To

CEO & Managing Director

Indian Overseas Bank
Central office
Chennai 600 002
Dear Sir
NPA RECOVERY CANNOT BEA MERE RHETORIC OR CMDS
APPELLATION IN A BUSINESS PLAN CONFERENCE
STRONG WILL AND ACATION REQUIRED TO ARREST NPA
Asset quality in public sector banks have been going from bad to worse for
last several years, and it is not a new phenomenon. Unfortunately or
fortunately management of all banks have been manipulating the figures
year after year in close nexus with team of auditors and officials of Reserve
Bank of India and that of Banking Division in Ministry of Finance to
conceal bad assets. They have put pressure on field official in branches and
taught not to improve the quality and take strong initiative to recover the
money from bad borrowers but taught only various tactics to conceal bad
assets to reduce provisioning towards bad assets as per RBI guidelines.
At corporate level top officials of banks including CMD and ED have used
various false and fake pleas such as global recession, interest rate hikes, bad
monsoons, natural calamities etc to give various reliefs to bad borrowers
instead of tightening the screws to trap bad officials and bad borrowers.
Top management of bank management have never diagnosed the real causes
of bad assets whenever it is found to increase due to some reason or the
other. Clever bank management do not want to take action against erring
official, corrupt sanctioning official because they themselves are part of dirty
game of bad lending.
This is why bank management have wrongly but willfully and invariably
pleaded that if action is taking against credit officers and top executives ,
credit growth will immensely suffer and they will not be in a position to
achieve the target set by Finance Minister.

After complete introduction of Core Banking Solution (CBS) in banks,

Reserve bank of India advised banks to calculate bad assets called as Non
Performing assets (NPA) on common terminology using advanced
technology and not manually . Banks are slowing getting pressure to assess
their quality of assets through automated system taking advantage of CBS
technology. Since management of banks find now difficult to conceal bad
assets under CBS oriented NPA assessment system, total of bad assets is
now being exposed in Balance sheet and it has reached a level of 3% of total
advances.
It is to be noted here that NPA percentage is still more than what it has been
revealed during last few quarters. Still banks have not declared their entire
NPA and after taking RBI hidden consent. Of course they are gradually
exposing their bad assets and this is why quantum of bad assets has not
jumped to highest position in one time but it is rising quarter after quarter.
Officials of RBI, top management of each PSB and official of Ministry of
Finance all know very well that actual quantum of bad assets in government
banks is far more than 5% of total advances. In more than 25% of three year
old branches gross NPA is more than 25% of total advances. There are many
such branches where gross NPA is even more than 50% of total advances.
Clever bank management are trying their best to show minimum percentage
of gross NPA by either manipulating the system secretly or by resorting to
fresh lending by opening new branches and resorting to fresh bulk lending to
big corporate, to real estate sector and to mutual funds so that total advances
in banks increases which in turn reduces percentage of Gross NPA compared
to Total Advances.
But this story will not help for longer period until there is adequate
improvement in quality and moral integrity of credit sanctioning authority ,
honesty in promotion processes in banks ,improvement in legal machineries
which may help in recovery from willful defaulters , tightening of screws on
Chartered Accountants , Valuers and official of rating agencies and change in
attitude of politicians. Bank management has to increase number of staff in
branches, reduce staff at administrative offices and award honest officers by
stopping and punishing corrupt officers who were rising in their career
through unfair ways and means.

Till now bank management has not tried to cure the real disease and at the
same time government of India have also not improved the quality of legal
system and not tried to inculcate good culture in politicians who are using
bank loan to enhance their personal wealth and to increase their vote banks.
It is very sad that all the time when proportion of bad assets increases in
banks , management of banks accuse global recession, interest rate hike, bad
monsoon, natural calamities etc but not punish the real culprit. It is
remarkable here that when most of top official have occupied the top post
and come through bad routes and when they have themselves created and
accumulated bad assets in their banks they are not in a position to punish the
real culprit and hence they are searching always some weak scapegoat ,
some lame excuses and pleading some irrelevant reasons before MOF for
deteriorating quality of bad assets in banks.
Million dollar questions is Who will bell the cat when even officials in RBI
and MOF are equally weak and guilty. System is not corrupt but corruption
has become the system in banks. Not only banks but all other government
departments including judiciary are also victim of same disease. It is
therefore not surprising that public demand led by Anna for strong Lokpal
Bill is gaining momentum month after month, day after day and none can
stop this.Government can torture Anna, Ramdeo and their followers but
cannot stop public revolt without punishing corrupt officials and corrupt
politicians.
If Reserve Bank of India really want to stop rising trend in Non Performing
Assets of banks it should order CBI inquiry on all NPA accounts which
involves more than one crore rupees. If this exercise appears to be
cumbersome RBI may in the beginning identify the branches of Public
sector banks where amount of NPA out of total advances is more than 20%
or 30% or say 50%.
STEPS TO BE TAKEN BY RBI
RBI should instruct CBI officials to investigate into depth on entire
state of affairs prevailing in that branch.
For example

