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After PNB, SBI, now Union Bank of India hit by bank fraud

The Central Bureau of Investigation (CBI) registered a Rs1,394.43 crore bank fraud case against Hyderabad-based Totem Infrastructure Ltd on a complaint by state-run Union Bank of India.

“The CBI registered a case today (Thursday) on a complaint by Union Bank of India against Totem Infrastructure and its promoters and directors Tottempudi Salalith and his wife Tottempudi Kavita of Hyderabad,” a person familiar with the developments said.

The number of bank fraud cases has been piling up after the Reserve Bank of India (RBI) directed banks to file complaints against erring companies. The latest case comes just a day after the investigating agency filed a case of loan fraud against Kanishk Gold Pvt. Ltd on a complaint by State Bank of India (SBI).

Union Bank of India’s industrial finance branch of Hyderabad filed the complaint against Totem for cheating the bank to an extent of Rs313.84 crore.

“Totem Infrastructure took a loan from a consortium of eight banks, including Union Bank, wherein the total outstanding dues stand at Rs1,394.43 crore. This account became NPA (non-performing asset) on 30 June 2012,” the person added.

The agency said that Union Bank of India had only recently filed a complaint with the agency against Totem Infrastructure.

It was alleged in the complaint by Union Bank that “the company had diverted funds by opening accounts outside the consortium and through payments of wages by showing excess expenditure and inflated stocks. The entire sale proceeds were not allegedly routed through the dealing branches of consortium banks.”


News about Gratuity for Bankers Part-4

Parliament on Thursday passed Payment of Gratuity(Amendment) Bill 2017 paving the way for doubling the limit of tax free gratuity to Rs 20 lakh and empowering the government to fix the ceiling of the retirement benefit through an executive order.

The Rajya Sabha passed the bill, which was approved by the Lok Sabha last week, on March 15. Besides enabling the central government to fix the ceiling of tax free gratuity, the bill will also empower it to fix the period of maternity leave through executive order.

It also notifies the period of maternity leave as part of continuous service and proposes to empower the central government to notify the gratuity ceiling from time to time without amending the law.

Rajya Sabha Chairman M Venkaiah Naidu said in the Upper House that he had met leaders of various parties in the morning and it was decided that the House would take up the crucial Payment of Gratuity (Amendment) Bill as it was of importance to the employees. Labour Minister Santosh Kumar Gangwar then moved the bill for consideration and passage. It was passed by a voice vote without a debate.

The labour ministry later said in a statement that the Bill also envisages amending the provisions relating to calculation of continuous service for the purpose of gratuity in case of female employees who are on maternity leave from "twelve weeks" to such period as may be notified by the central government from time to time.

Prime Minister Narendra Modi tweeted: "A significant pro-people measure passed in Parliament. Will benefit lakhs of Indians." After implementation of the 7th Central Pay Commission, the ceiling of tax free gratuity amount for central government employees was increased from Rs 10 lakh to Rs 20 lakh. The unions have been demanding for inclusion of the change in the Act.

At present, formal sector workers with five or more years of service are eligible for Rs 10 lakh tax-free gratuity after leaving job or at time of superannuation. A senior government official had earlier said that the government wants to provide tax-free gratuity of Rs 20 lakh to organised sector workers at par with the central government. 

The Payment of Gratuity Act, 1972, was enacted to provide for gratuity payment to employees engaged in factories, mines, oilfields, plantations, ports, railway, companies, shops or other establishments. The law is applicable to employees, who have completed at least five years of continuous service in an establishment that has 10 or more persons.

The amendment will also allow the central government to notify the maternity leave period for "female employees as deemed to be in continuous service in place of existing twelve weeks". The proposal comes against the backdrop of the Maternity Benefit (Amendment) Act, 2017 enhancing the maximum maternity leave period to 26 weeks.

Jewellery chain Kanishk Gold defrauds 14 banks

In yet another bank fraud, State Bank of India has requested the help of the CBI in January to investigate jewellery chain Kanishk Gold Pvt Ltd for loan fraud to the tune of Rs 824.15 crore.

