Friday, July 1, 2016

Why Bank Loan Defaulters Should Demand Favour?

Following is an appeal by Mr. T. R. Radhakrishnan published in lawyersclub website , submittd below for the benefit of bankers. Government has to try to differentiate between good borrowers and bad borrowers, good bankers and bad bankers, good lawyers and bad lawyers, good Chartered Accountants and bad Chartered accountants, good politics and bad politics , good politicians and bad politicians, good judges and bad judges, and so on.

Real transforamation and real reformation will take place only when government learn to award goodness and punish badness of a person, whosoever he or she may be.

Policies , rules, guidelines and various dictates used by various ministries and departmental heads go unheard and unfollowed when Human resource assigned to execute these tasks are dishonest, disloyal, untrustworthy, selfish, greedy, cheaters, flatterers , yesman and manipulators.

Our country is therefore best in making plans and policies but considered as worst in its execution. Government which will get success in reversing this trend and this evil culture will only be able to bring about real reformation and true transformation in the society.

Politicians, bankers, officers , advocates, judges , almost all are busy in preaching good sermons, in delivery of  motivating lectures, in conducting various workshops, trainings, conferences and publishing of books on morals, but unfortunately very few of them are truely and honestly putting their own valuable ideas and ear-soothing moral stories in practices.

There is no synchronisation in mind , body and soul. Body of a person does not indicate what he thinks in mind and mind does not think what his soul teaches him to think. This is why , we find more preachers, more cheaters, more manipulators , more fraud committers than true and honest performers who believes and acts as per moral lesson taught to him or her or preached by him or her.

People in general act against what their conscience tells to do. People have lost their conscience in quest of money and power. Public servants who are supposed to serve common men and Indian citizen  are  busy more in serving their bosses  in greed of quick money and quicker elevation in their career and less in serving people  . Persons at the top posts love flatterers more, than people who abide by rules and who work honestly . Top officials and top politicians love not to real performers who   follow guidelines for safety of their organisation but to those who blindly flatter them, gift them, garland them,  earn bribe for them and keep red carpet always ready to welcome and worship them.

This is why, perhaps that all talented educated youth prefer going abroad for job than to serve their own motherland.

For last three to four decades , many efforts by various bankers have been taken to stop evil culture prevailing in banking system, suggestions have been made by various committees to stop  evil culture  in politics which exploits banking for vote banks and  various acts have been framed and formulated to recover money from defaulters, training colleges have been set up in all banks to teach bank staff various methods for good lending and to take prventive steps for best moitoring and  for keeping and maintaining good health of bank's assets.  

But unfortunately outcome of all these efforts appear to be negligible and ineffective. Only because there is no honesty in persons who are supposed to execute them. 

Bank staff are taught many lessons for safe lending and strict monitoring. They listen all and forget soon because they do not accept these theories from their core of heart 

When  a loan seeker approaches a bank officer  for sanction of a loan, he or she forgets  all principles of lending and find it better , convenient and beneficial to oblige Loan seeker if  he gets some consideration in lieu of it. These considerations may be cash or in kind or a help in getting choice transfer or a favour in promotion. 

Every bank has a merit oriented promotion and recruitment policy in force for last three decades, but in practice value is given by top officials not to merit but to flattery, bribery, caste and community and to recommendations received from top sitted persons , politicians and professionals.

 Similarly a political person is taught several times not to press bankers for loan mela or for sanction of loan to a person of their choice or force bank to write off bad loans . But when a politician goes to field and delivers a lecture for mobilising votes during election campaign or when he gets power, he uses all unethical ways to force bankers to do injustice with bank, to favour his persons in loans etc. Code of conduct lies in papers only.

Similar is the position of lawyers, CAs, government officials, judicial officials, valuers, architects, contractors etc.

A doctor is taught hundreds of lessons for serving mankind . Doctors are considered God by those who are sick or who are wellwishers of patients. Still doctors use all unethical ways and means to cheat patients and to  earn wealth through exploitation of helplessness of patients. 

It is also because a person has to spend crores of rupees in undertaking  medical course and getting a doctor's degree. 

Similarly politicians use unethical ways to cheat voters so that they may recover multiple of amounts they spent in winning an election. All Kith and kin ,relatives and friends of  powerful politicians get favour in all fields at the cost of more competent very person .

Similarly bank officers indulge in unethical practices to spend on higher bosses and to brighten their career. There is mad rush for wealth and power in all sphere of life. There is always a multi- member committee or board to select persons for higher post in transparent way and to give opportunities to best persons. But in practice, every member uses their power to give respect to choices of each member. There is a always a strong bonding , harmonic relationship and lovely unity among  looters  whereas on the contrary intelligent people are usually divided, whimsical and self centered.

Link to source

The Hon’ble Prime Minister of India and the Hon’ble Finance Minister of India,
Dear Sirs,
Some of the recent pronouncements with regard to non-performing asset have created concern among the honest and upright borrowers particularly coming under the category of SME with integrity whose accounts have become non-performing assets (NPA) because of the circumstances beyond their control. Banks do have their right to recover their dues from the borrowers. But every right is derived out of a duty first to be performed and that duty being the concern and care of the borrowers and prevention of account being classified as NPA.

Indian banking sector have undergone changes from time to time. It passed through social control during the early 60s and then to nationalization of some banks in the year 1969 and then came the reforms of 1990. Since then the Indian banking system has been trying to integrate their activities with the global development and market and this has brought out drastic changes and reforms to keep up with the global trend.

The introduction of prudential norms particularly changed the very approach of the banks towards asset classifications and income recognition. But the reforms also put a great pressure on their profitability, compatibility and competitiveness  with the world banking trend and market demands which led to the enactment of Recovery of Debts Due To Banks And Financial Institutions Act, 1993 (RDDB & FI Act) and its later amendments. After having found the ineffectiveness of the RDDB & FI Act and to give more power to the banks and financial institutions, yet another more stringent enactment of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)  came into existence and amendment were introduced subsequently.

But did the reforms and the subsequent enactment of the Acts produce the desired result?

Taking into account the quantum of recovery compared to total NPA and mounting incidents of NPA accounts, the result is pathetic and alarming. Now everyone connected with banking and finance look eagerly up to the recently passed Bankruptcy and Insolvency Act with great hopes and aspiration. A dispassionate and non prejudiced review of the past experience and the result achieved and an understanding of the present unpleasant financial situation prevailing in the banking and financial sector would indicate none too pleasant situation of the future. That is because what steps that were taken in the past and being pursued in the present and envisaged for the future are for treating the symptoms and not the disease. Hence, a reorientation in the approach to the existing problems is very much necessary to produce the desired results.   
An unbiased review of the measures taken for the recovery of debt shows that there is an underlying conflict of interest between the bank and the borrower client. Since "a conflict of interest is a set of circumstances that creates a risk that professional judgment or actions regarding a primary interest will be unduly influenced by a secondary interest”, it is imperative to understand what is the primary interest for both the bank and the borrower.

There exists a trust deficit and mutual suspicion creating a divide between the bank and the borrower with regard to their perceptions about their respective roles in their contribution to the nation building activities and social obligations.  The primary objective of commercial banks is to accept deposits from the public and to lend for productive purposes. When the banks accept the deposits from the public, they become the custodian of public fund and keep it under trust. The duty and responsibility of the banks start when they deploy the funds for progress and development of commerce and industry.

The prime duty of the borrower is to utilize the funds for the productive purposes for which the bank has lent the funds. Hence, it is apparent that the roles of the bank and the borrower are complimentary to each other and not contradictory. But in the process of lending and utilization of funds, there arise conflicts of interest from time to time which affect the respective cash flows on either side depending on the situation prevailing then which results in the creation of non-performing assets which leads to recovery process being initiated by the bank which the borrower resents. 

