FITCH Have A Positive Outlook for Indian Banks

I do not agree with FITCH that asset quality of banks will remain under pressure for three four quarters only. Actually bad assets which are gradually surfacing are only hidden bad assets .

As a matter of fact asset quality of bank is worse than what has till now been projected by clever bankers and what has been certified by greedy Chartered Accountants. Game of manipulation and restructuring are only the options available with banks to stop exposure of huge NPA surfacing. After adoption of system generated recognition of bad assets, evil works of banks had started coming on surface but the trend of actual recognition of bad assets has  once again has been reversed.

Great administrator Mr. KC Chakravorty and Mr. D. K. Mittal contributed a lot to cure the banking system. But unfortunately master PC again gave free hand to wise banks to conceal NPA by hook or by crook and succeeded in shutting the mouth of Mr. Mittal and Mr. Chakravorty. But this is also certain that manipulation with system can give only temporary solution. One may however imagine the fate of honest whistle blower in banks who use to raise voice off and on against evil motivated lending by state run banks.

Until banks learn to stop the culture of flattery and bribery and ensure full proof method of recognition of right people in right way, there is no power on earth which can stop rise in NPA, manipulation and it is bitter truth that restructuring may only postpone the crisis in the same way as the government has postponed adverse impact of current fiscal crisis of the country by accepting FDI despite all round protest.

To improve the quality of assets in real sense and to stop further slippages of asset from good to bad category,  bank management  have to improve quality of assets from the level of sanctioning of loan, improving monitoring mechanism , improve legal system , Improve HR policies and create a fear in the mind of bad officers as well as bad borrowers called as defaulters by quick and effective action . 

Politicians have to differentiate between loan and charity and have to stop culture of waiver of loan and compromise settlement with willful defaulters..It is ironical that clever Finance Minister instead of curing the sick public sector banks have building pressure on RBI to ease prudential guidelines for recognition of Non Performing Assets. Mr. FM is ready to even sideline the recent report submitted by Mr. Mahapatra recommending first recognition of hidden bad assets and then suggesting stopping of forbearance of regulators and suggesting not concealing them under carpet.

Until a Doctor ascertain the gravity of sickness through through check up and body scan of the body he cannot properly diagnose the patient.Similarly clever  FM cannot cure the sick bank with prejudiced mindset and with ill motivated brain.

Bank management have to stop manipulation in promotion process, stop arbitrary and whimsical transfer of officers who fail to flatter and who are not complete yes-man of bosses. They have to stop manipulation in promotion processes and improve full proof value to real workers and give full weightage to experienced officers. They have to select knowledgeable person for the post of Branch Head and improve training system.

It is worthwhile to mention here that banks which had been frequently awarded with so many prestigious prizes for best and excellent training system in their bank have the worst quality of officers and have the maximum ratio of gross NPA in their bank. Corporate which have managed best rating from rating agencies are facing the worst fiscal problems and it is they and their companies which are mainly defaulters. Unrated advances like agriculture, trade advances and corporate advances upto Rs.5.00 crores constitute low proportion of bad assets in banks compared to corporate houses enjoying advances  more than Rs.5.00 crores which have been rated best by rating agencies after getting attractive service charges and much more unmentionable services.

8 OCT, 2012, 06.40PM IST, ATMADIP RAY,ET BUREAU 

Large Indian banks can withstand NPA pressure, says Fitch Ratings

Collected from Economic Times 09.10.12

Kolkata: Large Indian banks are resilient enough to withstand sustained pressure on their asset quality,Fitch Ratings said Monday. But it warned that a few medium sized lenders with high asset concentration and weak equity are vulnerable to downgrades.

The global rating company expects local banks to continue to face asset quality weaknesses over the next few quarters and has projected a rise in the banking system's gross non-performing assets or NPAratio to 4.2% in the fiscal to March 2013, up from an earlier estimation of 3.75%.

"Most banks have a reasonable buffer to withstand increased stress," it said, while it warned a few medium sized banks with poor equity base of possible downgrades if their exposure to stressed assets continues to rise without a corresponding increase in equity buffer.

"Asset quality is likely to remain under pressure at least for the next three to four quarters, particularly from the infrastructure sector in which banks' exposures are concentrated."

Fitch said most large government and private banks have passed stress tests done on them as their core equity remain intact with both profits and general reserves being adequate.

The government has budgeted around Rs 16,000 crore for bank recapitalisation in FY13 and has worked on a 10-year recapitalisation plan for government banks.

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/large-indian-banks-can-withstand-npa-pressure-says-fitch-ratings/articleshow/16725992.cms

9 OCT, 2012, 06.53AM IST, ET BUREAU 

Get real: Relaxed definition of NPAs will not solve the problem

Editorial in ET on 09.10.12

Faced with the reality of rising non-performing assets(NPAs) in the banking sector, the government is reportedly leaning on the bank regulator RBI to ease the prudential guidelines for recognition of NPAs. 

The move is both shortsighted and ill-advised. The first step in addressing any problem, whether it is NPAs or anything else, is to recognise its existence. The reality is that thanks to a combination of factors — aggressive (imprudent?) lending by banks during the time of easy money, the reversal in interest rates and the economic slowdown — NPAs have grown dramatically during the last few months. 

According to the RBI, while gross advances grew by 17% during the period 2010-11 to 2011-12, gross NPAs grew by 46%. This is clearly a cause for concern, if not alarm. Yet, far from admitting the full scale of the problem, the government seems to be looking for 'smokeand-mirror' solutions. 

Relaxing the definition of NPAs will only postpone the problem even as it becomes more intractable in the interim. The problem is more acute in the case of nationalised banks and further regulatory forbearance will ultimately necessitate large-scale write-offs; and with taxpayer money! It is worth noting that restructured accounts grew at a compound annual growth rate of 47.86% in public sector banks against a credit growth rate of 19.57% during the last year. 

Ironically, the government's move comes quick on the heels of the recommendations of the expert committee under the chairmanship of the RBI executive director B Mahapatra, advocating exactly the opposite. Pointing to the dangers of 'regulatory forbearance' that merely serves to brush bad debts under the carpet, the committee had urged tightening of the norms to bring them on par with those in more developed countries. 

On the contrary, the government seems to be toying with the idea of allowing even more regulatory leeway. The idea seems to be to present an artificially rosy picture. Never mind the reality. However, painting a Pollyanna world about asset quality is unlikely to fool either rating agencies or informed observers of the Indian economy

http://economictimes.indiatimes.com/opinion/get-real-relaxed-definition-of-npas-will-not-solve-the-problem/articleshow/16732449.cms