Bad loan clean-up must co-opt 'name, shame' policy
New Delhi : Even as Reserve Bank of India (RBI) Governor Raghuram Rajan says the claims made by analysts on the size of bad loans in the country's banking system border on scare-mongering, official data does not paint a rosy picture -- and even shatters some popular perceptions.
 
As per statistics available with the central bank, the net NPAs, or non-performing assets, of all banks, excluding accrued interest, was 2.8 percent of total loans as on September 15 last year. For state-run banks, it was 3.6 percent -- a sign that it is not uniform across the industry.
 
But the problem gets compounded when one takes into account the gross NPAs, that also includes the interest component: 5.1 percent for all banks and 6.2 percent for state-run banks. And by adding one more component, rescheduled loans, the issue becomes even more perplexing.
 
The quantum of gross bad loans, along with rescheduled ones (usually done when a loanee is unable to pay in time, and banks allow some more time so as to get the money back), jumps significantly to 11.3 percent for all banks and 14 percent for government-run banks.
 
Then there are the write-offs -- that is, the loanee has been unable to pay and banks are forced to consider them as exposures they'll never get back. Together with gross bad loans and rescheduled assets, this ratio is at 14.1 percent for all banks and 17 percent for state-run ones.
 
For private sector and foreign banks, it is distinctly lower at 6.7 percent and 5.8 percent.
 
When we compare historical data, the total bad exposures, including rescheduled and written-off assets, has grown to 17 percent as on September 15 last year, from 13.4 percent in March 2013 and 14.1 percent in March 2014 and 16.1 percent in March 2015.
 
For private banks the respective figures are: 5.4 percent, 6.4 percent and 6.7 percent, while for foreign banks, it is 5.5 percent, 6.3 percent and 6.5 percent. Rajan says not all bad loans are due to malfeasance. Then governance must be the reason for private versus state-run mismatch.
 
Is this not alarming? 
 
A presentation on asset resolution and management of bad loans of commercial banks by RBI Deputy Governor S.S. Mundra at a banking conclave of the Confederation of Indian Industry on Thursday, just ahead of the talk by Rajan, seeks to put the issues in perspective.
 
Contrary to the general perception, the level of stress is a lot more pronounced in the so-called non-priority areas, when compared to the exposures to the farm sector and the micro enterprises. This apart, large industries are the ones that have the highest NPA ratio.
 
The central bank data reinforces this fact. The ratio of gross bad exposures, plus rescheduled loans, plus written-off assets for all banks was 7.9 percent for the agriculture sector, 12.3 percent for the micro enterprises and a whopping 23.7 percent for large industries.
 
For small and medium scale sectors it was 16.8 percent and 31.5 percent, respectively.
 
The picture emerges even clearer seeing the actual quantum of money involved. As per the Reserve Bank's weekly statistical supplement, the total outstanding bank credit of all banks was Rs.67,060 billion as on September 15, 2015 -- this date has been taken for comparisons.
 
If the total exposure in terms of gross NPA, rescheduled loans and write-offs was 14.1 percent for all of India's scheduled commercial banks, then the actual quantum works out to Rs.9,455 billion (around Rs.9.5 lakh crore). 
 
The assumption may be that banks that were in denial over the poor quality of their loans are waking up now. This is getting reflected in the balance sheets for the quarter ended December 31, 2015. In doing so, if their net NPAs exceed 10 percent, there will be several curtailments.
 
Rajan, nevertheless, sees hope. He feels the extent of government help to commercial banks in the form of capital will be adequate -- Rs.70,000 crore in the present budget. He is also confident that by March 2017, the banks will have a clean and fully-provisioned balance sheets.
 
In doing so, the misdemeanor in the system must also be addressed. The Supreme Court has given its consent to banks to publish the names and photographs of defaulters, including directors. This "name and shame" policy must be pursued vigorously by both banks and the watchdog.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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TIHARwale

1 year ago

This Govt of Feku56 is hand in glove with crony capitalists. If the government is simply bailing out banks without making efforts to recover money from corporate defaulters, that equals to letting crony promoters loot taxpayers’ money. It needs to clamp down on the corporate wilful defaulters and recover money. If Subrata Roy (of the Sahara group) can be put behind bars, there is no reason why the same can’t be done with a wilful defaulter of Rs 7,000 crore loans to some 17 banks, who have committed financial irregularities by diverting bank funds to other group activities, dragged lenders to courtrooms instead of repaying money and continues to flaunt his wealth challenging the banks.
The point is this: If this government shows the guts to act on Mallya that would send a strong message to other wily promoters that there is no more free-lunch in this country with taxpayers’ money. Else, it will have to answer the same taxpayer why his money is used to bail out Sarkari banks looted by crony promoters.