The perceived knowledge about non-performing asset by the borrower and the bank alike and the modus-operandi of the recovery process adopted by the banks leads to further conflict and prolonged litigations. This is counterproductive to the objectives of lending and utilization of funds affecting severely the economic wealth and health of the nation. Thus it is the inevitable necessity that such deterioration in the economic wealth and health of the nation should be arrested.
Understanding the respective roles of the bank and the borrower which are complimentary to each other is the first step. KYC (Know Your Customer) norms are already implemented. There is vast difference between knowing the customer and understanding the customer and hence more importantly new UYC (Understand Your Customer) norms are to be formulated in line with Banking Codes and Standards adopted by banks as per the norms announced by Banking Codes and Standards Board of India. The next step is to understand and accept the harsh realities and unpleasant truth regarding the prevailing situations in their correct perspectives by the bank and the borrower which may lead to a change of norms in the classification of the account as NPA. The initial two aforesaid steps are very important because “Understanding is the first step to acceptance, and only with acceptance can there be recovery.” 
Effective communication is the key to understanding because the very purpose of communication is to understand and to be understood which will pave the way for an endearing and enduring relationship between the bank and its clients. But currently the emphasis is on technology, fiscal policies, system and procedures etc which are, no doubt, positive steps for making the banking and financial system robust and dynamic. But the fact is that technology innovation can bring only the marvels of technology but it cannot produce economic results. Economic results are produced only by knowledgeable and self actualized human resources and quality leadership and also that relationship can be built up only with human beings and not with machines or any policies. Unfortunately no such steps seem to being initiated to produce economic and financial results by building up healthy and strong understanding, endearing and enduring relationship between the bank / financial institution and the clients. Today the ‘relationship banking’ has given rise to ‘faceless baking’ using technology and there seems to be no ‘bonding’ but only ‘binding’ between the bank and the customer. This is the basic difference found in what is being done in the recovery of dues of banks and financial institutions and what should have been adopted for the recovery such dues.
What is advocated now is a total change in the attitude and approach to recovery of dues by the banks / financial institutions and the borrowers. Since attitude is the approach that banks and financial institution take to lend and recover the dues, the result depends upon their attitudes and similarly is the attitude and approach of borrowers with regard to utilization of funds received by way of loan and payment of dues.  Hence, a new concept of “Conscience Cum Conscious Banking” and “Recovery with a Human Touch” is if understood properly and implemented diligently, would ease the recovery of debts with the mutual consent of bank and borrower and facilitate reduction of NPA to a great extent if not totally eliminating them.
The Concept of “Conscience Cum Conscious Banking”.   (CCC Banking)
The dictionary meaning of conscience is “the part of you that judges how moral your actions are and makes you feel guilty about bad things that you have done or things you feel responsible for.” The legal meaning of conscience is “conscience: an internal sense of right and wrong. To respect differences between persons the law sometimes permits a conscience clause. Freedom of conscience is a human right.” (Collins Dictionary of Law © W.J. Stewart, 2006). The psychological definition of conscience states “Your conscience is what tells you whether an action is right or wrong. It is the reason you have guilt or remorse after doing something morally questionable, and the reason you feel relief or pride after telling the truth or giving to charity. It can also have an affect on decisions you are contemplating. If you just have a bad feeling about a possible action, your conscience may be telling you to choose otherwise. The sense of right and wrong is learned and deeply embedded, so someone with a very strict religious upbringing may have a more critical conscience than someone brought up with a looser moral compass.”
The dictionary meaning of ‘Conscious’ is “State of understanding and realisng something” and as per Wikipedia “Consciousness is the state or quality of awareness, or, of being aware of an external object or something within oneself. It has been defined as: sentience, awareness, subjectivity, the ability to experience or to feel, wakefulness, having a sense of selfhood, and the executive control system of the mind”
The concept may be considered more moralistic than practical. But more success can be achieved using a more moralistic approach than pursuing a ruthless way devoid of any justice, values and professional ethics. Every person has a conscience which is a very powerful part of the person. It helps him be aware of the world around him and it helps him have interaction with the world. With the conscience trained, the conscience empowers and helps every one. But, like all things in life, the conscience can have various degrees of training and capability.
The principal of “Conscience Cum Conscious Banking” is based on the fact that most people are honest and uphold integrity. The truth is that between the good and the bad, only the circumstances have to wedge in. Hence, as far as banking is concerned, the circumstances that trigger the creation of non-performing asset are to be identified and removed so that further deterioration of the secured assets does not take place.  Further, a constant vigil without complacency and effective monitoring of credit would also ensure prevention of accounts’ becoming non-performing assets.  
A “Conscience Cum Conscious Banking” will usher in an environment of goodwill and mutual respect among banks / financial institutions and the customers without the feeling of being abused, shamed and threatened. It also inculcate a sense of belonging among the executives, employees and the customers leading to understanding the respective roles and mutual obligations and contributions towards the health and wealth of economy and the society alike. Further they would hold themselves and each other accountable for adhering to some set of agreed-upon values and ethics and for working toward an agreed-upon vision. Deviations and errors would be considered as an opportunity for learning and growth, rather than an excuse for blame and punishment. This does not mean that there won’t be any problems. In an uncertain and volatile business environment nobody can predict precisely the future outcome. But with trust and mutual understanding based on the culture, values and ethics that they developed, timely actions will be initiated tide over the problems and to achieve the goals of mutual welfare keeping the national interest above all. A Conscience Cum Conscious Banking will create an everlasting relationship between the bank and the customer with mutual help and respect which will also enable “Recovery with Human Touch”.  
“Recovery with human touch” is the process of recovery without jeopardizing the interest of the bank and financial institution and the borrower. The basic rule is to fix the problems and find solutions.  There are two types of problems namely the internal problems of the banks, financial institutions and the borrowers respectively as the case may be which are within their individual domain and the other problems are external over which none have any control. Thus it is very important to recognize the cause of the problems to find solutions. 
“Recovery with human touch” is based on the following human behavioral principles:- “The greatest technology in the world hasn’t replaced the ultimate relationship building tool between a customer and a business: the human touch” and “Too often we under estimate the power of a touch, a smile, a kind word, a listening ear, an honest accomplishment, or the smallest act of caring, all of which have the potential to turn a life around” and   more importantly the truth is that “Your situation is never permanent. It is what you make it. Life isn’t solid. It’s fluid. It changes”.    
The “Recovery with human touch” method is based on the fact that it takes considerable time to build and it takes no time to destroy. Considering the roles of the banks and that of the borrower, any wrong step that the bank make either to lend or to recover would certainly affect the borrower and vice versa any erroneous path that the borrower takes would also affects the bank since their existence are interdependent and not independent. Any weakening of the banking system is detrimental to the economy of the nation and so also any adverse features inflicted on the entrepreneur organization would also affect the contribution to the welfare of the society and deprive the livelihood of the multitude of the employees and workers engaged by the enterprise and also other stake and share holders. Hence, the principle behind “Recovery with Human Touch” is that any recovery process being adopted should not jeopardize the existence of both the lender and the borrower aiming only to reconstruct and not to destroy. In the ultimate analysis, the veritable realization of the organizational objectives and individual aspirations for banks and enterprises depend upon the following principle: “In management, the first concern of the company is the happiness of the people connected with it. If the people do not feel happy and cannot be made happy, that company does not deserve to exist.”
There may exist a different situation where the borrower never has any problem but tend to become non-paying. They are the willful defaulters. Their case is to be treated differently and with a firm resolve. Therefore, it is imperative that there should be a definite distinction made between honest borrower with integrity and willful defaulter. This distinction should be made objectively and subjectively taking into account the human sensitivity. Expediency should not be a policy to declare a borrower as a willful defaulter who has a long association with the bank or financial institution who has been doing well but who becomes a defaulter due to circumstances beyond their control.   
