Gyan Sangam: A well thought out plan but requires follow up action

Prime Minister Modi attended a retreat with India's top public sector bankers, we take a look at what came out of the two day event

 

Speaking at the bankers’ meet christened ‘Gyan Sangam’ at the National Institute of Bank Management at Pune on Saturday, Prime Minister Narendra Modi conveyed a his expectations from the banking sector. However, concrete steps to achieve the objectives put forth at the conclave are yet to be spelt out by the Government. 
 
The Prime Minister (PM) said that the banking sector of a country mirrors its economic rise. Japan and China had banks in the top ten banks of the world during their economic rise. He therefore called upon the banking fraternity to establish banks here which rank among the top banks in the world. 
 
Only one Indian bank figures among the 50 biggest banks of the world. SBI is ranked at 38, ICICI Bank is 99 and HDFC Bank 126, the second biggest among public sector banks (PSB) is Punjab National Bank, ranked at 189, followed by Bank of Baroda at 206. 
 
There were signs that a decision to merge some of the weak public sector banks with strong ones would be taken at the meeting. The Financial Services Secretary Sri Hasmuch Adhia said after the meeting, that each bank’s board would decide on consolidation and if it was commercially viable, the Government would respect such a decision. This means consolidation of banks appears to have been put on the back burner for the present.
 
The most important statement made by the PM was that banks would be run professionally and there would be no interference. He even said that the Govt. had no vested interest and that PSBs can derive strength from this fact. He made a distinction between interference and intervention. He said he was against political interference, but supports political intervention in the interest of the people. Political intervention would enable the voice of the common man to reach such institutions to ensure accountability, which was essential he said. Let us hope all this is put into practice by the political class and thus provide the banks with autonomy to function without any fear or favour. 
 
The PM also asked banks to develop dedicated teams to fight cybercrime. Though he did not elaborate on this subject, this is an area that calls for concerted action from all banks to ensure that customers of banks do not suffer for no fault of theirs. There is a need for the RBI to issue guidelines to limit the liability of banks’ customers in all internet frauds, which alone will create more confidence among the public to use technology in their day to day operations with banks. 
 
Without specifying how to improve the performance of banks, the PM said that with 81% of branches and 77% of deposits, the net profits of PSBs should improve from current levels of 45%. PSBs however have been reeling under the burden of bourgeoning non-performing assets that have affected their profitability to a considerable extent. In fact, Moneylife Foundation has already submitted a memorandum last month to the Prime Minister giving suggestions on how to improve the functioning of public sector banks.
 
 
Unfortunately, neither the Govt. nor the RBI had any immediate solutions to fight the menace of large value NPAs, except to say that big defaulters need to be booked quickly.
 
There is a need to provide a systemic cure to ensure that such large defaulters do not take banks for a ride by legally empowering the banks to remove the willful defaulters/ promoters from management of such companies, which alone can help the banks to quickly come to grips with recalcitrant borrowers. 
 
The PM in all earnestness exhorted the PSBs to be conscious of the directions in which the country is moving and work towards simplifying procedures to facilitate the common man. He also called upon banks to trust the common man. He asked the banks to take the lead in skill development for youth in a big way and to prioritize loans to students as this would be a very productive investment for the country. The Prime Minister called for an end to lazy banking and asked banks to take a proactive role in helping the common man.
 
However, the subject of improving the customer service and creating robust customer protection guidelines was conspicuous by its absence. Even the threat of bank employees going on an indefinite strike in the coming days, demanding wage settlement, did not appear to bother the powers that be. Let us hope that these sombre words of sympathy for the common man will be followed up by concrete action. 
 
Another important issue that the PM highlighted was the poor financial literacy in the country and called upon the banks to encourage competitions in schools on financial literacy, so that financial literacy is inculcated at an early age among the children as well. 
 