Kanishk, which has a registered office in T Nagar in Chennai, is owned by promoters and directors Bhoopesh Kumar Jain and his wife Neeta Jain. Bankers said they were unable to contact the couple, who are currently believed to be residing in Mauritius. The CBI is yet to file an FIR in this regard.

SBI was the lead bank in a consortium of 14 public and private sector lenders to give loans to Kanishk. In a letter dated January 25, 2018 to the CBI, SBI charged Kanishk with "manipulating records, shutting shop overnight."

While the principle loaned is about Rs 824 crore, adding the interest due would indicate a loss of more than Rs 1,000 crore to the banks. SBI was the first to declare the account fraudulent to the RBI on November 11, 2017. By January, all other members had declared the account as fraudulent to the regulator.

SBI said the jeweller first defaulted in March 2017 in interest payments to eight member banks. By April 2017, Kanishk stopped payments to all 14 banks. The bankers were unable to contact the promoter when it initiated its stock audit on April 5, 2017. On May 25 2017, when bankers visited Kanishk's corporate office, factory and showroom -- the facilities were shut with no activity and stock.

On the same day, Bhoopesh Jain wrote a letter to his bankers admitting falsification of records and removal of stocks -- secured as collateral to the lenders. Subsequent visits by the bankers to the other showrooms of the jeweller revealed that they had also been locked.

A representative from the Madras Jewellers and Diamond Merchants Association said, "The company shut down as early as May 2017 since it couldn't cope with the losses."

SBI's letter shows that the loans to Kanishk Gold date from 2007. With the passage of years, the banks increased the credit limit and working capital loan limit to Kanishk Gold. In 2008, SBI took over the loans from ICICI Bank -- at that point -- they amounted to Rs 50 crore in working capital loan and Rs 10 crore in term loans. In March 2011, this was converted into a multiple banking arrangement with Punjab National Bank and Bank of India.

In 2012, the consortium with SBI as lead bank, sanctioned granting of metal gold loan (MGL) to Kanishk. "Using this option, Kanishk would purchase gold in the form of bullions from nominated banks in the consortium or from the open market using credit under MGL or from its current account," said SBI.

State Bank of India extended loans to the tune of Rs 215 crore, Punjab National Bank Rs 115 crore, Union Bank of India Rs 50 crore, Syndicate Bank Rs 50 crore, Bank of India Rs 45 crore, IDBI Bank Rs 45 crore, UCO Bank Rs 40 crore Tamilnad Mercantile Bank Rs 37 crore, Andhra Bank Rs 30 crore, Bank of Baroda Rs 30 crore, HDFC Bank Rs 25 crore, ICICI Bank Rs 25 crore, Central Bank of India Rs 20 crore and Corporation Bank Rs 20 crore.

In an interview to Times Now, R Soundarajan, AGM, Corporation Bank, said he was aware of the issue. "SBI would be in a better position to answer questions. Our exposure to Kanishk is small, compared to other banks. We have extended a working capital loan of about Rs 20 crore," said the AGM of Corporation Bank. GD Chandrasekhar, general manager, SBI, said the bank would respond when it has further information. Audits of Kanishk's financials were done by Ajay Kumar Jain partner at Ajay & Co Chartered Accountants and Sumit Kedia, partner, Lunawath & Associates.

Bank of India(BoI) shuts one of foreign office in January

State-owned Bank of India today said it has closed down its operations of representative office in Yangoon (Myanmar) from mid-January.
"The Ministry of Planning and Finance, Directorate of Investment and Company Administration, Myanmar has allowed to terminate/close our Yangoon Representative Office (Myanmar) with effect from January 19, 2018," the bank said in a regulatory filing.