The broader steps that are envisaged under the “Recovery with Human Touch” are as follows.
1. To begin with declare a moratorium on all cases pending with DRT, DRAT and other Courts for a period of two years pertaining to recovery proceedings of amounts more than a threshold limit on an experimental basis for which the limit has to be fixed. The remaining cases are to be tried in the respective
Tribunals / Courts but without
bias and prejudice.
2. Constitute an evaluation, assessment and appraisal committee in every state consisting of banking experts, representative from respective banks and financial institutions, representatives from respective industries and commerce whose case beyond the threshold is being evaluated in detail.
3. Evaluation should be done by identifying the internal factors of the bank / financial institution and defaulted enterprise and also external factors which caused the account being classified as NPA. The primary aim of such an exercise is not to fix responsibility and punish but to fixing the problems and finding solutions to take the account out of its NPA status.
4. Under the existing conditions there is a decision making paralysis due to fear psychosis of being held responsible and accountable for their actions prevailing among the executives of banks and financial institutions which is one of the reasons for the creation of non-performing assets because if the behaviour of the banks is governed by the attempt to escape risk, it will end up by taking the greatest and least risk of all, the risk of doing nothing.   Hence, the executives should be allowed to take decisions boldly without fear or favour.
5. To Implement the plan of action faithfully and diligently necessary support and help can be brought from outside also. A knowledgeable authority exclusively for the purpose of monitoring the implementation of the plan of action and to take such steps which are necessary for the success of the plan is to be constituted. A reporting system is to be devised to inform the concerned bank / financial institution and the borrower regarding the observations made by the monitoring authority and corrective steps to be taken without any delay.
6. Rightly or wrongly the general perception of the borrowers out of experience is that the banks and financial institutions invoke legal proceedings without complying with the directives of RBI which is mandatory and many times by violating the provisions of the respective banking Acts with impunity and also violating the principles of natural justice. If any such incidents are found then such banks and financial institutions are to be pulled up and reprimanded and directed to fall in line with the instruction of RBI and complying with the provisions of the Acts and principles of natural justice.
7. Most unfortunately it is found that most of the presiding officers of DRT and DRAT act as the recovery agents for banks and financial institutions. Even when clear evidences are produced against the banks and financial institutions for their wrong doings and even when higher courts’ citations are quoted during the course of legal proceedings, they are overlooked and orders are passed favoring the bank and financial institutions thereby denying justice and equity to the borrowers. Many are the cases when the borrowers and the guarantors have lost their livelihood and assets leading miserable lives devoid of human dignity. Such incidents are to be stopped to uphold equity, justice and principles of natural justice.
8. The pitiable effect of classification of account as NPA is that all avenues of raising funds by the borrower enterprise are closed and the resultant effect is that the workers and employees engaged by them are deprived of their livelihood and the pathetic plight of them and their families and dependants are not at all being taken into consideration which may lead to social unrest which goes against the government objective of wealth creation and employment generation. Such incidents also violate the fundamental rights and human rights of such deprived workers and employees. Chances of such depravation are to be eliminated ensuring human dignity and decent existence to those who are deprived of their employment and livelihood.
9. Of late it has become a practice for the banks and financial institutions to assign their debts to Asset Reconstruction Companies and Securitisation Companies which is another breeding ground for corruption and malpractices. Most of these companies are interested only in the real estate value aiding cartel of land mafia. In fact the banks and financial institutions shirk their duty and responsibility of rehabilitating the NPA to take it out of the purview of NPA. It only shows their inability to tackle the ticklish question of non-performing assets. Such transactions do not reduce the incidences of accounts becoming NPA but shifting them from one basket to another and does not solve the problem of recovery of non-performing assets. If the banks and financial institutions cannot deal with NPA, how can the Asset Reconstruction Companies and Securitisation Companies undertake managing non-performing assets? The assignment exercise is nothing but a sham and it will not produce the desired result destroying an otherwise potential industry. 
10. The cases of housing loans, education loans and individual retail loans are to be treated in a different way and not at par with industrial or commercial loans because the circumstances and purposes are different.   
The aforesaid steps form only a general approach to be taken in solving the crisis of non-performing asset. If the concept of “Conscience Cum Conscious Banking” is accepted along with the “Recovery with a human touch” then more studies and research can be undertaken to finally making it as an Act or a system and procedure to be announced by RBI and also a part of corporate and SME good governance and which should be made mandatory for the bank and financial institutions and also business enterprises to be adopted and implemented under a time bound programe.. 
It may be argued that already avenues are available to resolve the problems of NPA under SICA Act through BIFR, CDR and rehabilitation programme as announced by RBI, Joint Lenders Committee formed as per RBI directive etc. But experience has shown that nothing timely is happening and the results are meager and not producing any tangible result. But in the envisaged concept, the basic difference is that there is a factor of compensating the enterprise for the losses and damages incurred by them on account of the wrong doings of the banks / financial institutions if it is proved which can be construed as lenders’ liability.       
The prevailing approach of generalizing the reasons for the creation of non-performing assets though valid and since each case is different from the other, individual evaluation and assessment has to be undertaken to find solutions to the particular case. In order to make the approach to solving the problems of NPA a successful reality, it is necessary to understand the knowledge realities of the bank and financial institutions and that of the enterprise and the people managing the business on both sides. Since economic results are achieved by the concerted, unified and co-operative efforts of human resources, it is essential and inevitable that the importance of building a team of knowledgeable and highly motivated work force is to be established for the veritable realization of objectives of banks, financial institutions and the enterprise. Educating the work force and the customer is yet another important task along with undertaking training programmes to update the knowledge and skill for the effective and efficient implementation of plans and programmes for achieving goals.
Experts and officials may consider whatever that are stated above may seem to be utopian, non-practical and based on moralistic approach which has no value in the present day attitude. But there are many ways of implementing the aforesaid programmes effectively within the ambit of the law and RBI directives based on the above mentioned concepts. A review of various happenings in the history of the world, be it political, scientific inventions, discovery contributing to progress and development of the humanities show that all such initiatives have started with a vision which was opposed and unaccepted by the people at large in the beginning and later when the mission fulfilled successfully  were appreciated and adopted and accommodated by them. What were considered impossible is made possible. Hence, the aforesaid approach can also be tried and when implemented with the true spirit and with sincerity of purpose and with commitment can definitely produce the desired result.
Lastly what is lacking in the financial sector and the entrepreneurial field is lack of leadership to carry out effective and successful implementation of plans and programmes. Leadership is lifting an employee’s and workers’ vision to high sights, the raising of their performance to a higher standard, the building of their personalities beyond their normal limitations. Empowering people is an enthralling quality of a true leader. The quality of leadership is the ability to recognize a problem before it becomes an emergency and lies in guiding others to success by ensuring that everyone is performing at their best, doing the work they are pledged to do and doing it well.  “Experience is not what happens to a man. It is what a man does with what happens to him." Besides, "The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands in times of challenge and controversy.”         
The success mantra is:
Winners are too busy to be sad,
Too positive to be doubtful,
Too optimistic to be fearful,
And too determined to be defeated.”
And let the clarion call of Swami Vivekananda be followed, “ARISE, AWAKE AND STOP NOT TILL THE GOAL IS REACHED”. JAI HIND.
Sincerely Yours,
T.R. Radhakrishnan
(The author invites comments and opinions from readers. He can be contacted either through his email or mobile) )
(The author has advanced the concept of Conscience Cum Conscious Banking and Recovery with a Human Touch out his experience as an e x-banker and then as a facilitator for DRT cases.)

