The Great Indian Bank day light Robbery: Rs.2.27 trillion.
i.e. Rs.2270,000,00000 chor machaye chor ! About 11 years ago, Indian Express ran a series of articles under title The Great Indian Bank Robbery – chor machaye chor !on the systematic loot of the banking system with possible connivance of Bank Officials estimated at Rs.1.1 lakh Crore. Today the media is going crazy over NPA‗s of willful defaulters. These things have happened in the past also and conveniently forgotten. This happens as either people loose interest or gets appropriated into the system by the very people who are targeted by such reports. Whatever it may be, the point is kicking up such storms is just a hobby and a way to get into limelight with ulterior motives. Even Indian Express did not follow it up. Now the government /media is breast beating about black money stashed away in foreign banks. It is only such ill gotten wealth which is carted away. Whatever it may be, the point is kicking up such storms is just a hobby and a way to get into limelight with ulterior motive. When the parliament passed the a new law to act SARFESI against India Inc‘s mountain of unpaid loans the Indian express after thorough investigations ran series of five articles titled Rs 11,00,00,00,00,000. This is the money that India Inc owes and won't pay back. Here's what it could pay for: all our defence bills for 2 yrs. Or an expressway in every state. Or A school in every village‖ The report said ―Forgotten Harshad Mehta? Just as well. The scale of the scandal now threatening India's economy is vastly greater than the 1994 stock market carnage. The numbers may seem unreal, but Rs 110,000 crore is actually a conservative government estimate of the unpaid loans—officially called non-performing assets (NPAs)—staining the books of India's banks and financial institutions. For vast swathes of corporate India, it's been an era of financial plunder. Then why Finance Minister Jaswant Singh called NPA‘s ''loot, and not debt. The articled underscored the truth that ―The lenders should first target the largest defaulters, who have the ability to pay but have shown no willingness to do so,‘‘ said then UTI Chairman M. Damodaran. The Finance Minister has assured Parliament that the new law will be ‗‗enforced without fear or favour. The message may not have reached some of his colleagues in Parliament. FM & EX-FMS: ALL AGREED (This is) loot, not debt...
The provisions of the Act will be enforced without fear or favour. We‘ll start with the bigger NPAs, and then move to the others Jaswant Singh, then Finance minister if defaults continue, it will be the end of the financial system. Till now, everything was in favour of the borrowers. The lenders were being taken for a ride while the defaulting industrialists‘ flourished Dr Manmohan Singh Former finance minister and RBI Governor This Act gives unreasonable discretion to the banks. What is also important at this stage is not to see who have been sent notices, but who have not been. Questions must be asked why these people have not been sent notices. P. Chidambaram Former finance minister .If enforcement falters and NPAs continue their rise, it could help send India towards the kind of financial crises that ravaged the tiger economies two years ago. But South Korea, Malaysia and Singapore were better off then than India is today. The proportion of NPA‘s to total bank advances was at that time about 7 per cent in those countries in September 2000. India‘s figure, as of 2001 was 11 per cent, though Ministry of Finance (MoF) officials are quick to point out that NPA‘s of public sector banks, at least, dropped from 24.7 per cent in 1994 to 11.4 per cent in 2001
What has changed? Now once gain after 10 years after publishing of articles by Indian express, the eloquent statements, appellations of the ministers to hoot out this NPA menace through stringent legislations, banking sector has been in news for wrong reasons. ―Big borrowers from public sector banks are big loan defaulters” Gross NPAs of domestic banks jumped to 4.2 % of total lending by the end of September 2013 from 3.6 % six months before, according to the Reserve Bank of India (RBI). As per a recent warning by the RBI, bad loans (NPAs) could climb to 7% of total advances by 2015. In absolute terms, gross NPAs are estimated to touch Rs 2.50 lakh crores by the end of March this year. This is equal to the size of the budget of Uttar Pradesh. The biggest chunk of the soured debts is with state-run banks (Public sector banks or PSBs), which account for two-thirds of loans but 80 % of the bad assets. This is how the NPA curve has been moving in the recent years, as per a news report in the Business Standard:
Gross non-performing assets (NPA) of public sector banks rose to Rs 1.76 lakh crore at the end of June quarter from Rs 1.55 lakh crore at March 31, 2013. On the other hand The Business Standard on 31-12-2014 reported: Cases Rise
Sharply But Recovery Drops Only 18% of the total debt has been recovered as seen in the following table. The reason for slow pace of recovery the policy paralysis of the government to make tough of tough laws the paper quoted.
