Increasing profitability in banks by reducing manpower
In the olden days, say before nationalization and up to 1990 it was said that private sector employer exploit their workforce to earn profit. After introduction of new policies of deregulation, privatization, liberalization and globalization initiated, irrigated and implemented by Mr. Manmohan Singh government in the year 1991, even government departments have started exploiting labour.
And banks are now master and front runner so far as exploitation of employees is concerned. During last 18 years business of all banks have multiplied manifold without commensurating increase in manpower. On the contrary manpower of all PSU banks have come down drastically year after. There is no doubt to me that whatever banks have been showing as profit is nothing but sucking of blood from existing employees. Now-a -days employees specially officers and branch manager in the bank has to work from 8 a m to 10 p.m. There is practically no Sunday and no holiday for officers.
The great writer Mr. Munsi Premchand used to tell when Protectors become eaters, and then destruction is unavoidable. Before 1991 labour department used to commit excesses on private as well government offices for implementing working time frame and other amenities in offices for staff, now employers including government officers and departments are exploiting labour. And to a great surprise now all offices meant for enforcement of labour rules have become dysfunctional, inactive and ineffective (they are now burden on government exchequer).
Politicians are talking of GDP growth but 95% of population cannot afford even essential needs of the life. Labours and employees have least time to enjoy the fruits of their hard labour. Of course by dint of their hard labour top 5% of population including politicians enjoy and have accumulated huge wealth .Capitalism has overtaken the tenets of socialism. It is different that USA followed by other big countries is facing the brunt of blind capitalism in the form of financial crisis. Let us see what happens in our country and how long this manipulated, forced growth in profitability displayed, projected by PSU bank is sustained.
Downfall of banks in line with other foreign banks is inevitable. When assets are weak, employees are unhappy; survival of banks will definitely be endangered, sooner or later. Days are not far when real exposure of bank will reveal emptiness of displayed growth.
After all, USA banks are falling not because of mistakes committed by them in last few days or months. It is the consequence of over estimating their bad assets and under estimating their best human work force during last one or two decades. Banks have fallen there not overnight but it is the result of sin committed by them in past several years.
All of a sudden banks all over the world have started facing the pain of financial crisis.
After all where has all money gone from all banks in the world? Is it PC Sarkar's magic?
How have all assets became bad overnight and where has they gone during this month suddenly. How have the capital of Top banks of the world dried overnight. The billion dollar question is that what financial experts, economists of all Nations were doing in the past and why could they not visualize the present crisis before?
Strong financial institute like Lehman Brothers cannot be bankrupt overnight. Undoubtedly such banks were mismanaged and only false picture was presented before the world. Banks were playing foul game in collusion with their Auditors. I am of the view that they played fraud with balance sheet during last two three decades and government of USA as also other affected countries remained silent spectator of financial fraud being committed by so called veteran managers of the giant banks.
Similarly AIG, number one Insurance company of USA faced such an acute crisis that the US government had to come out with 87 billion dollar loan package. After all where have they lost the money? Not only this , as per report coming in newspapers as many as 4000 small banks in USA are suffering through the same crisis and the loss is estimated to be of not less than 2 Trillion dollar. Compared to this bailout package of 700 billion US dollars is nothing. And the more harmful damage caused by the current crisis is dilution in mutual trust, erosion in public image of the banks.
It is astonishing that even banks in other European countries, Russia, China, Australia, and Japan Germany have started feeling the pain of this virus fever spreading throughout the world like an Epidemic. The damage caused is so painful and devastating that people have lost faith in banking system and even inter bank transaction has come down due to loss of creditworthiness of even highly reputed banks in the world.
In such position our learned Finance Minister Mr. P Chidambram consoles Indians by saying that Indian banking system is solid and hence will not be affected by financial crisis the banks are facing in rest of the world. At the same time RBI has cut CRR by 1.50 basus points and removed restriction on PN for FII’s.Mr. FM has also extended help to MF by making provision for loan to the tune of Rs.20000 crores. Mr. Chidambram thought that due to such steps stock market will rise and the faith of investors will be restored. But nothing so happened in the stock market and there is no doubt that the stock market will see more black days in the days to come giving a sharp jerk to strategy of our veteran FM. Because FII will withdraw money from all foreign market due to the fact they need money in their own country.
It is pity and condemnable too that the same PN was considered by our government as painful disease in the year 2007 when share market was touching sky and in the year 2008 September the same disease has turned to be medicine to cure the ailing financial as also stock market. Similarly CRR was raised from 5% to 9 % in different phases to combat spiraling inflation and now RBI has again considered the cut in CRR as medicine. It may be their style of fighting with crisis created by them. We followed blindly what USA or UK was doing in the name of economic reformation without taking care of commensurating infrastructure, honesty, integrity, sincerity and literacy level needed to pursue such liberal policies in our country.
Nonetheless in my opinion the sentimental and environmental affects caused in our country by financial crisis in USA is not that much serious and durable as is likely to come in near future in Indian banks due to far more serious and fatal irregularities in identification and declaration of bad assets prevailing in our banks. Government and RBI both is silent spectator of false but rosy picture being submitted by Banks .Our judicial system is so weak that we cannot even recover the money from willful defaulters and banks think it wise to write them off than to make efforts for recovery of the same. How long government will provide aid to banks and how much loan will be waived by government will depend on the bank’s ability to recycle the fund profitably.
Indian banks need to be controlled, monitored by honest and devoted persons. The tradition of mere completion of audit formalities is slowly and gradually striking the Indian banks at the root. Maladies are being covered beneath the carpet. Banks are offering interest rate upto 12% on short term fund they acquire from big houses whereas they are ready to make retail lending and corporate lending at rates far less that their cost of fund.