Rajan speaks Truth on Bank NPA


RBI Governor Raghuram Rajan delivered a speech on "Resolving Stress in the Banking Sytstem" at Bangaluru during an interactive meeting with industry and trade.

The government and the RBI are helping our public sector bankers in this difficult time though it is a critical task. Rajan says in the last three years, RBI have paid all the surplus to the government . As such , the proposal of RBI providing capital to banks refects conflicts of interest. He says "This seems a non-transparent way of proceeding"

Govts are sometimes reluctant to infuse bank capital as there are so many more pressing demands for funds However, Rajan says that it is better that government capital be infused quickly in banks.

Rajan says easier monetary policy is no answer to serious distress. He does not endorse the widespread belief in this regard..

Those who diverted money, banks/investigative agencies should send the message that alternatives to repayment can be harsh. We should send message that no one can get away. Glad that the PMO is pushing prosecution of large frauds. Rajan says RBI has set up fraud monitoring cell to coordinate early reporting of fraud cases to investigative agencies He further says bank investors, after initially getting alarmed by the size of the disclosures, have bid up PSB bank shares.

RBI will shortly license a number of new Asset Reconstruction Companies (ARCs) We have coordinated with SEBI to increase penalties for wilful defaulters" .
It is important that banks do not use the new flexible schemes for promoters who habitually misuse the system" "Indebted promoters are being forced to sell assets to repay lenders," .

Rajan says there is still room for upward valuation PSU bank shares if they can improve the prospects of recovery. Process for recovery, despite laws like SARFAESI, is prolonged and costly, especially when banks face well-connected promoters.

Over-borrowed promoters often propose increase in scale so that bank’s outstanding debt and new loans all become serviceable.But if the project is unviable, doubling its size does not make it any more viable. Rajan advises banks not to throw good money after bad money because there is an unreliable promise that debt will become serviceable'

At the same time Rajan has advised banks to censure completion of projects that are viable, even if it requires additional funds infusion.

Rajan says that private banks' interest rate are equal or higher than PSU banks. Yet private banks' credit growth does not seem to have suffered. Need of the hour is to get government banks back into lending to industry and infrastructure , else credit and growth will suffer as economy picks up.He also added that private sector banks cannot substitute fully for the slowdown in public sector bank credit.

Government banks were shrinking exposure to infrastructure/industry from early 2014 because of high past NPAs. It is not that due to high interest rate credit growth has come down. It is remarkable to note that slowdown in credit growth is only in public sector banks not in private sector though RBI prescribed rates applies equally to private and PSUbanks. . Obviously credit growth slowed down mainly because of stress and not because of high interest rate.

The government is said to be considering a mega merger of 26 banks, which will create six big lenders.The proposal envisages major banks like State Bank of India, Punjab National Bank, Canara Bank, Union Bank, Bank of Baroda and Bank of India leading the merger.

As a part of the proposal, Syndicate Bank, IOB and UCO Bank will be merged with Canara bank. Central Bank and Dena Bank may be merged with Union Bank, Other banks like Andhra Bank, Bank of Maharashtra, Vijaya Bank will be merged with Bank of India.

However, the management of Bank of India that HR integration will be the biggest challenge during the merger. No bank was free of bad loans and the merger will not help in any way. Merger may help in increasing size of a bank , but cannot help in reduction of NPA or improvement of quality of lending and monitoring of assets

Why Trade Union Leaders Oppose Merger of Banks?

Bank employees oppose move to merge with SBI-News in THE HINDU on 16th June 2016

Employees of five associate banks have decided to observe a nation-wide strike on July 12 and July 13, opposing the recent decision of the Cabinet to merge them with the State Bank of India. A decision to this effect was taken at a meeting of office bearers of All India Bank Employees’ Association (AIBEA) held in Chennai. AIBEA General Secretary C.H. Venkatachalam said it was decided that a strike would be observed by the employees of associate banks on July 12, followed by all banks on July 13. The strike call has been given by AIBEA and All India Bank Officers Association. On June 30, there will be protests in the State capitals. After the strike, an emergency meeting of AIBEA and AIBOA will be held. Also, United Forum of Bank Unions has given a call for strike on July 29 against banking reforms and labour reforms.

State Bank officers’ body supports merger-The Hindu Business Line-  16th June 2016
Coimbatore, June 16:   
A day after the Cabinet gave its nod for the merger of five associate banks and Bharatiya Mahila Bank with State Bank of India, President of All India State Bank Officers’ Federation (AISBOF) D Thomas Franco Rajendra Dev said, “The Federation supports the acquisition by the parent.”

“We never wanted cross-merger for in it (cross-merger) we believed that we would be creating competition amongst us. Only the All India Bank Employees’ Association (AIBEA) was demanding the cross-merger of associate banks into one entity. We had always maintained that there was no need for merging the associate banks with SBI. Now it has been forced on us,” he told this correspondent. The Federation has formed three committees to discuss the various post-merger issues such as human resource (planning), possible closure of branches and ways to integrate the associations.

Committees’ meeting
“The committees met on Tuesday at Mumbai; held a discussion with the SBI Chairperson as well. We expect some quick follow up,” Rajendra Dev said adding, “only by next year, will things really happen.”
Sharing some of the suggestions, he said, “Instead of closing branches located in close proximity, the bank can consider converting some into specialised branches. This would help redeploy the staff as well.”

To The Hindu Business Line

After the rightful decision of the UFBU at its meeting held on 11.05.2016 at Hyderabad to give the call for strike on 29.07.2016, we find that Government is fast going ahead with their plans for consolidation and merger.  You are aware recently on 17.05.2016, in a hurriedly held board meeting, through a table agenda, decision has been taken to proceed towards closure of 5 Associate banks and to be merged with SBI.
Link To Important Banking News on Bank Strike

Bank  unions oppose SBI merger, to observe strike on July 12,13-Chandigarh Times-16th June 2016

Employees are apprehensive over downsizing, closure of branches and redeployment by the SBI on the pretext of relocating the branches. They are demanding recovery of bad loans and action against defaulters.

Rajesh Sondhi, organising secretary, All-India State Bank of Patiala Employee Federation, said, “Instead of opting for a merger, the government should focus on controlling bad loans. The merger will not serve the purpose. It is against the interests of employees. Also, the five banks have contributed to the country’s growth and after the merger, they will lose their regional identity.”
Read Full News Published in Chandigarh Times on 16th June 2016

28 जुलाई को एसबीआई के सहयोगी बैंकों की हड़ताल
Amar Ujala 12th June 2016

वर्मा ने बताया कि भारतीय स्टेट बैंक के पांच सहयोगी बैंकों स्टेट बैंक ऑफ त्रावणकोर, स्टेट बैंक ऑफ मैसूर, स्टेट बैंक ऑफ हैदराबाद, स्टेट बैंक ऑफ बीकानेर एंड जयपुर और स्टेट बैंक ऑफ पटियाला के निदेशक मंडल की बैठक 17 मई को तत्काल बिना किसी पूर्व सूचना के बुलाई गई थी।

इस बैठक में एसबीआई के आदेश पर सभी सहयोगी बैंकों को बंद करने और एसबीआई द्वारा अधिग्रहण करने का एजेंडा लाया गया। एमएस वर्मा ने कहा कि एसबीआई प्रबंधन के विरोध में 21, 29 जून और 11 जुलाई को पांचों बैंकों के कर्मचारी प्रदर्शन करेंगे।

28 जुलाई को स्टेट सेक्टर बैंक इंप्लाइज एसोसिएशन और आल इंडिया बैंक इंप्लाइज एसोसिएशन के बैनर तले पांचों सहयोगी बैंकों में हड़ताल की जाएगी। इसके बाद भी अगर एसबीआई प्रबंधन ने अपना फैसला वापस नहीं लिया तो भविष्य में आंदोलन को और तेज किया जाएगा।

21-June-2016 19:03 IST
Clarification regarding News Report of Arrest of Tax Defaulters
Certain sections of the press have been carrying news reports today that Income Tax Department is going to arrest wilful defaulters of tax.

In this regard, it is clarified that no such statement has been authorised by the Income-tax Department. Though the provisions for arrest and detention by the Tax Recovery Officers in respect of the non-compliant tax defaulters are contained in the Income-tax Act, these are used extremely sparingly.