Public sector banks (PSBs), as per the agenda approved in the Manthan programme in November last year, were asked to examine all their 216 overseas operations as part of clean and responsible banking initiative.
As many as 35 overseas branches of state-owned banks are said to have closed down since.
The closing down of overseas operations assumes significance in the present context in the backdrop of jeweller Nirav Modi and his uncle Mehul Choksi of Gitanjali Gems misused the foreign office facility in the nearly Rs 13,000 crore fraud at PNB by presenting fake Letters of Undertakings (LOUs) to overseas banks.
Apart from Yangoon, Bank of India is also said to have closed down its office in Botswana.Besides, Bank of Baroda and Indian Overseas Bank have shut their Hong Kong branch.
As on January 31, 2018, public sector banks had about 165 overseas branches, besides subsidiaries, joint ventures and representative offices. State Bank of India has the largest number of overseas branches (52) followed by Bank of Baroda (50) and Bank of India (29).
The state-owned banks have largest number of branches in United Kingdom (32) followed by Hong Kong and UAE (13 each) and Singapore (12).

"PSBs to consolidate 35 overseas operations without affecting international presence of PSBs in these countries," Financial Services Secretary Rajiv Kumar had earlier said.
He also informed about identification of 69 operations for further examination as a move towards cost efficiencies and synergies in overseas markets.
Expressing government's commitment to 'clean and responsible banking', Kumar had said that the overseas operations of the state-owned banks will be rationalised.
Kumar further said that: "All 216 PSB operations to be examined. Non-viable operations in overseas market to be closed for cost efficiency and synergy. Operations in some geography to be consolidated. Consolidate equity stake in joint ventures having multiple PSB partners".

Bank unions to organise dharna in Delhi

The United Forum of Bank Unions today said it would organise a "massive" dharna in Delhi on March 21 in support of its demands. 

UFBU's Andhra Pradesh and Telangana state units alleged that an orchestrated campaign has been unleashed against public sector bank employees and the banks after the PNB issue came to light. 

The demands include taking tough action against loan defaulters and stopping alleged harassment of bank staff following the recent PNB scam. 

"Subsequent to the recent fraud in Punjab National Bank, an orchestrated propaganda is being unleashed against all the bank employees, and the functioning of PSBs is being projected in poor light," VVSR Sarma, convener of the UFBU AP and Telangana State Units, told reporters here. 

He alleged that suggestions towards privatisation of PSBs are being made in some quarters without acknowledging the pivotal role played by the PSU banks in the country's growth since banks' nationalisation in 1969. 

"It is also a known fact that those corporate and industrial houses which are responsible for the huge bad debts in PSBs are freely suggesting privatisation of PSBs," he said. 

UFBU has been demanding strict action against loan defaulters, Sarma said. 

"The UFBU demands that tough action be taken against all those involved, connected and responsible for the fraud in Punjab National Bank," he said. 

"Do not single out lower level staff. Avoid harassment of employees and officers by mass transfers," he said. 

In addition to the dharna at Jantar Mantar in Delhi, UFBU would also conduct a mass signature campaign and the signatures would be sent to the Lok Sabha Speaker in April, Sarma added. 

State Bank of India (SBI) Recruitment for Specialist Cadre Officers Posts 2018

State Bank of India (SBI) has published Advertisement for below mentioned Posts 2018. Other details like age limit, educational qualification, selection process, application fee and how to apply are given below.