According to global rating agency Standard & Poor‘s, India‘s banking sector‘s non performing assets (NPA) ratio is likely to surge to 3.9 per cent of total loans in 2013-14 and to 4.4 per cent in 2014-15, compared with 3.4 per cent in fiscal 2012-13. The then Minister of State for Finance Namo Narain Meena, in a written reply in the Rajya Sabha, said the NPAs of banks have shown a rising trend. The stress on the asset quality is a reflection of the stress in the economy of the country. The then financial secretary Rajiv Takru in a reference to a Cobrapost expose on how bank officials bent rules for customers said. Bankers reckless, casual as bad loans rise. “Bankers are being ―reckless‖ and ―casual‖ towards lending, finance secretary Rajiv Takru said on Wednesday, blaming them for increasing bad loans. ―The government may increase the maximum penalty possible on banks for breaking rules to Rs.500 crore from the current Rs.1 crore”. Takru‘s comments come a day after Reserve Bank of India governor D. Subbarao described the banking penalty cap in India at Rs.1 crore as ―peanuts‖. Sometime ago, in a paper on corporate debt restructuring, Reserve Bank of India Deputy Governor K.C. Chakrabarty quoted statistics that revealed that the restructured advances ratio to gross advances had gone up from 4.87 per cent in March 2009 (a year after the financial crisis peaked) to 8.24 per cent in March 2012. By the 201213 financial yearend, it shot up to 10 per cent. Today, the estimated gross outstanding advances are pegged at Rs.50 lakh crore, putting the restructured debt figure at roughly Rs.5 lakh crore, compared to Rs.2 lakh crore as recorded four years ago he added... The increasing cases of defaults and delayed debt recoveries have even attracted the attention of the Finance Ministry, which, a few days ago, asked the banks to carry out viability assessment of proposed projects, independent of the appraisals by leading banks, before granting loan approvals. The Minister had also recently said if the promoters were unable to pay back loans, they should be made to give up the management of the company The Hindu on August 16, 2013 covered a news item CBI opens probe into firms defaulting on public sector banks. The media reported “These business houses secured huge loans from the banks after the 2008 financial crisis, but either defaulted or escaped by restructuring the loans. Big business houses that secured huge loans from public sector banks post2008 financial crisis, but defaulted on repayments or charted an escape route through multiple restructuring of bad loans, have now come under the Central Bureau of Investigation‘s scanner for suspected willful misappropriation of public money, running into thousands of crores. An inquiry has been initiated into the public sector bank loan nonperforming assets (NPAs) to understand the magnitude of the problem, which basically concerns the Finance Ministry. Big business houses have in the past procured loans worth thousands of crores and it is suspected that in several cases they have either defaulted or got the loans restructured, resulting in further delay in loan recovery by the financial institutions. Whether it amounted to willful misappropriation leading to embezzlement of public money has to be enquired into,‖ a
senior CBI official told.‖The official said the agency‘s banking division had already started an internal inquiry. ―It is only after we get to know the magnitude of the issue that we can zero in on specific business houses to ascertain their role in bank debt nonrecovery. Sadly, we have noticed that the bleeding banks, due to various reasons, do not usually come forward to lodge complaints seeking a probe. This exercise will throw light on the irregularities, if any, in the process of loan grant and non-recovery / restructuring,‖ he added. The CBI, which has also sought expansion of its banking probe division, has engaged experts as consultants for financial investigations. The soaring NPAs on account of bad loans have in the recent past resulted in a huge setback to financial institutions, especially public sector banks.