20-June-2016 17:11 IST
Quarterly Revision of Interest Rates for Small Savings Schemes
On the basis of the decision of the Government, interest rates for small savings schemes are to be notified on quarterly basis
On the basis of the decision of the Government, interest rates for small savings schemes are to be notified on quarterly basis. Accordingly, the rates of interest on various small savings schemes for the second quarter of financial year 2016-17, on the basis of the interest compounding/payment built-in in the schemes, shall be as under:

Rate of interest w.e.f. 01.04.2016 to 30.6.2016
Rate of interest w.e.f. 01.07.2016 to 30.9.2016
Compounding frequency
Savings Deposit
1 Year Time Deposit
2 Year Time Deposit
3 Year Time Deposit
5 Year Time Deposit
5 Year Recurring Deposit
5 Year Senior Citizens Savings Scheme
Quarterly and paid
5 year Monthly Income Account Scheme
Monthly and paid
5 Year National Savings Certificate 
Public Provident Fund Scheme 
7.8 (will mature in 110 months)
7.8 (will mature in 110 months)
SukanyaSamriddhi Account Scheme



Study-loan defaulters get harsh life lesson from ARC-The Hindu Business Line

LN Revathy

Coimbatore, June 20:  
Last month, J Padmapriya, a Coimbatore-based widow and mother of two, received a letter from Reliance Asset Reconstruction Company that had her reeling in shock.
The letter stated coldly that her son Radhakrishnan was in default on the ₹90,000 education loan he had taken from SBI in 2012 (for which she was guarantor), and that SBI had assigned all rights on the loan, which had been declared an NPA, to Reliance ARC. It directed Radhakrishnan to settle the outstanding amount of ₹1.22 lakh (including accrued interest) at one go, within 15 days.
Padmapriya acknowledges she and her son are in default, but says she was unable to repay the loan: her son was jobless for a year after completion of the course, by which time the moratorium on repayment expired, and interest began to accrue. She earns ₹6,000 a month and, struggling to survive, she fell behind on the EMI of ₹3,315. And, now, to be asked to pay ₹1.22 lakh in full is way beyond her capability, she laments.
Indigent borrowers
Nor is Padmapriya alone in her predicament. Other defaulters on education loans from SBI, many of whom are in indigent circumstances, are in a similar fix, with Reliance ARC hustling them to repay their outstandings within 15 days.
Nirmala (name changed on request), 23, whose mother works as a domestic helper, availed of a ₹2 lakh education loan in 2006, but secured a job placement only in 2011. By then, her loan outstanding had more than doubled, and although she has since made part-repayments, she still owed SBI ₹1.2 lakh last November, when she received a letter from Reliance ARC that claimed, shockingly, that she owed it ₹2.25 lakh.
A tearful Nirmala says that Reliance ARC is now “putting pressure” on her mother to settle immediately.
Foootnotes to a deal
Pitiful though their plight is, Padmapriya and Nirmala (and many others) are mere footnotes to larger, emotionless corporate deals that have touched their lives. In three tranches spread over 2015-16, SBI sold to Reliance ARC some 43,000 Education Term Loans (ETLs), corresponding to a total loan of ₹848 crore.
The bank’s ETL portfolio shrunk by ₹287 crore to ₹15,177 crore in FY 2016.
An SBI officer, who did not wish to be named, said the bank no longer had ownership of the ETL accounts, and so when the borrowers approached the branches, they were directed to Reliance ARC.
A communication from the SBI Corporate Office states: “While branches can accept the repayment and credit the amount into the Trust account of Reliance ARC, borrowers will have to obtain loan closure certificate from Reliance ARC only.”
Padmapriya says that when she sought an appointment with Reliance ARC staff, she was fobbed off. “When I explained that it would be impossible to settle the entire amount at once, he said, ‘we do not accept payment in monthly instalment. That is our policy’,” she recalls.
Financial illiteracy
A lack of understanding of how the education loan repayment schedule is structured has compounded the borrowers’ problems. Nirmala says she was unaware that she had to make a token remittance every month beyond the moratorium period so as not to be in default.
In other cases, SBI appears to have unfairly shifted the goalposts. “While the scheme provides for a 10-year repayment period for loans up to ₹10 lakh, SBI had fixed it at five years,” noted a banker, seeking anonymity.
Right now, a clutch of defaulters, caught between an SBI that has washed its hands of them and a stern-sounding Reliance ARC, is running around seeking help from any quarter. They are not sure which regulator or consumer court can help them.
And since even the overall mood has turned against defaulters of bank loans, even sympathy is in short supply for those in this predicament.

Clever Banks Want Shield From CBI CVC And ACB

Bank officers are now demanding that decisions taken by them should not be under scrutiny of CBI or CVC . In other words they want that they should be provided shield from the actions of CBI or CVC or CVO or anti-corruption bureau. TO make it more clear , I may say that banks want unbridled freedom in taking decisions related to lending and that to write off or in arriving at compromise settlement with defaulting borrowers like King Mallya.

Bankers are raising this demand not for the first time, but in the past too they have put such demand before Ministry of Finance to get patronage from them so that their evil works are not subjected to scanning by any other agency. They want to cover up their evil acts by submitting a purchased certificate from team of Chartered Accountants and Rating Agencies.

It seems to me as ridiculous because record of last three four decades make it crystal clear that none of top officials of banks or PSU has been punished for their involvement in corruption. 

An individual , posted in any post from top to bottom in any office  is punished only when he or she is thorn in the eyes of his or her bosses. To make it more clear , a government employees is safe as long as he or she is flatterer to his bosses and blidly follow the instruction of  bosses  without verifying the fact that the instruction given are lawful or not, morally right or not. On the contrary if an officer starts saying spade a spade, he has to face consequences even for small lapses.

Based on  facts and figure related to cases related to corruption filed in the office of CBI , CVC, CVO , Anti Corruption Bureau or filed in court of law and then analysing their rate of disposal, time taken in disposing off such cases, reasons behind closure of such cases, pending cases in want of permission from government , it can safely be said that government has willfully kept these bodies weak and ineffective .

For this purpose it is well thought  stretegy of the government has always been  to keep these bodies disabled and provided with inadequate manpower and inadequate infrastructure. They have tactfully but wilfully weakened judicial system as also investigating agencies like CBI or CVC or other anti corruption agencies so that action against erring officers and politicians can be manipulated as per their whims and fancies.

In other words,  it will not be an exaggeration to say that administrative, investigative and judicial machinery all have collapsed in our country. Let us see what new governmemnt led by NDA do it to change the culture which has taken deep root during regime of past governments.

In my view there is wilful conspiracy to keep these bodies weak, ineffective and by building undue pressure of whimsical transfer and arbitrary rejection in promotion processes. Adequate staff are not provided to judiciary also so that  aggrieved employees cannot get justice even from court of law..

Inefficient , incapable , unskilled , untrained, unwilled and corrupt persons are mostly and wilfully provided to the valuable offices of CBI, Anti Corruption Bureau, Audit and Inspection department,Office of CAG, offices of CVC, offices of Chief vigilence Officers situated in various public sector undertakings so that none of cases pertaining to key figures can be decided in time .

Whenever it is found by powerful politicians that any judge or any CBI official or any Vigilance officers is likely to prove charges of corruption against their friends, relatives and their political colleagues, such officers are immediately transferred to some critical, sensitive and remote places.

Rich people use their money and muscle powers to torture investigating officials, witnesses and police officials to weaken the case or to ensure the closure of the case or to postpone the hearing for an indefinite period.

Can any government  stop such whimsical and arbitrary transfers and rejection in promotion processes.?

Can any government  ensure adequate staff at all Anti Corruption bodies ?

Can  government take the risk of providing  efficient , effective, honest, stern,capable, skilled and well trained person to important bodies like CBI, High Courts, Supreme Court, Lower Courts, CVC or existing Ombudsman or in proposed office of Lokpal or Lokayukta?

It is bitter truth that most of officials working as Vigilance officers in various Public Sector Undertakings, banks, insurance companies have totally failed to stop corruption in such offices.

