Money & Banking
AIBEA blows the whistle on bad loans of Indian banks

Bank union, AIBEA, demands that banks recover bad loans from wilful defaulters

Trade unions are usually quick to announce protests to demand higher wages or better working conditions. This time, however, the All India Bank Employees Union (AIBEA), one of the biggest employees unions in India, has decided to turn into a powerful whistleblower. On 5th December, AIBEA gave a call to ‘stop the loot of public funds’ and start recovery of bad loans. This is a welcome development. I have always held that the destruction of giant entities, such as Air India, Unit Trust of India, and giant public sector entities in telecom and engineering, is as much due to employee apathy as it is due to the loot by politicians and bureaucrats. AIBEA has signalled that it will name and shame defaulters, if necessary, to force banks to start acting tough and recover bad loans. The Reserve Bank of India (RBI), as the banking regulator, is fully aware of what is going on; but now, the unions are asking it to move from rhetoric to action. The AIBEA cites the overused quote about India having sick industries but no sick industrialists. It also quotes RBI governor, Dr Raghuram Rajan, who recently told banks, “You can put lipstick on a pig but it doesn’t become a princess. So dressing up a loan and showing it as restructured and not provisioning for it when it stops paying, is an issue. Anything which postpones a problem (rather) than recognising it, is to be avoided.” AIBEA points out that the top four bad loan accounts add up to a massive Rs22,666 crore, which include Kingfisher Airlines and Winsome Diamond and Jewellery Co. Will RBI stop the “systematic loot of public money” by recognising these as pigs with lipstick?

The data collated and released by the AIBEA is a frightening indictment of the banking regulator and the finance ministry. While the government has been boasting about India having escaped the global financial crisis, how does it explain the four-fold increase in bad loans—from Rs39,000 crore in 2008 to Rs164,000 crore today? The creation of new bad loans is a mind-boggling Rs495,000 crore, according to AIBEA.  And, corporate debt restructuring through provisioning, concessions, waivers, write-offs, concessions, one-time settlements (which are done multiple times), compromise proposals, etc, add up to a massive Rs325,000 crore.  

Write-offs of bad loans by PSU banks in the past seven years amount to a massive Rs140,000 crore. If we include the bad loans of private banks and foreign banks and other financial institutions, the total bad loans are more than Rs2,50,000 crore, says the AIBEA statement. Worryingly, it says, things have reached a point where management is making banks vulnerable by reducing the provisioning of bad loans. RBI has pointed out, and is aware, that the provision coverage ratio of India’s banking system has dropped from 55% to 45% as against a global average ratio of 70% to 80%.

AIBEA’s demand will resonate with depositors who are being asked to pay higher charges for every service, to ensure higher profits for banks every quarter. AIBEA, for once, is on the same side as two big stakeholders of banks—bank customers and shareholders. Clearly, the call to publish the names of defaulters, to make wilful default a criminal offence, investigate collusion between banks and borrowers and the demand not to ‘incentivise corporate delinquency’, will find huge support among ordinary people.



Yerram Raju Behara

3 years ago

The point of inflexion is 1993 when liberalization and globalization had set in. The banks clamoured for legal protection and SAFRAESI Act came into being to securitize assets. This provided opportunity for banks to do armchair lending. Corporate lending, Infrastructure lending, lending to PSUs under government pressure, Housing Loans, Retail loan segment other than Agriculture and Micro and Small Enterprises fall under such category. The priority sector lending was blamed for rising NPAs and in particular agriculture and MSMEs as they are now called, in the name of behest lending. Today out of the NPAs in MSMEs, it is Medium enterprises that took a greater slice. It is good that AIBEA has taken up the cause obviously under fear of their own existence. There are workmen directors on Boards. And they are representatives of AIBEA. Being silent on Boards to get waivers or reduction in punishments of their highly delinquent members whose cases come to Board scrutiny, they have not contributed to raising concern on loan delinquencies. Seeing this articulation, I only hope they now take courage to raise the same concern and remedy the situation. The remedy lies in proper due diligence and stopping express and super express sanctions and the home loan and car loan melas. This must be mandated by the regulator without any delay. Loans can't be sanctioned in 24 and 48 hours save guarantees or LCs of the existing good loan accounts or adequately collateralized ones. Regulators have to come clean on these issues and the responsibilities of the nominee directors.