Advertisement No.: CRPD/SCO/2017-18/11


  • Special Management Executive (Regular): 35 Posts
    • CA/ ICWA/ ACS/ MBAin Finance or 2 years PG Diploma in Finance (The course should be of 2 years full time duration. Course completed through correspondence/ part-time are not eligible. The institute should be recognized/ approved by Government bodies/ AICTE)
    • Minimum 5 years post qualification experience (as on 31.12.2017) as an Executive in Supervisory/ Management role : a. In a Scheduled Commercial Bank/ Associate or Subsidiary of a Scheduled Commercial Bank. OR b. In a Public Sector or listed Financial Institution/ Company. Candidates having experience in processing of credit proposals are preferred.
    • Age Limit: Minimum 30 years & Maximum: 40 years
  • Deputy General Manager (Law) (Contractual): 01 Post
    • Degree in Law (3 years/ 5 years) from a recognised University India.
    • Enrolled as Advocate with Bar Council and having minimum 17 years of experience as Law Officer in the Legal Department of Scheduled Commercial Banks OR Financial Institutions OR Asset Reconstruction Company OR combined experience as Law Officer in the Legal Department of Scheduled Commercial Bank and Asset Reconstruction Company and having extensive experience in Recovery & Rehabilitation. The experience should be after enrolment as an advocate with Bar Council. 
    • Age Limit: Minimum 42 years & Maximum: 52 years
  • Deputy General Manager (Law) (Regular): 01 Post
    • Degree in Law (3 years/ 5 years) from a recognised University India. Post Graduate degree in Law will be preferable
    • Enrolled as Advocates with Bar Council and having minimum 17 years of experience as Law Officer in Scheduled Commercial Banks and holding the post of Assistant General Manager (Law) or equivalent in the Legal Department of Scheduled Commercial Bank for at least 3 years. The experience should be after enrolment as an advocate with Bar Council. The equivalence of the post held by a candidate to that of Assistant General Manager (Law) at SBI will be decided by SBI. The Bank's decision in this regard will be final and binding on the applicants.
    • Age Limit: Minimum 42 years & Maximum: 52 years
  • Deputy Manager (Law) (Regular): 82 Posts
    • Degree in Law (3 years/ 5 years) from a recognised University India
    • Enrolled as Advocates with Bar Council and having 4 years of experience as practising Advocate OR Law Officer in the Legal Department of Scheduled Commercial Banks OR 4 years combined experience as practising advocate and Law Officer in the Legal Department of Scheduled Commercial Banks. The experience should be after enrolment as an advocate with Bar Council.
    • Age Limit: Minimum 25 years & Maximum: 35 years

Total No. of Posts: 119 Posts

Application Fees: Application fees and Intimation Charges (Non-refundable) is Rs. 600/- ( Rs. Six Hundred only) for General and OBC candidates and Rs. 100/- (Rs. One hundred only) for SC/ ST/ PWD candidates. ii. Fee payment will have to be made online through payment gateway available thereat.

Selection Process: Candidates will be selected based on Test & an interview.

How to Apply: Interested Candidates may Apply Online Through official Website.

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Apply Online: Click Here

Important Dates:
  • Commencement of online registration of application: 20-03-2018
  • Closure of registration of application: 07-04-2018
  • Closure for editing application details: 07-04-2018
  • Last date for printing your application: 22-04-2018
  • Online Fee Payment: 20-03-2018 to 07-04-2018

One more fraud of Rs. 4000 cr with 20 banks

The Mumbai Police has arrested three directors of city-based Parekh Aluminex Ltd (PAL), as part of an ongoing investigation into the non-payment of dues estimated at Rs 4,000 crore, several media reports said.
Following a complaint by Axis Bank against PAL for defrauding it of Rs 250 crore, the Economic Offences Wing (EOW) of the Mumbai police arrested Bhawarlal Bhandari, Premal Goragandhi and Kamlesh Kanungo on Friday on charges of cheating, forgery, breach of trust and criminal conspiracy, The Times of India reported.

As many as 20 private lenders including the State Bank of India (SBI), Indian Overseas Bank (IOB), are also seeking the recovery of their dues.
According to Sify, Axis Bank's internal investigation found that directors of PAL cheated and manipulated the system to obtain loans and fraudulent letters of undertaking (LoU). The arrested directors have reportedly been raising fake invoices and issuing manipulated bills through bogus companies. 
Between 2011 and 2013, the accused availed a number of short loans and credit facilities from Axis Bank, totalling Rs 290 crore, according to Hindustan Times.

“The bank’s internal probe concluded that the loan amount given to the firm was diverted to the company’s loan accounts maintained with other banks and was used for purposes other than what it was taken for. To get the loans, the names and documents of many firms were misused by the accused,” an investigation officer told Hindustan Times on the condition of anonymity.