Thousands of cases related to corruption of employees of the organisation remains pending for years in the offices of Internal Vigilance Officers built in all government offices and eventually corrupt officials are exonerated or allowed safe retirement or at most motivated to submit resignation letter to finally close the files related to corruption, fraud and cheating.

How can anyone dream of justice in such offices where even protectors are corrupt and damagers. Even vigilance officers , audit officers and inspecting officers are bribed to close the file or weaken the case or to keep the case pending on flimsy ground for decades.

PSU banks seek shield from CBI, CVC on loans

Swamy Crosses Limit Against Rajan , Governor RBI

Mr. Subramanium Swamy has alleged that the former IMF chief economist who is presently Governr of RBI , Mr Raghuram Rajan had planted "a time bomb" in the Indian financial system in the year 2013 that will explode in December 2016.

On May 26, Swamy had levelled six allegations against Rajan, Mr. Swamy has alleged that Rajan is sending confidential and sensitive financial information around the world, and hence Swamyhas asked the Prime Minister to sack him immediately.

Prior to that, Swamy had claimed that Rajan was "mentally not fully Indian" and alleged that he has "wilfully" wrecked the economy.

I do not at all endorse the style of Mr. Subramanium  Swamy criticisng and indirectly abusing Mr. Raghuram Rajan Governor RBI in public domain. After all , Mr Rajan holds a Costitutional , prestigious, powerful  and the most important post of the country so far as economics of the country and its management is concerned.

I am of strong opinion that none of politicians  should be allowed to criticise any public servant . Because officers working in any department of public sector undertaking has to discharge his duties without any fear of repercussion. And if every political leaders start targeting government officials as per their sweet will, it will create chaos in the administration and ultimately result in adverse impact on governance. Officers in such environment think it wiser and safer to please politicians than to discharge their duty honestly and sincerely.

Even small village level political leader , either of ruling or that of opposition parties tries his best  always to blackmail government servants or build  unwarranted and illegal  pressure on government servants  for allowing illegal favour to them  and for   serving   self interests of local politicians ,state level political masters or central leaders or their kith and kins or their friends and relatives   violating all existing laws and sacrificing the interest of the state and in total disregard to rules of morality.

This is one of the key reasons, why government officers spend crores of rupees from government treasury to extend red carpet welcome to ministers in particular and  politicians in general and also in distributing costly gifts to their political masters. In turn they earn crores of rupees from contractors, vendors and business houses and even from government servants in form of bribe for allowing illegal discounts and rebates and for allowing public servants to earn bribe in lieu of undue favour .

 Rather I would like to say that use of power of transferring an officer by politicians or in  recommending promotion or rejection of a government servant in annual processes carried out for promotions of public servants , has created , irrigated and promoted a culture of flattery and bribery in almost all offices including PSU banks. This evil culture is prevalent in all public sector banks and all PSUs. Workers find more interest in serving their bosses than in serving their organisation or their country. This evil culture has damaged the work culture in police departments and even in defence services.

AS soon as a new Chief Minister joins his duty in a state , he or she prepares a chain of transfers to accomodate officers and staff as per his  or her choice and to suit his or her political strategy. As a result of this dirty culture followed by almost all  political masters, officers instead of focussing on their work , have started focussing on how to please their political masters and how to oblige ministers and powerful persons so that evil acts of such corrupt officers are not put in question or even if questions are raised by media men or some agencies  , they may get full protection and acquitted from all charges of corruption and irregularity taken place in discharging their duties.. 

I have no doubt in saying that government officers are using political powers in general to brighten their career and to grow in their personal power and  wealth and during this course of ugly action , they totally sacrifice the interest of the organisation they serve and the government under which they work. This evil culture is mainly responsible for large scale corruption prevalent in govrnment departments, banks and insurance companies or in all pUblic sector enterprises. This evil culture has created a vicous cycle of flattery and bribery in which officers and politicians play mutual blame game but never own their own responsibility, frauds and failures.

I hereby make it clear that there may be valid points in what Mr. Subramanium Swamy says about Mr. Raghu Ram Rajan , Governor RBI. There may be merit in what Mr. Swamy has been alleging against Mr. Rajan. His all points must be verified and investigated by appropriate authorities. But there is well established procedure to place such information seeking action against accused officer or any government staff . There is provision for  giving sufficient opportunity to every accused to explain in his or her defense.

Mr. Swamy therefore is not justified in putting blame on Mr. Rajan in public domain and has got no right to malign image of a dignified and reputed person like Mr. Rajan . If Rajan is guilty of playing a foul game to cause loss to the country , he must be punished by following lawful procedure but he should in no case be humiliated in the manner in which Mr. Swamy is doing against Mr. Rajan.

If Mr. Swamy is not restrained from his unlawful action , other politicians will also be motivated to follow similar type of character assassination at all levels to mlaign image of any government servants whoever denies  to serve the ill-motivated politicians as per their whims and caprices. 

I know very well through my four decade long services , how even low level political worker exerts pressure on staff each banks, government offices and PSUs to ensure that his self interest is served without any hindrances and no one dares challenge unlawful demand of such corrupt political worker because everyone knows that they will not get protection from their superiors even if they are cent percent right in their approach.

And the most painful is that if such officer complains to any higher office or a police station or any regulator against wrong demands of such politicians , none of seniors or police officers will dare to come to the rescue and none of them will ever try to safeguard such officer from torture of corrupt politicians . 

This is why government officers has made a habit of blidly following the instruction of politicians even though such instructions are many times unlawful and damaging to the interest of the country. Even the policy of whistle blower has not convinced honest workers and also failed to create deterrent affect on  evil workers and politicians who have been engaged in  committing crime one after the other.

I therefore once again make an appeal to the government , specially to Mr. Narendra modi to restrain persons like Swamy in tarnishing the image of any officer. Please do not allow the work culture to move from bad to worse . People of India have great expectation from Mr. Modi and they are fully confident and convinced  that Mr Modi for the sake of good governance will not allow political exploitation of government staff in any manner. Otherwise , public servants will like to continue to act and  remain as slave of these politicians and country will continue to suffer. 

India is a country of 126 crore population and there is no scarcity of intelligent people in our country who can perform equal or better than Mr. Raghuram Rajan, present Governor of Reserve bank of India. A vast country like India cannot be dependent on any one person for long for economic prosperity or economic stability . And none of politicians or government servant is indispensible in country like India or anywhere in the world.

We have seen many Governors earning name and fame. But we have to see which Governor has helped the economy in growing on permanent basis and who has strengthened roots of our economy. We must analyse pros and cons of the matter, assess merits and demerits of Rajan regime,i identify strength,  risk and threat probabale due to Rajan and finally it is to be ascertained whether awarding  him with second term will prove beneficial for the country or prove to be a losing game.

We cannot allow politicians like Mr Subramanium Swami to malign image of a public servant , that too person like Rajan holding a prestigious post of RBI Governor. We cannot allow propaganda war or media war against a post like RBI Governor. At the same time we cannot totally ignore allegations against Mr Rajan put forward by Mr. Swami.

I simply stress here to say that Government must restrain Swami criticising RBI Governor in public domain. Any Government does not like any of his party men criticising its own government in public domain . Similarly it should not like criticism of any public servant by any politician in public domain . There is a properly defined and set  procedure for moving against an erring public servant and it must be followed by all to maintian minimum decency and decorum in the matter of governance.

Here I would like to say that our country was facing rating downgrade in the year 2013 due to decade long misrule of UPA government led by Finance Minister like Mr. P Chidambram and his predecessors. Country  lost lacs of crores of rupees in a chain of scams unearthed by CAG, opposition parties , Team Anna , social workers, RTI experts, lawyers like Prashant Bhusan and  Mr. Subramanium Swami. Image of our country was  tarnished and fully blackened during UPA rule . Environment became unconducive for growth in business, for new  investment in business  and for FDI in India .