Gopalakrishnan T V

3 years ago

This loot through banks by Corporates and others has been a regular feature and it gets ignored because banks are able to write off of the loans out of profits and they are also able to get capital support fropm the Government.The write offs seldom get scrutinised. On the contrary , influence worksa lot to get the loans written off.Board of Directors who include RBI and Government nominees have no time to seriuosly go through the Agenda items and most of the items cleared as a matter of routine. These agenda include loan proposals and write offs. The auditors of banks seldom make any comment or dissent and there is always a trade of between auditors and the Board of Directors. The banks balance Sheets are drawn as desired by the Chairman and by the influential Board members.It has nothing to do with the ground realities. Chairmen of banks are entitled to draw bonuses based on performance and the performance indicators are window dressed heavily so that they are able to draw a lumsum money on an yera to year basis. Employees representatives are also on the board and they seldom raise any dissent or they are not heard adequately on tyhe Board agenda. The Chamber of Commerce and other representative bodies who always fight for concessions and reliefs are never heard fighting to reduce the bad loans and are never found disciplining the borrowers.Thee only way to reduce the formation of bad oans is to have a self correcting mechanism by which right from the day of sanctioning of loans
the borrowers need to be disciplined by a rating method based on their conduct of acounts. Banks also need to be brought under discipline and should be penalised if they are observed to be lax in the proper conduct of loans. Banks need tight regulation as they deal with money and hunman resources and it is humanly impossible to prevent greed and commitment of irregularities. Banks need a strict vigilance on an ongoing basis as they deal with depositors hard earned money. Tax payers also should object supporting banks for their failures by using Govt resources

t k mitra

3 years ago

The move made by AIBEA is timely and needed urgently to save the nation from disaster.It is well known that in our country industries/enterprises become sick whereas the owner/entrepreneuers are generating/getting fat.Loan appraisalsystem,inspection,project monitoring etc. are far from fullproof which fails to protect the financial institutions,there are rampant corruption,political interference,tardy judicial redressal etc.

nagesh kini

3 years ago

Now that the Division Bench of the Bombay High Court in DJ Exim vs. SBI, has cleared the 'naming and shaming' exercise of the publishing of the photographs serves the purpose of creating awareness and cautioning prospective clients, it should be the very first move in dealing with wilful defaulters even before going into CDR that results in and calls for major sacrifices for the banks and more benefits for borrowers.


3 years ago

It would be interesting to watch if AIBEA actually publishes the names of defaulters, or if they would be silenced, like many other whistle blowers. Are there not workers' representatives in the Banks' Boards? Why are they not raising the issues there or in the shareholders' AGMs?


3 years ago

Bank employess themselves are responsible for bad loans.

Bank Employees/managers/directors -hand in gloves with known defaulter borrowers ( in consideration of cash/kind/kickbacks) IS WELL KNOWN IN FINANCIAL CIRCLES.

Its high time to bring such bank employees to BOOK to eradicate a portin of large NPAs of all Public sector and private sector banks and financial institutions.

Panchapakesan S

3 years ago

Restructuring of Corporate loan accounts is nothing but a gimmick to show a bad loan as a standard asset. RBI and Govt.of India should take concrete steps to curtail bad corporate loan accounts and stop forthwith restructuring of big corporate loan accounts