‖ Finance Minister Arun Jaitley said on5-12-2014 In view of the major increase in their non-performing assets (NPA), banks are taking a number of steps against wilful defaulters to recover loans, "It is normal for the banks to have 2-3 percent of NPA. But in the last 2-3 years, the NPA has increased substantially and gone up to 6 percent. Stress assets have also been increased," Jaitley told the Lok Sabha during the question hour. Actions have been initiated against those who have failed to repay the loan amount under various provisions of the Indian Penal Code and civil laws, he added. http://www.newindianexpress.com/business/news/Banks-Battling-Big-Spurt-in-BadLoans-Arun-Jaitley/2014/12/05/article2556676.ece The report added the percentage of gross non-performing assets (GNPAs) for the banking sector is expected to worsen from 3.9 percent of advances in fiscal 2013-14 to about 44.2 percent in 2014-15, Moody's analyst ICRA has said in a report The New Indian Express Dec 29, 2014 reported Loan Write Offs for Large Public Sector Banks May Soon be History writing off a loan is never an easy option for any bank. .― It was informed in the parliament .A whopping Rs 42,447 crore write off and restructuring of loans in the year to March 31, 2014 by public sector banks was surely no music for banks, the government or investors. Write-offs in 2012-13 was Rs 32,992 crore and in 2011-12 Rs 20,752 crore. Cumulatively over the past five years, state-run banks wrote off loans of as much as Rs 106,170 crore.‖ (Source: http://www.livemint.com/Industry/jssFqXkiYkrnxyGubF3DXK/PSU-bankswrite-off-over-106-trillion-in-last-five-years.html?utm_source=copy And above all There are reports in news papers that soon after Prime Minister launched the scheme Pradhan Mantri Jan Dhan Yojana on this independence day Sources in the finance ministry said that the PMO is keeping a watch on banks' rising NPAs, estimated to be Rs 2 lakh crore. Source: (See: DNA Friday, 29 August 2014, http://www.dnaindia.com/india/report-day-1-of-pm-narendra-modi-s-mantra-to-endfinancial-untouchability-sees-15-crore-bank-accounts-created-2014554)
The high end loan-owners, most of whom are builders, manufacturers or managing educational or medical institutions, account for 78 per cent of bad banking across the nation, going by statistics provided by 26 nationalised banks to an RTI query by a Thanebased chartered account. The affluent borrowers which total up to a miniscule 969 accounts, have collectively defaulted on their scheduled loan repayments exceeding Rs 78,000 crore to the lending banks as on December 2011. A vast majority of the defaulters -- 49.23 lakhs as on December 2011-- across the nation were responsible for a gross Non Performing Asset (NPA) of just over Rs 22,000 crore or a mere 22 per cent of the bad debts. It means that people who borrow less pay more in interests and capital to the banks. But those who borrow more have no liability whatsoever to repay their loans. Any person who defaults on small or medium loans taken for his house, car or any entrepreneurial venture has to face such humiliation from bank-appointed recovery agents and bank officials that it leaves an imprint on his psyche. However, people who virtually rob banks of crores of rupees go scot free despite all the half-hearted attempts by the banks to recover the amount. That is the reason we euphemistically define the acronym CDR as Cruel Denial of Recoveries and / Consensus delay for recoveries and /or CRUEL DENIAL OF REVISONS (OF WAGES) Thus It is an irrefutable fact that cumulatively over the past five years,( i.e. from the period of effect of 10 bipartite – emphasis !) state-run banks wrote off loans of as much as Rs 106,170 crore( Rs1.6 trillion )
NOTE: On million= 1000 000 = 10 00 000 = 10 lakh one thousand million is billion (9 zeros) 1000 000 000 = 100 00 00 000 = 100 crores one thousand billion is trillion (12 zeros) 1000 000 000 000
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As on the date of writing this article 27-12-2014 1 million USD is 63174950.00 Indian Rupee INR 1 billion USD is 63155000000.00 (6315 crores) Whereas the GDP (nominal) of India and neighbouring countries as per the World Bank (2013) are INDIA 232,287 Millions of US$), PAKISTAN232,287 Millions of US$) BANGLADESH 149,990 Millions of US$), & NEPAL 19,415 Millions of US$) In other words Cumulative write off loans over the past five years,( i.e. from the period of effect of 10 bipartite – emphasis !) of state-run banks as Rs 106,170 crore( Rs1.6 trillion) is more than combined GDP( nominal) of India, Pakistan , Bangladesh and Nepal . This the money Indian Inc owe the