During UPA rule, IIP figure came to negative zone. Inflation went beyond control . Foreign exchange reserve faced erosion . Value of Indian currency faced sharp and faster erosion. Exporters and importers started facing problems due to unbearable volatality in value of Indian rupee and rise in value of dollars in International market . Current account deficit and Fiscal deficit went above tolerable and sustainable limits.  Rating agencies started threatening downgrading of sovereign rating of our country. UPA government in the year 2013 got criticism from all corners on all fronts.

 When the situation went beyond control , the then clever Finance Minister Mr. Chidambram appointed Mr. Raghuram Rajan ,world famous economist as RBI Governor. He took this step in the last leg of his government .

Here it will not be out of place to mention that it was bad policies of his government and mismangement and exploitation of PSU banks by FM Mr. Chidambram  that health of public sector banks started facing  capital crisis year after year and banks started facing abnormal rise in bad assets . Mr. Chidambram did not allow Chiefs of PSU banks to treat bad assets as bad assets and this is why a large amount of bad assets were concealed by clever and corrupt bankers. It became culture of every banks to hide bad assets and show them all as standard so that they need not make any provision for these bad assets as required under prudential norms set by RBI. 

All PSU banks indulged in fraudulent exercise and they under a stretegy made lesser provision to artificially inflate annual net profit and to earn blessings of corrupt FM of that time. In order to book higher  credit growth they were forced to lend in infrastructure projects. Banks started using short term funds for long term uses and thus invited liquidity crisis. Rising bad debts hidden in balance sheets added fuel to fire.

As soon as Mr. Rajan took charge of RBI as Governor , things started moving in positive direction due to temporary , permanent , and faster steps taken by clever Mr. Rajan to stop fall in Rupee price , to control fiscal deficint ,to contain rise in bad debts and to bring inflation in control .

A few months after appointment of Mr. Rahuram Rajan as Governor of RBI,  UPA government lost the election due to its misdeeds  and Mr. Narendra Modi led NDA government came to power in the year 2014.  Mr. Arun Jaitley became Finance Minister in Government led by Mr. Narendra Modi and both worked in cooperation with RBI Governor Mr. Rajan for almostt two years.  Economy moved up and progress were visible in every parameter including inflation, fiscal deficit , rupee value etc.

Though there was huge pressure from the side of Government and business class for reduction of interest rate , Rajan did so in phased manner so that purpose of containing inflation could also be served along with executing the advice of Modi govrnment. There was overall good understanding among all three stalwarts. Cleaning of banks also started and  geared up gradually.

Here I would like to express that any more reduction in interest rate may prove deterimental and suicidal step for Indian economy from my point of view. Low interest rate regime may prove helpful to rich class business community to some extent, but in the long run it will cause much more damage to the economy , to savings culture of people of India and cause consequent erosion in  investment capacity of the government.

A country cannot propsper on permanent basis if it has no adequate resources for investment and that for expenditure and spendng on social welfare schemes. Similarly savings is the source of fund for public sector banks and if people of India start putting their savings in other better avenues, banks will face liquidity problem as well as its  capacity to lend will be adversely affected. And when bank's capacity to lend is reduced, GDP growth will also fall. Obviously FM and the government will find it very difficult to save banks from further damage , further detrioration in health and final disaster if they contrinue to cut interest rate .

In my view banks can invest in long term projects only if it is able to get long term deposits from savers. And banks should offer at least 10 percent rate to savers and there is no harm if lending rate goes up due to this to some extent. Because role of interest in majority of projects is negligible in earning profit and in its sustenance. But role of interest rate is considerably higher in survival and sustenance of pensioners and people whose family is run on interest income on their hard earned business income or terminal benefits for salaried class people.

It is Mr. Rajan who ordered Asset quality Review of PSU bank of large 150 borrowal accounts and adivsed banks to consider bad accounts as pointed out by RBI auditors as Non Performing Assets. This forced banks to treat these accounts as NPA and make higher provisions for them which resulted in loss to some bank or erosion in profits of almost all banks. Due to this bank officials who were blindly distributing bank's fund as charity to persons and companies they liked were forced to put a check point on reckless lending.

Bank officers were forced to stop slippages and recover money from wilfull defaulters. He advised government to make legal set up effective and active to help banks in recovering money from defaulters. 

Government came out with Bankruptcy and Insolvency Code 2016 to create an environment of credit discipline and inculcate good habits in business community and to ensure repayment culture which was spoilt by past governments. Government has introduced amendment bills in Parliament seeking improvement in DRT act and SARFACIE Act to make them banker friendly and make them as curse  for  cheater borrowers of banks. All taken together will help in beinging Achhe Din for banks.

But Corrupt top officials, corrupt business houses  and corrupt politicians who were looting banks for their self interest did not find it good that RBI head Mr. Rajan become strict in compliance of set guidelines and identification of NPA as per preudential norms set by RBI. 

Business houses and politicians who were getting loan after loan and who were not repaying loan in time were getting exposed and facing threat of legal action and humiliation in business community. They came together and planned ways to eliminate Rajan from picutre who forced Banks to change  from acting as  bad of roses to act as bad of thorns for defaulters. They could not digest compliance of rules by Rajan. And hence Mr. Swami portrayed the picture of Rajan as anti-national and a hinderance in the path of low rate regime.

To ilustrate, I submit one case for your study.

A patient goes to a Doctor and after examining all patholgical tests, the doctor  prescribes sour medicine and surgical operations to cure the patient. This doctor is considered a beast by patient and anti-human. On the other hand if the same patient goes to another doctor who after examining all symptoms , says that patient is ok in all respect and need not take any medicine. Rather he advises to take sleeping pills , drugs and wine to forget sickness.

After some time patiens gets cure in first case whereas on the other hand the same patient may die in case of obeying advice of other doctor. Rajan is acting similar to first doctor and hence rejected by the banking patient who is addicted to taking wine, drugs and sleeping pills . 

On the other hand FM like  Chidambram preferred second line of action and he managed all Governors of the past to a great extent in following his line of action. As a result of his ill-advice , all banks are now in worst health condition and likely to collapse.

 Rajan committed a blunder by exposing critical sickness inflicted in body of banks  and by prescribing sour medicine , painful injection  into bank's body and by carrying out surgical operation on PSU banks to remove evil culture of concealment and window dressing. He in cooperation with Modi government stopped culture of selling post of ED and CMD  which used to take place during UPA regime. He helped government in formation of Bank Board Bureau headed by hard core honest and sinceere person Mr. Vinod Rai for improving health of banks.

Now after end of Rajan's tenure , it will be hard nut to crack for new comer to cure the ailing banking system and to set right the economic system which was ruined by past governments. I say so because evil culture in lending is deep rooted in banking culture and it is not easy for anyone  to stop rising trend in NPA .

 New comer may again resort to art of restructuring and evergreening of bad loans or selling of bad loans to ARC to conceal bad loan in another bottle and inflate profit as done in the past. But there is no doubt in it that bomb of NPA has to explode , sooner or the later.

Our country run on the basis of certificates and banners. Team of Chartered Accountants will be bought to certify bad loans as good loans and again all banks will start booking higher false profits by saving provisions on bad loans. But this is not a permancnet solution to the problem banks are facing or country is facing.

Lastly I like to make it clear that I never mean to say that alleged guilt of Rajan should be ignored only because he has taken some good steps to improve health of economy and that of banks. I rather feel that all charges levelled against Mr. Rajan by Mr. subramanium Swamy must be investigated and proper action must be taken if needed. But dirty politics on continuance of a person like Mr. Rajan inparticualr or on any governent officials in general  will give rise nothing but a chain of  evil culture where politicians will bark upon public seervants to serve their self motive and get their illegal work done. 

Ultimately this invisible fear of humiliation promotes a culture of flattery and bribery in administrative officials. It is open secret , that good officers are subjected to torturous transfers and face rejection in promotion processes if they do not flatter to their bosses in political circle.