Gopalakrishnan T V

3 years ago

AIBEA can strongly recommend for introduction of some self Corrective mechanism to discipline both banks and bad borrowers. The amounts written off by banks as bad loans can be shared among employees and other stakeholders if the banks show some guts to discipline the borrowers. The need to prevent formation of Non Performing Assets in banks in the interests of all stakeholders of banks who include depositors, good borrowers and shareholders is the need of the hour and is long over due. The responsibility for recognition, resolution and recovery of bad assets is basically with the bankers and the borrowers and they cannot be casual and careless in their dealings.The banks can educate and discipline the borrowers on an ongoing basis and the borrowers can be rewarded or punished if they deviate from bank's disciplinary requirements and attempt to hoodwink the banks with their erratic behaviour and conduct of accounts leading to formation of non performing loans.. The erring borrowers can be identified easily by banks and they can be brought under proper discipline by making them to pay a penalty based on their irregular conduct of accounts and deviation from the discipline envisaged. These penalties over a period would be adequate to cover up the losses on account of bad assets. The provisions now made towards bad assets can be minimised and the money saved on provisions can be passed on to the depositors and other stake holders. The write off of loans presently resorted to by banks at the cost of tax payers' and the depositors' money can also be considerably brought down.The basic approach of the bankers is to discipline themselves in the selection of borrowers, grant of loans, coverage of securities, monitoring and supervision of loans,etc and enforce discipline on borrowers in a constructive manner. Borrowers are partners in business and their healthy growth should reflect in banks balance sheets. Likewise, their deterioration in health should not affect banks balance sheets and other stakeholders. Unless and until a built in mechanism is in place, there cannot be an effective control on the defaulting borrowers.Earlier the action,the better for banks, borrowers, and other stakeholders of banks and the economy. RBI being a regulator of banks and being the monetary authority of the economy cannot and should not tolerate unhealthy balance sheets of banks, large corporates and the economy. Bad assets do not contribute to the economy is a fact which cannot be allowed to continue for ever.It affects the economy badly and all its stakeholders.SEBI has also a major responsibility to ensure that by any reckoning defaulting companies should not get listed in the Stock Exchanges and they should never be allowed to raise capital through IPOs.The Corporates should have an excellent ratings from banks and these ratings should reflect on the conduct of loan accounts.These ratings should be made transparent by banks and should be available for all having dealings with the Corporates.Will the RBI and the Government show the guts to discipline both banks and borrowers to ensure that the loans turn productive in the larger interests of the economy, the financial system, and all its stakeholders.


3 years ago

Great that the unions are waking up to this loot. It is wrong and incorrect to say that this loot is of recent origin. The composition of BoD and their selection is the cause of such rising badloans. Directors and Chairmans of PSB are least bothered to do their jobs. They are very aggressive in punishing the lesser mortals in the bank but hardly display such activism in evaluating their faults which are enormous ie the NPAs. The BoD have perfected the system to such an extent that it is impossible to fix responsibility on them and or the Statutory auditors of the Bank. look at the power sector and the coal scam one can understand the magnitude of their incompetence and or corrupt practices. The governance structure in PSBS are a sham and authority without responsibility at the top just does not work. It is these banks which bring a bad name to capitalism and encouraging the left in this country to clamour for increase government control of banks. Surely not the remedy to set right this situation. Act fast else banks will go the Air India way


nagesh kini

In Reply to Bhaskar 3 years ago

Extremely well said.
It is in deed a sad fact. Then Law Minister Ashwin Bansal's CA was 'elected' shareholders' Director of a PSU!

LPG price hiked by Rs3.46 per cylinder for paying commission to dealers

The price of LPG cylinder was hiked after the government raised commission paid to dealers by over 9% to Rs40.71 per 14.2-kg cylinder

The price of domestic cooking gas (LPG) was on Tuesday hiked by Rs3.46 per cylinder after the union government raised the commission paid to dealers by over 9% to Rs40.71.


An official from the Oil Ministry said, “The commission paid to dealers has been increased by Rs3.46 per 14.2-kg cylinder to Rs40.71. Consequently, the retail selling price of domestic LPG too has been increased in the same proportion”.


The increase in commission — which as per practice is passed on to consumers — has been effected from today.


LPG in Delhi costs Rs410.50 per 14.2-kg cylinder and after the increase will cost Rs413.96.


The last revision in cooking gas prices happened in October last year when because of an increase in dealers’ commission the rates were raised from Rs 399 per cylinder to Rs 410.50.


Also, the dealers’ commission on 5-kg LPG cylinders has been increased by Rs1.73 to Rs 20.36 per bottle. At present a 5-kg LPG cylinder costs Rs353 in Delhi.


The official said an annual revision in dealers’ commission is being proposed keeping in view the increase in expenses such as salary and wages.


