RBI stays mute but must be held responsible
An interesting aside to the controversy at United Bank of India is that no political party or opposition leader has questioned RBI or the finance ministry on the rapid decline of this bank, for a second time. A hallmark of the United Progressive Alliance’s regime is that the crony club of politicians and industrialists covered the entire political spectrum, including the main opposition parties. Various mega-scams under the UPA, such as loot of natural resources and infrastructure contracts structured as public-private-partnerships, were funded by massive loans from public sector banks. Academic articles on RBI’s own website confirm that the sharpest increase in bad loans, since the turn of the century, happened in 2012 and 2013; in these two years, the incremental accretion to bad loans trebled compared to 2011 and earlier.
Power and infrastructure were the two sectors that saw the sharpest increase in bad loans since 2012; most of these are with public sector banks. With general elections a few weeks away, bankers are now turning bold and admit to pressure from the ruling coalition to keep lending to these sectors and to favoured industrialist-politicians.
Why has RBI remained a mute spectator to the sharp escalation in bad loans over the past five years? RBI, as India’s monetary authority and banking regulator, is never held accountable for its many lapses in supervision or its spending. A retired central banker says, from chief general manager upwards, most central bankers are far too busy logging frequent flying miles and garnering fat daily allowances. Many enter the Mint Street headquarters only to submit their vouchers before taking off again. That is one reason why policy decisions take forever and there is little time to discuss and analyse inspection reports about banks.
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PSU Vs Private Banks.
- Private Banks Are looting Consumers in all possible way and making money for their stakeholders so they are looking profitable and healthy.
- PSU Banks are on a reckless lending spree to Big Borrowers and thus looting Depositors and Government is the Stake Holder so its squeezing in the Tax Payers money to keep PSU's survived.
They whole sectors is Morally Sick.
Second, how on earth that the thousands of crores of rupees of NPAs periodically join the NPAs when it has regular information on the corporate loans sanctioned; directors' interests, CDRs etc? All said and done, RBI representative sits on the PSB Boards. Is there a regulatory arbitrage and therefore, the RBI silent on the misdemeanors of the Banks? The Economist in its latest weekly acknowledges two institutions in our economy and body politic - the RBI and the Supreme Court. We take definitely pride in it. But the recent happenings of the UBI allowing the Chairperson to voluntarily retire after the huge NPAs surfaced leaves many in doubt.
Realities can be much more startling. The health of public sector banks has a direct relationship with the owner’s approach to their management. This is not to defend the regulator or to argue that we should ‘let go’ the goings on in cases like the fast deteriorating condition of the United Bank of India. The purpose is just to point out that RBI is also staring at an adamant finance ministry which has no worry about the strength of public sector organisations.