Pune citizens petition to CM for taking back 55 hectares of forest land from ARAI
The Automobile Research Association of India (ARAI) perched atop Vetal Hill, the highest green plateau in Pune refuses to part with 53 hectares of forest land. Even the Forest Department had recommended that the land be taken back, as revealed under an RTI query
 
Vetal Tekadi (hill), perched at a height of 2,600 feet, makes it the highest point in Pune. It is also the main lung of the city, considering its thick forest. Ironically, Automobile Research Association of India (ARAI) is located within this nature’s enrichment, its building, occupying a little over 1.5 acres, but sitting pretty on 53.74 hectares of precious forest land, which it refuses to part with.
 
Recently, members of Deccan Gymkhana Parisar Samiti (DGPS), who have been campaigning for protecting the hill, used the Right to Information (RTI) Act to procure copy of a letter written by Jeet Singh, Conservator of Forest, Pune. The letter has revealed that he has recommended to the Principal Chief Conservator of Forest, Nagpur that 53.74 hectares of reserved forest land on Vetal Tekdi, which is currently held by the ARAI should be returned to the Forest Department and that only the two hectares, which house their offices and laboratories should remain with them.
 
Earlier in 2011, the state government had issued a notification allotting this large tract of land of ARAI. It stated that:
* This land, owned by the Forest Department has now been granted to the Automotive Research Association of India (ARAI) for construction of laboratory building and vehicle testing track
* After consulting the Director of Town Planning, Maharashtra State, Pune and after making necessary enquiries the Government is of the opinion that for granting permission to ARAI for laboratory building and vehicle testing tract it is necessary to delete the said land approximately 20 hectares (to allow existing built up areas 24265 sq meters plus proposed built up area 35,435 sq meters) from Hill Top/ Hill Slope and include it in Public/ Semi-Public Zone
* The government is also of the opinion that the said modification is in the public interest and hence, it is necessary to issue notice under Section 37 (IAA) of the said Act by the government to incorporate the above changes in the sanctioned Development Plan.
 
This move was stalled after objections from citizens and Mr Singh’s letter was a sequel to that. RTI documents also reveal that until now, there has been no change in the development plan (DP), as suggested by the state government, in its notification. Hence, ARAI has no authority to occupy it.
 
The DGPS petition to the Chief Minister state the reasons why Mr Singh has recommended so as per the information they procured:
  1. There appear to be many irregularities in the initial allotment, continued occupation of, and expansion of ARAI on forestland
  2. Large numbers of Puneites who come to the tekdi regularly for exercise are strongly opposed to the presence of ARAI on reserved Forest Land
  3. Though the land was given to ARAI by the Ministry of Environment & Forests (MoEF) in 2009, no use of it has been made in the last six years.
  4. The proposal for which ARAI needs the land will involve destroying 18,287 trees.
 
Since past several years, a valiant citizen campaign has been going on in Pune. Noted political leader and environmentalist, Late Mohan Dharia and renowned astrophysicist, Dr Jayant Narlikar and noted environmentalist, Madhav Gadgil, steering the campaign.
 
Mr Dharia had stated in 2009 that, “ARAI should be shifted to the auto hub region with no permission for further development. Around 80,000 citizens have objected to it and if the government goes ahead with the plan, we will launch an agitation.”
 
Dr Narlikar had stated, “The hills cannot be recreated. They are nature's gift and we should preserve them. It is a premiere research institute set up by humans so it cannot be larger than the public interest.”
 
Dr Sushma Date, a prominent member of DGPS says, “Such commercial enterprises, especially ones which cause sound and air pollution, should not be on hills or in forests but should be relocated to the industrial belt outside Pune.’’
 
Noted environmentalist Sujit Patwardhan said, “The Vetal tekdi is one of the few remaining green spaces in the heart of the city. It should be protected and preserved as a natural heritage site so that our children and grandchildren can have access to this oasis of serenity in the midst of urban clutter.’’
 
The Chief Conservator of Forests Jeet Singh has recommended to the Chief Minister that ARAI should return 53.74 hectares of forest land back to the Forest Dept. 
 
