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Why policing requires reforms and accountability for a better civil society
"While talking about police reforms and accountability, we need to make sure that there is an effective mechanism like allowing people to register complaints without making them face consequences of it," says senior counsel Mihir Desai. He was speaking at the 9th session under the "Police & You" series.  
 
Moneylife Foundation with Police Reforms Watch and support from Saraswat Bank have launched the 12-week program (every Wednesday) that aims to spread knowledge about protecting yourself, your rights, the Indian Penal Code (IPC), cybercrime and economic offences. This was the 9th such session.
 
Adv Desai, who has been practicing in the Bombay High Court and the Supreme Court in matters, especially in human rights and civil liberties work as well as service law, says, "While expecting accountability from police, we also need to understand the conditions under which they are made to work. Police are on duty virtually every time of the day and night. This is also extremely stressful job laden with interference from seniors and politicians. So both accountability and reforms need to work hand in hand to make it effective."
 
The event was held in the well-appointed auditorium of Saraswat Bank headquarters, Eknath Thakur Bhavan. 
 
The ninth session of the 12-week series on "The Police & You- Demanding Reforms and Accountability in Policing" was conducted by Adv Desai, Mr Sudhakar Suradkar former Inspector General of Police and Ms Maja Daruwala, Director of Commonwealth Human Rights Initiative (CHRI).
 
Mr Suradkar, who, during his career spanning decades had arrested several top-notch criminals including Jayendra alias Bhai Thakur, a noted gangster from Vasai-Virar belt under TADA, says, "The fear of the police has waned. Corruption by some in the force is one of the reasons. Politicians are also responsible, as many elements are emboldened to do this because of political support."
 
Talking about recent and increasing attacks on police personnel, the former IPS officer feels that the reason for such incidents may include corruption and unjust action taken by police against common citizens. Ms Daruwala from CHRI feels that for better policing there is a need for three Ps, policy, provisioning for performance and participation by citizenry. "Police needs to keep active peace so that anybody can enjoy their constitutional rights," she said. The CHRI Director also hit out at the Maharashtra government for the new internal security law. She said, "This law will cast suspicions on everyone. This is what we all have to fight with help from active citizenry."
 
Ms Daruwala, who has been working to advocate for rights and social justice for over 30 years, feels the Police department, especially in Maharashtra faces manpower woes. She says, "Maharashtra has 165 police per one lakh population as against international minimum of 222. Even Delhi, Assam and Jharkhand have higher number of policemen compared with Maharashtra. There is a shortfall of nearly 8,000 policemen. Even this number tells only half the story. In Mumbai, about 56% of the police are on VIP duty." 
 
"Unfair rural-urban ratios, the unreasonable numbers deployed in service of VIPs, and the use of taxpayer-supported manpower as orderlies, drivers, guards and general saluting puppets by senior officers casts the burden of a great many core policing tasks onto the shoulders of just a very few," she added.
 
According to Ms Daruwala, between 2002 and 2013, there is a 47% increase in complaints against the Police. This ranges from no record of disappearance of persons, illegal detention, fake encounter killings, extortion, torture, false implication, failure to take action, indignity to women, atrocities on SC and ST or others. 
 
"What is required for the Police is accountability, operational independence, unbiased nature, efficiency and responsiveness," she concluded.

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COMMENTS

Mahendra Islaniya

8 months ago

I attended this /mine 9th meeting in series of Police & You reform Process & found very much informative & speech of 3 experts were just excellent.

Vasudeo Shenoy null

8 months ago

Police are not aware of the laws of the land.
Even senior officers need to sent for updating their knowledge

Bad loans recovery grim, because they are concentrated among large companies, this time
Religare conducted a conference call, the key takeaway of which was that in the current cycle of bad loans, non-performing assets are not concentrated in smaller accounts (SMEs), as the last time. They are concentrated in large companies. This makes recovery more difficult. Due to the bloated ticket sizes, banks are deterred from turning hostile. Earlier, the ticket size was around Rs100 crore –1,000 crore. Today, many of the loan ticket sizes are around Rs5,000 crore. This makes the current scenario different as compared to the earlier downturns where stress was restricted to Small and Medium Sector industries (SMEs). Another key point is that earlier a large part of stressed SME loans was backed by real estate as collateral, which is not the case currently. 
 
Postponement of stress recognition due to which solving the stressed assets problem has been delayed, is another key issue associated with the sector. Interest has been accrued over many years. The stressed non-fund exposure has not yet been fully recognised. These are currently being treated as restructured, Strategic Debt Restructuring (SDR) or 5:25 loans.  It is a near-term risk for banks. According to experts, banks should ideally have a provision cover of 60-65% against these loans compared to the 40-45% coverage in place for public sector banks (PSU). 
 
