Tuesday, May 24, 2011

Our Banks - 4

So called "N P A"s

EenaDu's 'Banking Expert' writes, '(While)....on oneside the famous commercial Banks have increased their Net Profits and Net Interest Margins and travelled in progressive path, the SBI, which has stood as the icon of growth and strength for the last decade has stunned (the people) with results.'

His main allegations are, that the SBI has, unlike other commercial Banks which have appropirated the burden for the coming 5 years, provisioned Rs.7,927 crores towards payments of Gratuity and Pension to its employees, in a single year itself.

Also that The Bank's gross NPAs have increased from Rs.19,535 crores to Rs.25,326 crores. In 2009-10 it has provisioned Rs.5,148 crores towards "Lost Assets" and this year increased the provision to Rs.8,792 crores. This may continue in the commenced financial year also.

His main grievance is that with these results, its share price has gone down by a couple of hundred rupees.

But, is it the crieterion for the health of a Bank.....that too the largest Bank in India?

From the year (One & a half decades ago) the "prudential norms" as recommemded by the Narasimham Committee were made mandatory, all Indian Banks' endeavour is to compete with each other in 'showing' the minimum assets as NPAs.

A Bank's CMD says, "our Target for reduction of our net NPAs for this year is by ......%. Come what may the Target should be reached, surpassed rather!"

The Field level executives will be taken to task if they fail.

"Manage the annual auditors if necessary. We will take care of the hard nuts to crack!"

The Local Head Office Managers, Zonal Managers, Regional Managers pass on the message to the lower rung Managers. And Lo! the balance sheets of the branches are "white-washed" to that extant!

This year 2010-11, the RBI has "unofficially" instructed the Banks to "show" the "almost correct position" of their NPAs. (Our Duvvuri S. Rao is managing a tight rope walk between 'growth rate' and 'inflation' and GDP and inspite of guidelines from the Govt. of India, dared to find the "exact" position of our Banks.)

All other commercial Banks strived their level best and managed to white-wash their balance sheets as usual, to the extent as they could manage.

Only SBI has stood 'odd man out', thanks to its CEO.

It is rumoured, the net NPAs of any commercial Bank are more than 32% and Gross NPAs are nearly 47%. For how many years they can white-wash their balance sheets and sweep the truth under the carpet?

let us wait & see!