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PAL's dubious record
In August 2017, the Securities and Exchange Board of India (SEBI) had barred PAL from the securities market and issued show-cause notices to its statutory auditor and a former executive director for alleged accounting fraud, diversion of funds and understatement of loans by over Rs 1,000 crore. The SEBI action followed a SBI complaint, filed with the CBI, which alleged that PAL and its directors had defrauded and cheated a consortium of banks.
The complaint filed by SBI had alleged that PAL and its directors fraudulently availed credit facilities from a consortium of banks including SBI, misused such credit facilities with an intention to defraud and cheat the banks, thereby causing losses to the tune of 122.07 crore and interest and other charges to SBI, the SEBI order had said.

Parekh Aluminex debt stands at Rs 2,545 crore at November 2015

According to documents reviewed by The Indian Express, at least 22 banks and financial institutions have lent Rs 2,545 crore through fund-based and non-fund based facilities. The banks include — Indian Overseas Bank (Rs 292 cr), SBI (Rs 148 cr), Bank of Baroda (Rs 100 cr), Union Bank (Rs 75 cr), Punjab National Bank (Rs 125 cr), Exim Bank of India (Rs 13 cr), Axis Bank (Rs 327.75 cr), Dena Bank (Rs 209.47 cr), Central Bank (Rs 159 cr), SBT (Rs 147 cr), Allahabad Bank (Rs 109 cr), Vijaya Bank (Rs 103 cr), Kotak Mahindra Bank (Rs 111 cr), Dhanalaxmi Bank (Rs 110 cr), Canara Bank (Rs 81 cr), Corporation Bank (Rs 89 cr), South Indian Bank (Rs 78 cr), Uco Bank Bank (Rs 71 cr), Federal Bank (Rs 66 cr), IDBI Bank (Rs 62 cr), ICICI Bank (Rs 24 cr), LIC (Rs 39 cr).

The Deloitte report on Parekh Aluminex found irregularities in the firm’s inventories record, provision for doubtful debts, insurance of plant and machinery, cash and bank balances and drawing power calculations.

For instance, the audit report said loans of Rs 1,314.78 crore given by Parekh Aluminex to seven private firms and a few related entities as on December 2012 were without any documentation defining the terms and conditions and security against which the loans were disbursed. Out of this, at least Rs 869.25 crore was extended to these firms as interest free loans. The seven private firms are JK Shah Group, Kamlesh Kanungo Group, Kirti Kedia-Transcon Group, Orbit Group, Shanti Dalal, Vishal Sharma Group, YA Mamaji Group. The audit report also raised concern about the company’s Rs 27.46 crore interest free loans to three related parties — AAP Entertainment Ltd, Arsenel Bulls Securities and AAP Realtor Ltd.

“Loans amounting to Rs 38.16 crore extended to companies trading in bullion were adjusted against expenses not directly attributable to company’s business,” said the Deloitte audit report. The report also found that the actual inventory of the firm was 97 per cent less at Rs 26.57 crore in December 2012 from Rs 918.25 crore in November 2012. It added that the company inflated its records to avail maximum drawing power from the lenders.

In December 2015, SBI, submitted the Deloitte audit report on Parekh Aluminex with the Securities and Exchange Board of India (Sebi). Sebi investigated the firm and in August 2017, barred it from securities market and issued show-cause notices to its statutory auditor and a former executive director for alleged accounting fraud, diversion of funds and understatement of loans by over Rs 1,000 crore.

At least six banks — SBI, Dena Bank, State Bank of Travancore, Corporation Bank, IDBI Bank and Indian Overseas bank — have filed a complaint with the CBI between 2015 and 2017 alleging fraud by Parekh Aluminex and its directors.

The banks alleged that the company “had borrowed many times more than its possible annual turnover” and “diverted around Rs 1,400 crore out of the total bank finance of Rs 2,000 crore. They have also alleged that the firm “consistently” showed inflated sales, stock holdings and trade debtors. “Book debts statement was given with the assumed and artificial figures with intention to cheat the bank. Names of debtors were not mentioned by the company which shows their fraudulent intention of non verifiable source to the bank and have more drawing power/ funds with actual sales,” said one of the complaints filed by the lead banker of the consortium of lenders, Indian Overseas Bank, with the CBI in May 2017.