The impact of Asset Reconstruction companies (ARCs) to resolve the problem of stressed assets is limited, finds Religare. This is because they prefer to buy small to mid-sized companies with debt below Rs1,000 crore which are in the initial stages of difficulty. Thus, ARCs are unwilling to take loans of large distressed carriers, especially when promoter credibility is perceived to be lacking. Secondly, due to limited capital, ARCs cannot resolve the problem. Consider these figures. The total credit in the system is more than Rs70 trillion, while the total stress in the system is around Rs10 trillion. On the contrary, ARCs have a cumulative capital base of merely Rs4,000 crore. 
 
Another problem is that ARCs and banks cannot agree on the level of haircut. Currently, the spread between bid-ask rates stands at around 25%. This implies that on average ARCs wanted a 50% haircut whereas banks were ready to yield only around 20%. ‘One needs to sell an asset when it is sick and not dead,’ as per one of the experts. The consensus among our expert panel was that the average haircut on troubled iron & steel sector accounts should be 40-50%. It should be 36-40% for power sector loans. It should be around 60% on construction loans, where a large part is non-funded.  Experts from ARC’s believe that banks have been excessively optimistic about the realisation value of these assets. 
 
Coming to different sectors, the steel sector is considered to be the worst. It has a humungous Rs3trillion – Rs5 trillion of stressed assets. The dependence on China and the low capacity of steel plants are a few reasons responsible for its woes. Another issue is one of promoter credibility in some large steel companies due to which many ARC’s are unwilling to work with them. The government has not been very keen on solving problems in this sector as opposed to the power sector. 
 
In the Engineering, Procurement, Construction (EPC) sector, the total stress is around Rs3 trillion, out of which only Rs 700bn is fund-based. If the non-fund based exposure is increased, then the loss given default (LGD) will increase. Key issues in the construction sector include the build-operate-transfer (BOT) nature of most projects, and an inflated cost of assets due to the accumulation of interest over the last three years. When it comes to construction sector, the build operate transfer (BOT) nature of most projects is an issue. Diversion of bank funding to real estate development by promoters is another one. An inflated cost of assets due to the accumulation of interest is another problem. 
 
“Provisions will likely stay elevated and bank P&L statements are unlikely to improve for 9-12 months at least”, according to one of the experts. In addition, some large accounts may also become NPA’s in the next 1-2 quarters. 
 
The Non Performing Assets (NPA) resolution process is likely to remain protracted despite the upcoming bankruptcy law. Setting up of infrastructure which includes setting up of national company law tribunals (NCLT) across India and training of judges is likely to take time. The Bankruptcy Code, which bears a strong resemblance to Chapter 11/9 of US bankruptcy law, tries to addresses the inefficiencies in the system by defining specific timelines for various processes. 

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COMMENTS

Anil Kumar

8 months ago

Good and thorough article. Excellent data to show the overall picture.

Mahesh S Bhatt

8 months ago

Enjoy the fun Chill Legally illegal situation self inflicted aping USA Amen Mahesh

Deepak Narain

8 months ago

It is quite a complicated matter. All the noise about growth has to be evaluated in the light of such bad loans. These giant-size players and politicians are having their pound of flesh and the common man is crushed under their weight for no fault. What kind of growth is this which benefits the looters in good and bad weather alike.

SuchindranathAiyerS

8 months ago

Too big to fail:

I remember when, as a Probationary Officer in the SBI, I was asked to summarise the Hegde and Golay file (File 80 A to G), by N. Sadashivan the then C & I Manager of Bangalore City Branch, into a single type written legal size page (1977). I did, and could not resist adding my recommendation in the last line which was to shut down the account and take legal action of recovery of debt.

Hegde and Golay had essentially used political clout (B.T.Shankar Hegde was a former Union Leader at Tata's) to get the deal going with the help of the Karrinayithikka Khangress. Bernard Golat S.A. was a failing watch company in Switzerland.

They had mulcted State Bank by importing large quantities of obsolete watch parts and demanding additional loans for "balancing" components. In essence this tactic, combined with the accusation that SBI did not understand the need for large economies of scale and horology had, with political assistance from the local politicians operating through Delhi had expanded the loan well beyond the original limits without, effectively, bringing the watch to market over several years. I had added my two bits worth from Cost accounting and Management accounting in paranthesis in the synopsis.

