Neemuch-based activist Chandrashekhar Gaur put in an RTI, wanting to know the cases of fraud in the PSU banks, post Nirav Modi and all the action which the Govt seems to have taken.
The answer is not encouraging at all. In the first quarter of the current fiscal, between 1st April till 30th June 2019, as many as 2,480 cases of fraud involving a huge sum of Rs 31,898.63 crore was detected in 18 PSU banks.
SBI remained the biggest prey to frauds with 38% share, with 1,197 cases of cheating involving Rs.12,012.77 crore. Number two was Allahabad Bank with 381 cheating cases involving Rs 2,855.46 crore and third in line was PNB with 99 cases worth Rs 2,526.55 crore.
So what has really changed? We do not if there are more Nirav Modi’s happening even as we read this because that comes to light only much later.
India today is the number one in the world when it comes to worst bad loans pile. This “prestigious” spot was earlier held by Italy but it has managed to halve its debt as it quickened the pace of its clean-up.
Moody’s Investors Service to Credit Suisse Group AG. warned that more loans may sour in India’s banking system, saying more than 2.4% of total loans in India’s banking system may be under stress on top of the 9.6% bad debt ratio as of June, the highest among major economies.
One of the biggest reasons is the delay in resolving bankruptcy cases. There are insolvency cases stuck in the bankruptcy courts for over months now, making a mockery of the 270-day resolution deadline set by the insolvency law. Remember the “Dirty Dozen” list of borrowers which the RBI named under the NPA resolution process. Of these 12, only 6 have been resolved so far.
Italy managed to bring down its bad debts – three of its biggest banks- Banco BPM SpA., Unicredit SpA and Intesa Sanpaolo have cut the amount of toxic debt on their balance sheets by almost half from a peak of 341 billion euros in 2015 by selling bad loans at discounts to tidy up the pile. But the banks in India simply do not want to sell at huge discounts and with no infrastructure in place to hasten this process, the pile is only piling up further.
Sadly, we do not see any reforms coming out to clear this morass. Mega mergers does not solve any problem of NPAs. If one may recollect, a few days ago, the Minister for Civil Aviation said that the Govt should not be running airlines. The same wisdom applies to banking and a host of other businesses. The government must limit its remit to only collecting taxes and spend the money on essential things like buying VVIP helicopters and providing A to Z security with gun toting commandos disguised in black to all jaded politicians.
Merged banks or otherwise, these PSUs are fiefdoms of the political parties. They are victims of political aspirations. Needless to say, waiver schemes have destroyed the banking system in India. Those working with banks say that more than 50% of the MSME portfolio is restructured and irony is that bankers are begging their borrowers for restructuring rather than recovery.
The Govt needs to follow a complete hands-off policy, with the bank Boards driving the bank and not the finance ministry. To run banks like a true professional, like the private sector, PSU banks need to give up social banking or else NPAs and losses will remain permanent bed mates. Banks need to be run like a business enterprises – for profit. Or else, this saga of bad debts and the dubious reputation in the world of having the highest pile of bad debts will perpetuate.