state owned banks and to the government . Whereas GDP48 of Least developed countries as UN classification in 2013 is only US$804.4 billion . (For list of least developed countries see http://www.un.org/en/development/desa/policy/cdp/ldc/ldc_list.pdf) In other words Cumulative write off loans over the past five years,( i.e. from the period of effect of 10 bipartite – emphasis !) of state-run banks as Rs 106,170 crore( Rs1.6 trillion) is more than GDP of 48 least developed countries. This is enough money to fund half of India's defence budget this year, is an open secret. What has come as a surprise, though, is the fact that big borrowers-those who owe more than Rs 10 crore but have not paid up on time-make up more than three quarters of the amount in default, data obtained through an RTI application revealed.
Is it not starling? If we take into account Total loans restructured by Indian banks under the socalled corporate debt restructuring (CDR) route crossed Rs.2 trillion(2,00,000 crore). In December2012. In the past quarter alone, banks restructured Rs.24,584 crore of loans, up from the Rs.19,544 crore they recast in the previous quarter, to reach Rs.2.12 trillion of restructured loans. (The actual figure for restructured loans may be around Rs.4 trillion as this estimate does not include bilateral restructuring cases that banks undertake individually with firms). The write, off and CDR route has cost the state run banks whooping exchequer which much more than the GDP ( nominal ) India and its neighbors and 48 least developed countries in the world . this is extent of the is great bank robbery which the successive government in power is unable to arrest other than making popular rhetoric press statements policy pronouncements under the garb of banking reforms . . Therefore are we not right in saying that "Financial Reforms" and NPA‟s &Scams are like an Object and its Shadows! Isn‟t it time to abandon the charade?
Whey we should oppose: These gargantuan NPA‘s will be seen by general public with awe and there is not likely to be any backlash against these companies. A man on the street will merely talk as to how foolish were bankers but will not demand any action against the owners as they had larger than life image and are viewed with awe. And these willful defaulters are getting ready to mine the new loopholes of the new law: no clear definition of who‘s a wilful defaulter; no prison sentences; nothing to stop a defaulter from taking over a privatized bank (especially after the amendments to banking bill ―banks borrowers can become banks directors‖) and paying off debts; and nothing to stop their private life of luxury‖. If the spirit behind the new law doesn‘t match the letter, if this mother of all bad loans continues to grow, it will squeeze the financial system. In time, it could mean paying more for your home or car loan, and getting less interest for your savings. If you are just an ordinary tax-payer, the quintessential man on the street, why should you be reading the series of exposes in the media time and again why should you be getting angry? What questions should you be asking? And what answers should you be seeking. The rich, after all, have always stolen. From the banks, from governments and, most of all, from the poor. So what‘s new this time? You should bother precisely because now
there is a difference. The essence of free markets is fairness of opportunity and accountability. Free markets run on impartial regulation, prudential norms, protection of investors‘ money from risks other than what an instrument of investment justifies for the returns promised. This Day Light Great Bank Robbery euphemistically called as NPA is not about companies taking legitimate market risks. It‟s about total subversion of the principles of free markets. So, here is the first question you should be asking. Why is it that your bank pays only 4 % or so on your fixed deposits but charges 10 per cent on your housing loan? Why should you pay 13 per cent on your car loan? And why is it that you so often read on the front pages of the pink papers about fresh government bailouts for your financial institutions? This money, too, comes out of your pockets, your common tax kitty. In civilised countries with free economies, banks work on spreads of no more than two per cent. In India it is four. So, overseas, if your savings bring you four