SBI complaint stated that the company had a “drastic” reduction in assets in December 2012 and had diverted loan money to entities that had business activities in sectors (iron and steel, real estate) that were not the core business of Parekh Aluminex. Allahabad Bank has declared Parekh Aluminex as a “wilful defaulter”, a tag the firm has challenged in the High Court. ICICI Bank has filed a winding up petition against the firm in the National Company Law Tribunal.

Just two things can fix PSU banks’ problems

Sometime in late 2017, billionaire diamantaire Nirav Modi walked into the office of the chief executive officer (CEO) and managing director of a large Indian private bank in Mumbai with two of the bank’s directors in tow. The meeting did not last long. No, Modi—who has drilled a big hole in the balance sheet of India’s second largest government-owned bank, Punjab National Bank—was not looking for fresh funds for any of his companies. He was exploring ways to replace part of his existing bank loans with a fresh facility to bring down the cost of funds. The private banker did not oblige him. After Modi left his room, the CEO told the two directors not to arrange another meeting with Modi, if they really cared for their board seats.

The CEO of a government-owned bank might have reacted in a different way. Probably, the banker would have asked his general manager (credit) to look into Modi’s proposal. He would have done this not because he is corrupt but he would have found it difficult to disappoint the directors of his bank who had brought Modi to him. Besides, other banks have exposure to Modi’s companies and it is only logical that his bank, too, should lend (cynics call this “herd mentality”). Also, it’s not easy to say no to a person whose diamond jewellery designs have been flaunted by celebrities like Kate Winslet and Rosie Huntington-Whiteley on the Hollywood red carpet and advertised by Indian film star Priyanka Chopra.
For most public sector banks (PSBs), it is a cultural issue, inseparable from the lack of corporate governance. What are the reasons behind this and how to solve it? While many believe privatization is the panacea for this set of banks which roughly have 70% share of the assets in the Indian banking industry, here is a list of issues that influence the culture and governance structure in PSBs. It is indicative and not exhaustive and does not include other issues relating to inefficiency in project appraisal, risk management, monitoring, pressure from the government to give loans to certain sectors and invest time and resources in non-banking work, et al.
The quality of boards: Even though all government-owned banks are listed on bourses, they do not need to have one-third of their directors independent, as stipulated by the capital markets regulator. The quality of PSB boards is not uniform; most directors lack vision and many are there to broker loan deals for the borrowers and not guide the senior management with vision.
The quality and tenure of the CEO: Till recently, the appointment process for managing directors and executive directors of these banks was opaque, and it was influenced by industrial houses, political parties in power and bureaucrats.
The relatively short tenure at the top also queers the pitch as the CEO needs time to understand a bank and act (typically, the person comes from another bank). With no skin in the game, the bosses often follow an easy out. The new CEO spends the first couple of quarters in cleaning up the book. This leads to losses for the bank, and the message goes to investors that the previous CEO did not do a proper job; but the incumbent repeats the “mistakes” of his predecessor while leaving with a happy note, announcing hefty profits. The cycle goes on.
The regulation is not ownership neutral: The Banking Regulation Act, 1947, which lays down norms for all banking companies in India, is not entirely applicable to government-owned banks. The Reserve Bank of India (RBI) does not appoint the chairman, managing director and other directors of a bank board. The regulator also cannot dismantle a board and remove the CEO. As a result of this, there is no accountability either of the board or the senior management.
Poor pay structure of the executives of PSBs: It comes in the way of hiring the right talent and keeping them wedded to ethics. For the record, up to the middle management, the officers in public sector banks are better looked after than their private peers in terms of remuneration, perks and job security; but at the top level, private banks pay many times more. At least two banks—State Bank of India and Bank of Baroda—have proposed to pay stock options to their employees, but the government has not cleared the proposals.
The list can go on. Various theories have been doing the rounds on how to tackle misgovernance. To start with, if we address just two things, we can cure many of the ills that plague PSBs. At the root of the governance problem in such banks is the way transfers and promotions are done across all layers. Bank officers at different levels are routinely blackmailed to toe the line of their proximate bosses—if they do not look after or look into certain accounts favourably, they run the risk of being transferred to a place not to their liking and/or miss the next promotion.