 Who are the Branch Managers who worked in the Branch, Who has
sanctioned advances in reckless manner, who has indulged in bribe led
lending, who are high value NPA borrowers and how did they manage
sanction of credit from that branch etc?

Whether the same Branch Manager and the same Regional Head has
created bad assets in other branches of that bank?

Who are those branch managers who contributed larger amount of bad
assets for that branch?

Whether such corrupt branch manager has been getting out of turn
promotions and cream posting all the time

Who are those executive who promoted corrupt culture, who tolerated
corrupt practice of the corrupt official, who stopped punishment of
such corrupt officers, who played dubious role in Interview panel to
ensure promotion of such officer etc

How much of NPA amount has been written off in the past?

Whether there is total failure of legal machinery in recovering overdue

loan from willful defaulters?

Whether local administration is responsible for execution of court

decrees

 Whether political or other pressure is applied by local men to get loan

sanctioned from that Branch

Whether credit officers of controlling offices of that bank took bribe

and allowed sanction to bad borrowers and then built pressure on the
branch officials not to treat such bad advance as but so that misdeeds
of his friend is not exposed

Whether telephonic advice from controlling offices built pressure on

Branch officials to sanction or to recommend loan to bad borrowers
Whether the branch ignored normal inquiry process before sanction of
new loans?

Whether vigilance officials, inspecting officials, auditors, chartered

accountants also took bribe to conceal the bad assets for years
together due to which timely action was not initiated against
defaulters to safeguard banks interest

Whether any natural calamity has caused loss in business, whether

really bad monsoon or market slump or global reasons has resulted in
loss to borrower, whether the account became NPA really to some
unavoidable reasons and hence need fresh dose of finance?

Whether the reason of advance going bad is lack of proper monitoring

or inadequate advance or excess lending

 Whether any middlemen or broker played dubious role in sanction of

loan from the branch

Whether banks policy for sanctioning of loan or for monitoring of

loans is defective

Whether officers of the banks are not having adequate knowledge

And so on

I have no doubt that after thorough investigation of a few branches RBI will
come to conclusion that corrupt officers sitting at controlling offices are
providing umbrella to corrupt subordinates sitting in selected branches. It is
the chain of corrupt officers who are mainly and primarily responsible for
spurt in NPA percentage of that branch and it is they who have inculcated
corrupt culture in bank by promoting flattery and bribery culture. RBI will
have to know the reason and take remedial steps as soon as possible to stop
rising trend in NPA of banks.

Deputy Governor Mr. K. C. Chakravorty have admitted that after change of

chief of a bank profit of that bank sharply falls and at the same Gross NPA of
that bank shows abnormal rise. Mr. Chakravorty should understand that
sudden change in result of any bank is nothing but sum total of sudden
change in similar data of various big branches. He should identify and
punish officers who concealed the mischievous lending done by an officer.
He should find out the list of officers who always tried to hide evil works of
corrupt officers as long as particular person was head of that bank or
particular person was head of any branch.

It astonishes that even after bad experiences in number of banks; RBI has
not taken any punitive action against any of CMD or ED or top ranked
officers of any bank.

Is there close nexus between RBI and PSU bank official?

Why bankers always blame external reason like global recession or

inflationary pressure, high provisioning for their inept work?

Why top ranked corrupt officers are always acquitted from

punishment and why and how low level insignificant officers are
invariably punished for fault of top ranked officers?

