30,000 crores  or 85 percent of the loans raised in the last fortnight of March, 2015 were reversed in April 2015.  

 (b)Similarly, nearly 60 percent of the  Rs. 3,30,000 crore of deposits were reversed.


The figures are mind blowing but these are very well  known to regulator (RBI) and GoI as it is continuing for years now.   Although RBI keeps on issuing circulars, advisories  and statements, BUT  they have NEVER  dared to take action against any CMD or ED for window dressing.   All those manipulative top bosses have always got their promotions through fast track and some of them are even offered jobs after their retirements as a reward for their manipulative skills in window dressing.   Some of such CMD even found job in RBI !!


Is RBI Hand in Glove with PS Banks for Window Dressing ?

 I consider RBI to be hand in glove with bank management in ensuring window dressing though in public they keep on crying it foul.   In the last few years,  RBI has issued numerous circulars / advisories / statements warning banks to stop this malpractice.   However, let me quote one statement from the news that appeared in The Hindu on 1st April 2014 (i.e. more than a year back) under the heading Rajan warns banks against year-end window-dressing”, wherein RBI Governor, Mr  Rajan,  has shamelessly elaborated how banks are manipulating their balance sheets in the following words :-


“What happens towards the end of the year is banks are trying to build a certain kind of balance sheet for a variety of reasons…. (wherein) some lenders reduce their risk weighted assets to lower their capital requirements, while some State run banks increase their assets in order to meet performance targets set by the government”.    Mr Rajan also told that such adjustments by banks affect various market segments and cited volatility in certificate of deposits starting even from February.   He also threatened banks that they will not be bailed out for following such policies.


The above statement is only a reminder that RBI Governor is well aware of the methods used by banks to manipulate balance sheets, inspite of the fact that these banks are listed on stock exchanges and have money of public invested in such stocks.   The regulator tells the press with immunity as to how PS banks are manipulating their balance sheets.      Great Regulator.   This is the “Greatest Transparency” in financial sector of India, not found anywhere else in the world.     After one year of above threatening statement of RBI Governor (regulator of the banks), the situation is same or even worse.  All PS Banks with the blessings of their CMDs / EDs / Statutory Auditors  have openly flouted the norms for window dressing in March 2015 (confirmed by report of Reuters quoted above) and our helpless RBI Governor only watches from the sidelines whereas bank management giggles.   Mr Rajan does not have the powers or guts to take action even against one CMD or even dressing down  in public of any top official of even the weakest PS Bank.  Kudos to all the authorities who have been assigned the job to check the banks.


In the above environment now, Modi Government officials are again talking about “overhauling annual targets for public sector lenders”.   They are boasting that the new targets will focus on efficiency with objectives set around return on assets, or return on equity and controlling of bad debts”.     Interestingly, they intend to discuss these with the top officials of the banks who have all through career have learnt the art of window dressing to impress their bosses and get promotions, incentives and after retirement jobs.   Do you expect them to give any concrete suggestions which will unsettle their cart?   It will be nothing but eye wash.


The good suggestions can be given by only those who have NOT  been involved in such manipulation and are independent credentials with some international experience of best practices.  The present lot of people heading PS Banks have only experience of manipulating the balance sheets through window dressings, and thus an exercise of discussions with this coterie will be only a futile exercise.


The new Government at the Centre is yet to prove its credentials that it is serious to curb this malpractice which is at the root of most of the ills of banking industry.   I will delve upon the effects of these malpractices in my future articles.   I can only hope that GoI will be more serious this time and give free hand to RBI to deal with this menace of window dressing and Rajan shows that he means what he speaks.




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