Non-performing assets burden shifted on public sector banks: AIBOC

Source: The Hitavada      Date: 08 Jan 2018 10:44:54


Business Bureau,

All India Bank Officers’ Confederation (AIBOC) is opposing prompt corrective action (PCA) by Reserve Bank of India in public sector banks (PSBs). Most of the loans which have become NPAs are large advances, sanctioned at board level consisting of RBI representatives and members nominated by Government and the employees and officers of these banks had little to do in this regard. Further, the post of Officers’ and Workmen’s Director in the banks’ board are also lying vacant for the last three years and the Government seems to be in no mood to appoint them.

Unfortunately, the burden of the NPAs is shifted on the banks and the staff has to suffer. And secondly, public sector banks have major role in financing to priority sector and infrastructure projects unlike their private sector counterparts. Further, these sectors are under stress since last couple of years and it is high time the banks should introspect to find out the reasons for such debacle and address them. Moreover, it is very imperative on the part of the banks to finance these sectors for the overall growth of the economy.

Hence, we condemn the RBI’s strategy of avoiding sanctioning of loans on the pretext of risky and large advances and avoiding accepting deposits from the public. The basic function of any bank is to accept deposits for the purpose of lending. Now, in the name of PCA, the regulator is bringing in restriction for the banks to perform their basic function. Quite ironically, at one hand, the Government is insisting on the turnaround of these banks and on the others, it is bringing these banks within the ambit of PCA to impose restrictions.

RBI has also insisted for avoiding new recruitments which means the existing staff has to take the burden of the vacuum created by the continuous large scale retirements in these banks. Everyone knows that there is a growing concern that the recruitments in public sector banks have come down year after year. It is also significant to note that these banks have to increase their retail loan in order to make good for the non-financing of large advances; and increase in retail loan require more man-power to be recruited The new strategy of the RBI is again emphasizing to curb the recruitment in banks which will further aggravate the situation of man-power crisis in these banks hampering the customer service and all. This is really worrisome as far as these banks are concerned. AIBOC condemns this step on the part of the Government and demands RBI for its immediate reversal.

Government and the RBI are also very much aware of the ground reality. It is disgraceful on the part of the Government that being the majority shareholder in these banks, Central Government is running away from its own responsibilities.

One of the recommendations of the Parliamentary Standing Committee was to convert loans given to steel, power, telecom and infrastructure should be transferred to Industrial Finance Corporation which was created as a development bank to cater to the long-term finances; but the recommendation is yet to be implemented.

Again, Reliance Defense, which was an non performing assets (NPAs) has been converted into a long time finance with 20 years repayment period so that it could not be declared as NPA; whereas the same is not done in other eligible NPAs. All the corporate defaulters are not willful and since norms are there, the same facility in line with Reliance
Defense, should be extended to others as well.

Further, the Parliamentary Standing Committee also made it clear that some of the companies could not do well because of the stagnation in the economy and it bears the testimony that all are not willful defaulters.