(The author is a banking analyst, writing for Moneylife under the pen-name ‘Gurpur’)
 
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COMMENTS

B. Yerram Raju

4 years ago

Private Banks have behaved no better and this has been proved when recession gripped the financial sector in 2008. US, UK and elsewhere, governments resorted to nationalisation of financial assets. If the public sector is not interfered with they have a good chance to perform as the trust can be leveraged for sound business and converting risk into business opportunity.
More importantly today, which Gyan Sangam did not choose to discuss is the machine taking over man in the financial sector. KYC is nothing but compliance with a set of documents to be kept on record. The Bank officers do not understand the customer or his needs. They today have become slaves of the computer. Every employee acts in absolute obedience to the instructions of the system because he has neither time nor interest in responding to the need of the customer/client.
Marketing officer markets the credit; System apprises the application and throws up the limit for sanction; laid down discretionary powers apply the sanction; the field officer/branch manager goes to the units to remind the due dates of installments; in desperate cases, they put up proposals to auction of assets under the SARFAESI Act. In regard to corporate entities, the proposals are discussed in cozy chambers; anticipated project returns as proposed by efficient chartered accounts are endorsed and the proposals go to the Boards for sanction. The boards have little time to go through the nitty gritty of things and they approve. When the monitoring reports are placed again before the Board, they hardly have time to scrutinise and raise relevant questions. The result is they get into the NPA group. When the NPA statement also reaches the Board, the one-day or half-day Board has little time to go into details of the voluminous papers before them and they fail to monitor them. When the NPAs touch the roof, everybody sheds crocadile tears as if the bank is a victim of circumstances in generating them.
Humanising banking is the need of the hour. The reforms should focus their attention here.

R.Asokkumar

4 years ago

Politics is always practice of tokenism. Even if two or three big deliberate defaulters are put behind bar or divested of control in their companies, you will see significant improvement in the NPA situation in PSBs.
-R. Asokkumar

Rajendra M Ganatra

4 years ago

Public sector banks (PSBs) are bust due to management moral hazard since the management exercises no control on the operations. Government interference though real, is more of an alibi. It is unlikely that a super board at the holding company level would fix the internal hemorrhage.

Today the young HDFC bank has higher market cap than the behemoth SBI. It is inconceivable that only the government interference is responsible for this.

Any entity to be efficient has to be controlled and run by people with stake in the entity. This is possible only with private sector, and privalisation of the banks is the only way forward keeping with the maxim that the government has no business to be in business.

Let the government operate special purpose institutions such as SIDBI and NABARD to meet the developmental needs. Let the commercial banks be in private sector domain.

Who is Zafar Sareshwala, the new Chancellor of Urdu University?
Sareshwala, an avid Modi supporter from Ahmedabad, was banned by SEBI from markets for seven years
 
The Ministry of Human Resource Development has appointed Zafar Sareshwala, chief executive and managing director of Ahmedabad-based Parsoli Corp Ltd, as new Chancellor of Maulana Azad National Urdu University, a Central University established in 1998 to promote and develop the Urdu language. Sareshwala succeeds Syeda Saiyidain Hameed, the former Member of Planning Commission. There are two aspects of Sareshwala, one is his closeness with Prime Minister Narendra Modi and second, his tainted innings in the stock market.
 
Last February, Sareshwala organised the Ummat Business Conclave 2014 to showcase the corporate culture of Muslim business community and help them network with other business communities. Of course, Modi, the then Chief Minister of Gujarat was the chief guest for the Conclave. Today, according to media reports, Sareshwala is one of the closest advisors of Modi for the Muslim community. 
 
Interestingly, in 2002 when the Gujarat riots took place, Sareshwala was a banker living in UK and had organized anti-Modi rallies there. However, a meeting with Modi in 2003 at St James Court in London changed his political ideology and Sareshwala became a staunch supporter of the (then) Gujarat chief minister. Nevertheless, some conservatives from the Muslim community still accuse Sareshwala of being a ‘back stabber’ and ‘sheer opportunist’ for siding with Modi. 
 