Following are the contents of the online petition
 
To
Shri Devendra Fadnavis
Chief Minister, Maharashtra
 
Subject: Return of 53.75 hectares of Reserved Forest Land held by ARAI to Forest Dept
 
Dear Sir,
 
Automotive Research Association of India (ARAI) located on Forest Land on Vetal Tekdi, Pune, had received permission from the Ministry of Environment and Forests to build test tracks and labs on 55 hectares in 2009. The expansion of ARAI activity on the tekdi received sustained opposition from local residents, backed by senior scientists Shri Jayant Narlikar and Shri Madhav Gadgil as well as Vanrai founder Shri Mohan Dharia (See related news 
Consequently, ARAI has not utilised the land for the purpose it was taken.
 
Further, in January 2015, ARAI cleared and levelled approximately 2 acres of Forest land adjacent to its premises to construct a parking lot without the knowledge of the Forest Department and without obtaining necessary Environment Clearances. This shows that ARAI has scant knowledge and respect for the precious biodiversity of the Forest land it is occupying.
 
DGPS recognises the need for automotive research and testing but we feel that such industries should be given alternative land in the industrial belts around Pune, instead of our valuable forests, where such activity will impact the fragile ecology and wildlife in the area.
 
We submit that the tekdis of Pune are the last remaining green spaces in the heart of the city and need to be preserved for future generations. 
 
We urge you to approve CCF Shree Jeet Singh's recommendations regarding reclaiming Reserved Forest land from ARAI. By reclaiming the forest land for Punekars, an excellent precedent will be set and future generations will be eternally grateful to you.
 
Thanking you
 
Sumita Kale, Dr. Sushma Date, Cdr. Lele, Suvrat Kher, Adv. Madhavi Rahirkar, Chetan Mehendale and other members of DGPS
 
 
Here is the link for the online petition: 
 
 
(Vinita Deshmukh is consulting editor of Moneylife, and also convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book "To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte" with Vinita Kamte and is the author of "The Mighty Fall".)

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Annika

1 year ago

Dear Vinita Deshmukh, thank you for exposing this.

1 soldier dies every month in Siachen
With the death of Lance Naik Hanumanthappa Koppad and nine of his comrades, India has lost nearly one soldier every month due to avalanches or extreme climatic conditions in the Siachen Glacier, since first sending troops to the contested Himalayan area 32 years ago to counter the Pakistani Army.
 
Overall, 869 Indian troops died serving at the Glacier between 1984 and December 2015, according to data presented in the Lok Sabha. The death of 10 soldiers of the Madras regiment on February 3, 2016 – buried under an avalanche that struck their post at an altitude of 20,500 feet – and three others this year brings India’s Siachen casualties to 883.
 
The toll includes 33 officers, 54 junior commissioned officers and 782 other ranks.
 
The number of troops killed in Siachen has declined steadily, from 24 in 2011 to 5 in 2015, according to Lok Sabha data. All of these are a result of avalanches or extreme climatic conditions, not enemy fire. The deaths this year were from avalanches.
 
India has spent Rs. 6,566 ($4.5 billion) crore between 2012-13 and 2014-15 on clothing and mountaineering equipment – much of it imported – for soldiers at Siachen.
 
The world’s highest battlefield – but the battle is mostly with the weather
 
The Siachen glacier, situated in a Himalayan region astride the India-Pakistan border, holds the dubious distinction of being the world’s highest battlefield.
 
Siachen’s forbidding conditions have claimed the lives of many Pakistani soldiers as well. Most recently, in 2012, an avalanche hit a Pakistani army camp at the strategically important Gayari sector killing 140 people, including 129 soldiers.
 
Altitudes reach as high as 22,000 feet (The top of Mount Everest, the world’s highest peak, is at 29,000 ft) and temperatures dip below -45 degrees C.
 
Oxygen levels are low, and soldiers are prone to suffer from memory loss, blurred speech, frost bite, lung infection and severe depression. They also deal with the dangers of crevasses (long cracks or fractures in ice surface), especially during the summer months.
 
Transporting the most basic supplies in these conditions is an arduous task, with some posts accessible only by helicopters. A few posts use pulleys to hoist supplies up the mountainside.
 
During winter, when land routes close, ageing, light Cheetah helicopters are the only means of food and ammunition supplies and emergency evacuations.
 
Nearly 3,000-4,000 Indian troops from three battalions serve year round. Each battalion spends up to three months on the Glacier after acclimatization.
 
The high monetary and human costs of deployment, have prompted calls for the Glacier’s demilitarisation. However, mistrust between India and Pakistan has prevented that.
 
“The decision on Siachen is based on the security of the nation”, said Defence Minister Manohar Parrikar recently. “I am disturbed by the loss of life, but I think that due to this, some other solution (withdrawal) would not be the proper analysis.”
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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