A few weeks later, the Branch Manager, M. Victor sent me off to meet the Circle Management Committee (S. K. Dutta Chief General Manager, T, K, Sinha, General Magaer (Operations) and V. N. V. Padmanabha Rao, General Manager (Planning) and R. Vishwanathan Chief Manager (Credit). I was asked a few searching questions on the contents of my synopsis that I had to answert from memory as I had not carried the files. (Unknown to me, the mirror file was available with the Credit Appraisal Cell of the Chief Manager Credit)

Based on this, the line of credit was immediately stopped and legal proceedings commenced with the approval of the Local Board.

My experience, as a Probationary Officer, in several branches such as Belgaum, Thiruvalloor, Vellore, and so on, with transferring "non performing assets" to Recalled Debts and Protested Bills, however, was entirely different. These had to be done aftre office horus as the onerous task would not be performed by the Unionized staff or the confirmed (unionized Grade Two) officers.These were mainly "priority sector" loans in small scale and agricultural sector distributed to politically preferred castes, tribes, religions and vote banks. In National aggregate they must have been enormous. But the Bank was simply not willing to go through with the enormous expense and effort of going through the legal processes demanded by the Bank's own policy! My hard work went in vain, and all this was simply covered up!

B. Yerram Raju

8 months ago

Religare's perceptions from the conference calls is worthy to note. Banks implementing the SARFAESi Act provisions, now armed with more powers after the latest amendments giving priority to institutional debt are on the trigger. They are resorting to either over valuing the assets and putting the bid amount at 10% and the related EMDs that instantly lead to repeat auctions as bidders are not showing interest when the assets on hold are more than 50 crores. This delays the realisation of the dues. In the case of SMEs the Banks are overenthusiastic in sale of assets even where the realisation is possible through restructuring or OTS.
RBI's guidelines are thrown overboard in being transparent on OTS norms. The Board decided OTS norms that should be non-discriminatory should be put on the Banks' websites as per RBI regulations. You can't find any. Asset sales to ARCs as mentioned in the Religare Study with large haircuts in the case of SMEs because of their interest, have few recovery tales to tell. Since the Boards of Banks are represented by the RBI and GoI Directors on the PSBs, these directors should review the NPA position in regard to the ARC and Auctions and ensure that their regulations are complied with fully for better monitoring and realisation of such loans.
The Banks are classifying quite a few companies as willful defaulters to save their skin where their actions like not granting in time adequate working capital or stopping working capital in the midstream of project execution by the companies, non-supervision of the advances, etc. The grievance procedure required to be followed in such cases as required under the RBI guidelines is followed in breach as several borrowers do not even know that such a procedure existed. The Grievance Redress Committee consists of the officials from the same Bank and it is anybody's guess as to why the members disagree with the branding of willful default that would affect the interests of their officials. RBI typically distances itself from many such lapses as they fall under micro management. The border line between non-conformance to regulation and micro management is very thin.

B. Yerram Raju

8 months ago

Religare's perceptions from the conference calls is worthy to note. Banks implementing the SARFAESi Act provisions, now armed with more powers after the latest amendments giving priority to institutional debt are on the trigger. They are resorting to either over valuing the assets and putting the bid amount at 10% and the related EMDs that instantly lead to repeat auctions as bidders are not showing interest when the assets on hold are more than 50 crores. This delays the realisation of the dues. In the case of SMEs the Banks are overenthusiastic in sale of assets even where the realisation is possible through restructuring or OTS.
RBI's guidelines are thrown overboard in being transparent on OTS norms. The Board decided OTS norms that should be non-discriminatory should be put on the Banks' websites as per RBI regulations. You can't find any. Asset sales to ARCs as mentioned in the Religare Study with large haircuts in the case of SMEs because of their interest, have few recovery tales to tell. Since the Boards of Banks are represented by the RBI and GoI Directors on the PSBs, these directors should review the NPA position in regard to the ARC and Auctions and ensure that their regulations are complied with fully for better monitoring and realisation of such loans.
The Banks are classifying quite a few companies as willful defaulters to save their skin where their actions like not granting in time adequate working capital or stopping working capital in the midstream of project execution by the companies, non-supervision of the advances, etc. The grievance procedure required to be followed in such cases as required under the RBI guidelines is followed in breach as several borrowers do not even know that such a procedure existed. The Grievance Redress Committee consists of the officials from the same Bank and it is anybody's guess as to why the members disagree with the branding of willful default that would affect the interests of their officials. RBI typically distances itself from many such lapses as they fall under micro management. The border line between non-conformance to regulation and micro management is very thin.

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