Sareshwala, meanwhile had quite a brush with the stock market regulator. The Securities and Exchange Board of India (SEBI) in July 2013 cancelled broker registration of Parsoli Corporation for violations of its regulations. In 2010, Parsoli and its whole time directors Zafar Yunus Sareshwala and Uves Yunus Sareshwala were barred from the capital market by SEBI for seven years, for alleged fraudulent trading activities.
 
However, the order cancelling its registration came on a separate probe that looked into alleged violations of broker norms by Parsoli.
 
"If the applicant is allowed to continue in the market, even after it has been repeatedly found guilty of violating securities laws on more than one occasion, it will seriously prejudice the interest of investors and the safety and integrity of the securities market," Prashant Saran, whole time member of SEBI had said in the order.
 
In 2010, SEBI had passed order against Parsoli and its directors after finding prima facie that the company's promoters had transferred shares to themselves in a fraudulent manner from shareholders.
 
Sareshwala’s Parsoli is touted to have introduced Islamic banking in India. However, it was not an easy ride for Zafar Sareshwala and his entire family, who had been living in Gujarat since over 250 years. 
 
According to a 2006 report from Hindustan Times, for decades, Zafar Sareshwala’s affluent Gujarati Muslim family had distributed lakhs of rupees to the poor in Islam-mandated zaqat donations. “Sareshwala — whose company Parsoli has pioneered Islamic banking in India — lost Rs3.3 crore in the 2002 riots when its employees fled the ambushed building that was catching fire. They left computer terminals on, without being able to square off their positions on the stock market. It was the deadliest blow to the family that had lived for some 250 years in Ahmedabad, and had suffered severe damage in the riots of 1969, 1985 and 1992,” the reports said.
 
According to the report, family and friends suggested that the family should migrate. Sareshwala had to choose between his British resident visa and the stock exchange membership. “It was easy to leave. However, I decided to stay and revive my business. Others just laughed at us,” he told the newspaper.
 
Sareshwala then sold his century-old industrial valve-producing factory and revived his business. So much so that earlier in October 2009, Sareshwala, who also owns Parsoli Motors, a dealership for BMW in Ahmedabad, gifted a X6 Activity Coupe (Xdrive 30d), worth Rs79 lakh to Salman Khan.
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COMMENTS

dheeraj kaur

4 years ago

zafar zareshwala is fraud,he has not only cheated shareholders of his company (parsoli corporation)which was blacklisted by both BSE and NSE stock exchanges, the order link is here
http://www.sebi.gov.in/cms/sebi_data/att...
But he has also cheated his german partner (BAADER
BETEILIGUNGS GMBH)in his parsoli motors corp.see the order passed by guj high court http://indiankanoon.org/doc/90703766/

dheeraj kaur

4 years ago

fraud zafar sareshwala see the below link which he committed fraud with his partner in parsoli motors http://indiankanoon.org/doc/90703766/

Arvind Panagariya to be first NITI Aayog Vice-Chairman

The Columbia University professor will take over as the Vice-Chairman of the newly form body, which will come under the PMO

 

Laying to rest and confirming all speculation, the Prime Minister's Office announced today the people who will be a part of the newly formed think thank and Planning Commission successor, NITI Aayog.

 

The body will be headed by the Prime Minister as its Chairman and will have Arvind Panagariya as its Vice Chairman.

 

Following is the list of all appointees as per the PMO statement:


Vice Chairman - Arvind Panagariya, Economist


Full-Time Members

  • • Bibek Debroy, Economist

  • • Dr. V.K. Saraswat, Former Secretary Defence R&D


Ex-officio members

  • • Rajnath Singh, Union Minister

  • • Arun Jaitley, Union Minister

  • • Suresh Prabhu, Union Minister

  • • Radha Mohan Singh, Union Minister


Special Invitees

  • • Nitin Gadkari, Union Minister

  • • Thawar Chand Gehlot, Union Minister

  • • Smriti Zubin Irani, Union Minister

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