He, however, said no revision in the additional distributor commission of 75 paisa paid on sale of non- subsidised sale of 14.2-kg cylinder was required for the time being. The 75 paisa is over and above the commission of Rs40.71.


Non-subsidised LPG is sold at market price of Rs1,017.50 per cylinder in Delhi.


The LPG dealers’ commission was last revised on 7 October 2012, when it was raised to Rs37.25 from Rs25.83 per 14.2-kg cylinder. The same for the 5-kg cylinder was hiked to Rs18.63 from Rs13.30 per bottle.


The commission has more than doubled in the past six years with almost yearly increases. The commission was raised from Rs16.71 per 14.2-kg LPG cylinder to Rs19.05 on 1 March 2007; to Rs20.54 on 4 June 2008; to Rs21.94 on 30 June 30 2009, and to Rs25.83 per bottle on 1 July 2011.


Sensex hits an all time high: Losers and gainers

On Monday the BSE Sensex has made an all-time high of 21,483. Prior to this, on 10th January 2008, it made a high of 21,206. Who were the winners and losers over these years?

On Monday, the BSE 30-share Sensex made an all time high at 21,483, surpassing the prior high it made on 1 November 2013 (21,294), driven by just four stocks: Indian Tobacco Company (ITC), Tata Consultancy Services (TCS), Infosys and HDFC Bank. These stocks have collectively contributed to a majority of the rise in benchmark index in the five years since its previous high (21,206) in January 2008.

But this is not the same Sensex that the 30-share benchmark was in 2008. Several companies have switched in and out of the BSE benchmark over the past five years, and the bulk of the movement was caused by a few companies. In fact, even heavyweights like Reliance Industries-RIL (-42.65%), ICICI Bank (-13.84%), State Bank of India- RIL (-23.32%), ONGC (-7.53%), Larsen & Toubro- L&T (-21.87%) are actually are down since January 2008.

In last five years, a total eight companies have been omitted from Sensex and replaced by new companies.

The companies that were omitted from Sensex in the last five years were:

Cos eliminated from  Sensex



%  change





Satyam Computer Services




Ranbaxy Laboratories




Grasim Industries




Reliance Communications




Reliance Infrastructure




Jaiprakash Associates








Elimination of these big losers substantially added to the Sensex performance.

Meanwhile, the companies that replaced these losers turned out to be excellent
performers. Companies that were added to Sensex in the last five years:

New additions in Sensex



%  change

Sun Pharmaceutical




Bajaj Auto




Dr. Reddy's Laboratories




Hero MotoCorp








G A I L (India)




Coal India




Jindal Steel & Power





On 10 January 2008, the BSE Sensex hit its all-time high of 21,206 at that time. However, within just eight trading sessions, Sensex crashed to 15,332 (22 January 2008). On 21st and 22 January 2008, alone, it crashed 3,587 points. On 22nd January, the trading was suspended for an hour on BSE within minutes of opening.


Thanks to a confluence of factors, such as quantitative easing (QE) and positive sentiment over the years, the BSE Sensex slowly recovered and breached a new all-time high of 21,483 on Monday.

Companies like ITC (173.59%), Infosys (97.43%), HDFC Bank (99.95%) and TCS (302.75%) have contributed to the rise. Share prices of Infosys and HDFC Bank have doubled during this five year period. However, IT companies have not grown much. Apart from these companies, Hindustan Unilever (141.85%), Tata Motors (150.53%), and Sun Pharmaceutical Industries (434.14%) have also contributed to the benchmark upswing.

The stocks which have done poorly in last five years are Bharat Heavy Electricals (-64.46%), Tata Steel (-52.50%), Jindal Steel & Power (-46.64%), Tata Power Co. (41.04%) and Bharti Airtel (-30.35%).

22 companies in Sensex since 2008



% Change

Bharat Heavy Electricals




Bharti Airtel




H D F C Bank








Hindalco Industries




Hindustan Unilever




I C I C I Bank











97.43 %

Larsen & Toubro Ltd (split)




Mahindra & Mahindra




Maruti Suzuki India








Oil & Natural Gas Corpn




Reliance Industries




Sesa Sterlite




State Bank Of India




Tata Consultancy Services




Tata Motors




Tata Power Co




Tata Steel










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