Lastly who are the persons and authorities accountable, answerable ,

punishable and responsible for such unhealthy culture prevalent in
bank?
STEPS TO BE TAKEN BY MOF & RBI
I would like to request RBI , Government of India, Ministry of Finance and
particularly to all responsible officials to prepare a list of NPA borrowers in
various segment of amount involved and try to know the person who
sanctioned and who failed to monitor and also who supported indirectly
from administrative offices .Officials who are corrupt and who sits in
controlling offices manage bad advances through Branches and contribute in
generation of more and more bad assets known as Non Performing Assets
(NPA).
RBI can direct each bank to furnish such information and then RBI officials
can make a study of such report to identify corrupt executives . Now a days
such information can be generated through CBS without any loss of time
and without any discomfort. Even controlling officer can generate such list if
he or she so likes. Excel sheet can be prepared very easily on following

columns.
1. NPA Account with value involved upto Rs.5.00 lacs (small borrowers)
2. NPA accounts with dues more than 5 lacs to o 50 lacs (medium size
borrowers)
3. NPA accounts with dues more than Rs.50 lacs to Rs.5.00 crores (large
borrowers)
4. NPA accounts with dues above Rs5.00 crores. (Very large borrowers)
Each segment should contain following columns so that it can precipitate
and clear;ly reflect the name of bad bankers.
1. Name of borrowers
2. Date of sanction
3. Name of Branch head or credit sanctioning officer
4. Name of immediate controlling head called as regional head or circle head
or zonal head
Then anyone can select through excel and filter data as per person on all
India basis. It means bank should prepare a list of all bad borrowers which
have been sanctioned by a top executive say ED, then General Manager,
Deputy General Manager and so on up Regional Head and Branch Head.
Such list should be prepared for each and every executive in the bank
starting from top scale VII to scale I. The person who has created NPA in all
branches and Regional Head who selected more and more corrupt branch
Manager should be treated as bad bankers.
First make a list of big amount NPA borrowers created by regional head or
circle head in India during last five years irrespective of his posting
(sanctioned directly by him or through branch manager working under him)
This will indicate the name of executives who created maximum NPA and
prove that such officials are getting fastest promotion and all such people are
sitting on top post and hence there is none to punish bad officers.
Such executives have very good relation with top bosses and also powerful
persons sitting in RBI and banking division. This is why no action is taken
against top officials and in all cases of misdeed junior officers are made
scapegoat. Such officers if trapped accidently can manage tactfully even CBI
or vigilance officials and ensure closure of files or at least ensure awarding

of minimum punishment.
This is why there is dissatisfaction in the branches and administrative offices
among junior officers in all banks under public sector. Bank officers are least
bothered at field level whether NPA is increasing or profit is shrinking.
Clever bankers are always expert in making lame excuses of global
recession or bad monsoons or debt relief and so on.
Corrupt officers are quickly promoted and posted at good places in big
towns whereas good officers who are serious workers are placed at bad
places and in critical branches.
It is therefore dire need of the hour to find out and identify corrupt officers at
top level and ensure that they are punished and without which one cannot
imagine of NPA coming down in any bank. When top officers will be
booked to task , clear cut message will reach upto the bottom level officers
and only then juniors officers will desist from corrupt practices and top
officers will not post and promote juniors on the basis of flattery or on the
basis of golden and diamond gifts they get from juniors.
When bank management can publish the name of bad borrowers in
Newspapers, Government of India or RBI or Banking Division in Ministry
of Finance can also publish the list of bad bankers. At least they can prepare
a list of such bad executives whose advances invariably become bad and
RBI can ensure their demotion forthwith.
Rather name of sanctioning officer and controlling regional head must be
published along with the name of each bad borrower published in
newspaper. When action can be initiated against borrowers to take
possession of assets by banks, why not illegal assets of bad bankers also
should be confiscated and sold off before public.
Only a healthy culture in bank can help in reducing NPA percentage and
help in becoming top ranked performer bank.. Hitherto CEOs and EDs in
banks are showing lesser percentage of NPA by increasing volume of fresh
and short period advances or by selling NPAs to Arcs. Days are not far when
this manipulative tactics will also fail to salvage banks. It is therefore
necessary that actions are initiated before it is too late.
Awaiting your just response and feedback

Yours faithfully

S.SRINIVASAN
Retired bank unionist
25-11-2015
ambujchinu@gmail.com