Typically, the managing director drops a hint to the concerned general manager for sanctioning a loan or a general manager implicitly tells a deputy general manager or an assistant general manager to do so. This system of dropping hints and tacit influence for loan approvals percolates down the line. This is done verbally, over phone, without any paper trail. If such requests are not respected, the junior officer may lose the next promotion or get transferred to a remote place where his family would hate to relocate and his career would take a beating. Only those officers who do not care for such occupational hazards stick to the rules and keep the banks going. Most get sucked into the system, which breeds corruption.
There are seven scales of bank officers at public sector banks; at the top is the general manager (scale VII). For a general manager’s appointment, generally, interviews are conducted by the managing director of a bank, the government and/or the RBI nominee on its board or any other director and a couple of senior bankers from the industry. For a deputy general manager (scale VI), the interview is conducted by the managing director, executive director (ED), a senior general manager and two external representatives. For an assistant general manager (scale V), the interview is conducted by one ED and two general managers.
A written examination, interview and the annual performance report decide the fate of the candidates, with their weightage varying at different levels of appointment. Those who do not listen to their bosses on sanctions of loan proposals get poor performance appraisals and the interview can always be managed with the directors and the external experts being handpicked by the managing directors and executive directors.
Transfers are done for three reasons—promotion, business exigencies and as a disciplinary action. At the senior level, an executive can be transferred within a month of a new posting because of exigencies. For other levels, there is a transfer policy which varies from bank to bank. Typically, at the middle level, one can be transferred once in three years, and a junior officer can stay put at one location for as long as seven years, but not at one branch.
Those who face disciplinary action are generally posted at the headquarters, or a bank’s administrative office. At the senior level, non-performance can always lead to transfers, and herein lies the catch. Those who do not toe the line of bosses are typically branded as non-performers and get the stick.
Finally, if an honest officer is neither afraid of being transferred nor of losing promotion, the fear of vigilance is always there to scare him.
An anonymous letter to the chief vigilance officer of the bank, drafted by the boss, can finish one’s career. It’s not difficult to find a hole or two among the hundreds of commercial decisions that an officer takes while sanctioning loans.
Privatization and amendment to the Banking Regulation Act to empower RBI can wait. If the government—the majority owner of these banks—and RBI institutionalize a mechanism to ensure an objective, transparent and merit-based transfer and promotion policy in public sector banks, a bulk of the cultural and governance problems will vanish into the blue.
An apocryphal story
The problem of corporate governance in public sector banks reminds me of an apocryphal story. Once upon a time, there was a king who loved walking on the streets but didn’t like the idea of making his feet dirty. So, he announced a hefty award for the person who could solve his problem.
The first person appeared on the scene with millions of brooms. His efforts to make the country dust-free went in vain even as the cloud of dust that formed over the kingdom made the king sick.
The second aspirant for the award ended up killing millions of goats and sheep, but still couldn’t cover half of the roads with their skin.
Finally, a cobbler entered the royal court, carrying 2 sq. ft of hide in his bag. He measured the king’s feet and within hours stitched a pair of sandals. Now, the king could roam around on the dusty roads with ease. The government and RBI should cover the king’s feet instead of trying to make the kingdom dust-free. If the bank officers are allowed to perform without fear or favour by their proximate bosses, the bulk of the problem is solved.
A caveat

Here is a caveat: The culture of influencing “subordinates” to sanction loans to undeserving borrowers is rampant in PSBs but not all banks suffer from it. There are banks where fair and transparent systems and processes are in place. Also, not listening to the boss when it comes to favouring a particular borrower is not the only reason for an honest banking officer missing his promotion.
Here is how a chief manager (scale IV) of a PSB once lost his promotion. Busy managing a large branch in a coastal town, the officer got a phone call from his ED, informing the arrival of the latter’s daughter and son-in-law. The chief manager (who was never told but expected to arrange the couple’s stay and a vehicle for sight-seeing) did not “act” on the phone call and paid the price for it. However, this probably is not unique to banks alone—all government-owned companies have this culture. That’s, however, a separate story.
Source- Livemint

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