 IAS and IPS officers are indulged in flattery to their ministers at the cost of national interest. If Swami like politicians continue to attack top officials , culture of flattery and bribery will rise more and more and all efforts to contain and control corruption will go in vain. 

Country will progress only by inculcating good cultre in all departments where good workers can perform and bad workers are ignored or removed. WE have to create an environment where all workers can work without fear of political intervention , repercussions and without fear of getting torturous transfers or rejection in promotion processes . Until HR policies are made performance oriented and until flattery is given a final good bye , we cannot hope of any reformation and transformation in the system.

I hope Mr. Narendra Modi who is sincere, honest and hard worker for the progress of the country and for the comfort of common men will take cognizance of evil design of Mr. Swami and take appropriate corrective action to stop recurrence of the same.

Here  are 10 points Mr. Raghuram Rajan stated in his  letter addressed to the RBI team-

1) When I took over, India was labelled one of the 'Fragile Five'
2) I laid out an agenda for action and a new monetary framework.
3) We focussed on bringing inflation down and raising forex reserves.
4) My plan took on the licensing of niche and general banks by committees.
5) I undertook the creation of the Bharat Bill Payment system and the Trade Receivables Exchange.
6) Extended payments to all through mobile phones.
7) Developed a large loan database to better map distress in this area.
8) Today inflation has been halved and savers earn positive interest after a long time.
9) Currency has stablized and government has launched a 40 year bond for the first time.
10) The new Bank Board Bureau has been instrumental in creating a structure for PSBs.

Here in below is full text of letter written by RBI governor Mr. Rajan to his staff:--
Message to RBI staff from Dr. Raghuram Rajan.
Dear Colleagues,
I took office in September 2013 as the 23rd Governor of the Reserve Bank of India. At that time, the currency was plunging daily, inflation was high, and growth was weak. India was then deemed one of the “Fragile Five”. In my opening statement as Governor, I laid out an agenda for action that I had discussed with you, including a new monetary framework that focused on bringing inflation down, raising of Foreign Currency Non-Resident (B) deposits to bolster our foreign exchange reserves, transparent licensing of new universal and niche banks by committees of unimpeachable integrity, creating new institutions such as the Bharat Bill Payment System and the Trade Receivables Exchange, expanding payments to all via mobile phones, and developing a large loan data base to better map and resolve the extent of system-wide distress.

By implementing these measures, I said we would “build a bridge to the future, over the stormy waves produced by global financial markets”.
Today, I feel proud that we at the Reserve Bank have delivered on all these proposals.

A new inflation-focused framework is in place that has helped halve inflation and allowed savers to earn positive real interest rates on deposits after a long time. We have also been able to cut interest rates by 150 basis points after raising them initially. This has reduced the nominal interest rate the government has to pay even while lengthening maturities it can issue – the government has been able to issue a 40 year bond for the first time. Finally, the currency stabilized after our actions, and our foreign exchange reserves are at a record high, even after we have fully provided for the outflow of foreign currency deposits we secured in 2013. Today, we are the fastest growing large economy in the world, having long exited the ranks of the Fragile Five.

We have done far more than was laid out in that initial statement, including helping the government reform the process of appointing Public Sector Bank management through the creation of the Bank Board Bureau (based on the recommendation of the RBI-appointed Nayak Committee), creating a whole set of new structures to allow banks to recover payments from failing projects, and forcing timely bank recognition of their unacknowledged bad debts and provisioning under the Asset Quality Review (AQR).

We have worked on an enabling framework for National Payments Corporation of India to roll out the Universal Payment Interface, which will soon revolutionize mobile to mobile payments in the country. Internally, the RBI has gone through a restructuring and streamlining, designed and driven by our own senior staff. We are strengthening the specialization and skills of our employees so that they are second to none in the world. In everything we have done, we have been guided by the eminent public citizens on our Board such as Padma Vibhushan Dr. Anil Kakodkar, former Chairman of the Atomic Energy Commission and Padma Bhushan and Magsaysay award winner Ela Bhatt of the Self Employed Women’s Association.

The integrity and capability of our people, and the transparency of our actions, is unparalleled, and I am proud to be a part of such a fine organization.
I am an academic and I have always made it clear that my ultimate home is in the realm of ideas. The approaching end of my three year term, and of my leave at the University of Chicago, was therefore a good time to reflect on how much we had accomplished. While all of what we laid out on that first day is done, two subsequent developments are yet to be completed. Inflation is in the target zone, but the monetary policy committee that will set policy has yet to be formed. Moreover, the bank clean up initiated under the Asset Quality Review, having already brought more credibility to bank balance sheets, is still ongoing. International developments also pose some risks in the short term.

While I was open to seeing these developments through, on due reflection, and after consultation with the government, I want to share with you that I will be returning to academia when my term as Governor ends on September 4, 2016. I will, of course, always be available to serve my country when needed.

Colleagues, we have worked with the government over the last three years to create a platform of macroeconomic and institutional stability. I am sure the work we have done will enable us to ride out imminent sources of market volatility like the threat of Brexit. We have made adequate preparations for the repayment of Foreign Currency Non-Resident (B) deposits and their outflow, managed properly, should largely be a non-event. Morale at the Bank is high because of your accomplishments.

I am sure the reforms the government is undertaking, together with what will be done by you and other regulators, will build on this platform and reflect in greater job growth and prosperity for our people in the years to come. I am confident my successor will take us to new heights with your help. I will still be working with you for the next couple of months, but let me thank all of you in the RBI family in advance for your dedicated work and unflinching support. It has been a fantastic journey together!
With gratitude
Yours sincerely
Raghuram G. Rajan

As Rajan ends speculation on his continuance, Hindustan Times  takes a look at his achievements as the central bank’s chief:

Stabilising Rupee: The rupee, which weakened to a record 68.80 against the dollar in August 2013, stabilised over 10% between September and December 2013 after a number of RBI measures taken on the day of his joining the central bank.

Beefing Up Reserves: Today, India’s foreign exchange reserves are at a record high of $363.23 billion as on June 10.

Easier Banking: Rajan also released on-tap licensing to ease the process of universal bank applications that enable services such as payments via mobile phones.

Inflation-focused Monetary Policy: Under his governorship, the RBI came out with a new monetary framework that focused on bringing inflation down and raising of Foreign Currency Non-Resident (B) deposits to bolster foreign exchange reserves.

Inflation: Rajan’s sustained policy focus helped the RBI bring down inflation to below 5%. Under him, a new monetary framework that focused on bringing inflation down was formalised.

Interest Rates: Lower inflation and stability in currency markets helped Rajan bring down key repo rate to a five-year low. This helped the economic growth and consumer spending.
Outside the RBI

Rajan predicted the 2008 global financial crisis. In 2005, at an event honouring Alan Greenspan, who was about to retire as chairperson of the US Federal Reserve, Rajan delivered a paper on “Has Financial Development Made the World Riskier?”, and he argued that the disaster might be looming.

IMF chief Christine Lagarde said at an RBI event in March 2015 that the world should have listened to Rajan.

Indian Express writes about unfinished agenda of outgoing Mr. Rajan

His unfinished agenda

* Monetary policy committee that will set policy framework is yet to be formed
* The bank clean up initiated under the Asset Quality Review, is still ongoing
* Navigate the country through the Federal Reserve’s interest hike cycle

Risks looming large

Brexit: On June 23, Britain will vote whether it wants to remain a part of the European Union, or leave. In the near term, an exit could will heighten global volatility, thereby impacting capital flows into emerging markets and could have a currency impact in the longer run. India has a big trading corridor with the EU.

FCNR bonds: A big risk could be the redemption of the Foreign Currency Non-Residential (FCNR) bonds issued by Rajan way back in October 2013 to protect the rupee from its worst slide in decades. The bonds are due for redemption and the currency market could face an impending outflow of $20 billion, which will put the Rupee under pressure.

Inflation risk: The latest policy statement highlights the upside risk to inflation; CPI has been rising due to a rise in food prices while core inflation also remains high.