per cent interest, your housing, loan would cost no more than 5.5 or 6. Here, you first pay for the inefficiency of your bank, the overheads and the bloated bureaucracy. Second, you also under-write your bank‟s Non Performing Assets (NPAs). The big guys steal, then get write-offs or bailouts. You and I meanwhile keep the banks afloat by paying that additional spread on our borrowings. A good question to ask, before that is done, is: who were the people sitting on its board when these loans were given, where are the defaulters now and do their personal wealth, lifestyles, match the bankruptcy of their lender? If it doesn‘t, why should we tax-payers fund its revival? But banks are always known to lose money and big banks lose big money. So, if you still think why you should bother, here is a story former Prime Minister V.P. Singh used to tell in the Allahabad parliamentary bye-election of June 1988 to explain to mostly illiterate villagers why they should be angry about the Bofors scandal. ‗‗Your house has been burgled,‘‘ he would say, and then explain how. ‗‗When you buy a matchbox for 50 paise, five paise go to the government as tax. With this the government builds your roads, hospitals, bridges, schools, buys guns for your army. This is your money. It has been stolen. That‘s why I say, your house has been burgled.‘‘ What should worry us the sheer extent of the exposure to such accounts. Losses to the tune of Rs 10,000 crores in just two accounts will shake the whole industry. Even the wage revision due from November 2012 will be affected It will be the Honest , hard working who will suffer - more pressures for profits, denial of decent wage hike, no updation of bank pension etc. The total employees in the banking
sector (private as well as public sector) are about 9,00,000. Do you know that how much loss of Rs 10,000 crores will work out per employee of banking industry as a whole. It is about Rs 1,11,000/-. Thus, if banks fail to recover from these companies, then each one of you (each peon, each clerk and each officer in the banking industry) will lose more than Rs 1 lakh. The cost of 25% increase in wage load demanded by unions will work out to mere infinitesimal fraction of the recovery of the restructured loans as on 31-032012 and cumulated write off over the last 5 years as stated above. Which would have been otherwise not classified as of NPA‟s without costing any additional exchequer to the banks if they have the will to recover! Is not now our demand is just. The only bright side of the 1992 scam—it revolutionised the market infrastructure, Too little has been recovered and too many cases are unresolved, reducing the scam trial to a farce .Justice or Farce? What a far cry all this is from 1956, when Justice MC Chagla said after the Haridas Mundhra scandal: ―After very anxious consideration I have decided that this enquiry should be held in public. A public enquiry constitutes a very important safeguard for ensuring that the decision will be fair and impartial. The public is entitled to know on what evidence the decision is based. Members of the public will also be in a position to come forward at any stage to throw more light on the facts disclosed by the evidence. Justice should never be cloistered—it should be administered in broad daylight.‖ He also decided to take evidence on oath so that those who ―gave evidence did so with a sense of responsibility and the knowledge of the consequences of giving false testimony.‖ The Mundhra enquiry was wrapped up in two years, including the appeal to the Supreme Court. That record has never been repeated in the 56 years since that scandal. The sheer quantum of the NPAs, a mild euphemism for outstanding loans owed to banks by persistent defaulters, is mind-boggling although there may be some cases where for genuine reasons advances have become NPAs, in most cases borrowers turn defaulters wilfully. Instead taking drastic and stringent action is taken against defaulters such as: confiscation of the properties of wilful defaulters, imprisonment, and blacklisting for all future advances and loans the government and bankers have resorted often to bail out packages, including this preposterous , retrograde step of setting up of holding companies as mentioned above to raise capital to provision for NPA„s present and future, which is bound to cause increase in NPA time and again .