Collateral less lending by Indian Banks have grown from roughly one lac crore in 2003 to three lac crores in the current year. In lack of strong judicial system our banks find difficult to recover the money they lend but still they prefer to take risk just to compete with foreign banks. Such high heartedness will prove to be high handedness in the near future. Our government never cures the actual disease but try to conceal the sin through ornamental measure which will never prove sustainable and stable results.
Strategy of the government to combat the crisis is faulty not only with regard to financial irregularities but also in the field of terror attacks occurring frequently in the country. This is why our government has always failed to nip in the bud all crisis coming in the way. They know only to sound empty red alert and high alert and never feel shy when the mistakes are repeated and repeated, damages are caused repeatedly.
It is now wave of fear and distrust that has adversely affected the banking, stock market and financial sector in the world. Measure taken by Bush administration has not produced any fruitful, effective and positive results neither in banking nor in share market.
Bailout package of 700 billion dollar accompanied by aid to AIG and other financial Institutes has generated more demand from corporate as also falling banks for further increase in bailout package. Not only this, all major countries have been constrained to follow this path of bailout package.
In India corporate sector has demanded for Rs.one lac crore worth bailout package inspite of the fact that FM Mr. Chidambram claimed a few days ago that India is not affected by foreign bank crisis and Indian banks are strong and stock market is wisely regulated.
On the one hand government claims that prices under free economy is decided by market forces and government has nothing to intervene, on the other they do not hesitate to withdraw restriction of Participatory Notes (PN) knowing very well that the same PN had created bad effects in share market and caused loss of income tax .Same PN was treated as source of terror fund coming into our system.
It seems to me FM does not want to understand that the real cause of present crisis is not what he pretends to understand. As a matter of fact all foreign countries have now started thinking in terms of nationalization of banking sector, directly or indirectly through bailout package in return of equity rights.
There is no doubt to me that extraordinary freedom to banking to create so called competitiveness in the name of unwarranted globalization, privatization and liberalization has caused the current crisis and bankers in the name of growth has forgotten the basis principles of banking and started reckless financing with collateral or without collateral.
In the sphere of real estate or commonly known retail sectors, bankers are moving fanatically in the market in search of loan takers, either for purchase of home or vehicle. Banker are ready to extend even personal loan without taking any security in the greed of higher rate of interest in the same way as private lenders in the past used to do. They have neither time nor will to verify the creditworthiness of the prospective borrower because they are under pressure to achieve the unachievable target given to them. Bankers do not take pain even to assess the value of flat or apartment or the house which they are going to finance. They are more worried about their target and survival than the quality of lending as also survival of bank.
Out leaders know very well that government or the bank cannot recover the money from defaulters due to faulty and ineffective administrative as also judicial system. In their fear of erosion of vote banks, Our leaders think it wise and prudent to write off /Rs70000/- crores than to ensure effective recovery of bad loans in addition to need based delivery of credit. To add fuel to fire Government vitiate the culture of recovery by prompting PSU banks writing off the loan of some sector or the other to please their friendly corporate houses or in their desire to enrich their vote banks.
That is why I say the real cause of the present turmoil in banking is reckless financing and lack of effective tools to recover the money from defaulters. Otherwise one cannot imagine any reason for sudden erosion of bank’s capital or sudden spurt in liquidity crisis in India. Story of liquidity crisis in the US and other countries linked to US dollars is different which has necessitated many countries all over the world announcing bailout package. Of course Indian banking is also victim of such global crisis but not to that extent as claimed by our FM,PM and RBI governor. It is true our banking system already suffering from various diseases has been further hurt and injured by the current global crisis.
There is no doubt that the present global crisis will gradually help in exposure of ongoing misdeeds in the banking and quicken & fasten the process of downfall as also merger of small and wek banks.
Reign of target and blind competition has given rise to rise in default and sharp fall in bad assets and also fraudulent disbursal of credit resulting in ultimate loss. And now falling of banks like playing cards have resulted in panic in investors. People have started withdrawal of money and this stormy wave of exit from banks as also stock market is causing liquidity crisis to deepen further. People have started withdrawing their hard earned money from banks and Mutual fund only because banks have lost faith in the market. Even Insurance sector has become victim of this liquidity crunch, astonishing indeed.
Under such critical juncture government need to introspect where they are wrong and what types of mistakes are being repeatedly committed by bankers in the name of competition and growth. Authorities responsible to regulate the system must punish without delay all those who contributed largely in creating the current crisis.
Bailout package is the temporary solution but the permanent remedy will come out only when the mistake of the past is not repeated and the real culprit is booked to task.
It is worthwhile to stress here that it will be gross blunder if Banks in India try to blame global crisis for irregularities in our banking system. Our problem of inflation, liquidity, falling share market, withdrawal of FII fund and irrecoverability of bad loans has been persisting since long whereas global crisis has come in picture only in the month of Septembr08. Our banks have been hiding bad loans for last several years and presenting false picture .As such position of Indian banks is much more alarming and dangerous. When Indian banks show correct picture even RBI and government of India fail to provide required bailout package.
Banks can be run really profitably only by honest, sincere, devoted and loyal persons. Present crisis can be combated by sincere honest workers and honest politicians to restore the lost faith and confidence. Policies based on vote bank cannot help in strengthening of the bank. Financial sector is after all the backbone of the economy and the nation as a whole and hence need preferred attention and it cannot survive long on ventilator of bailout package.
I Pray God that wisdom prevails upon our Finance Minister, Prime Minister and other responsible officers in the government on whom depend the fate of the country.
Danendra jain
No comments:
Post a Comment