Well done AIBOC!

AIBOC has written letters to Honourable P.M/F.M/Governor, RBI/Secretary Ministry of Finance,
Explaining issues of today’s banking sector as well as issue of Bank/Employees/Officers
At an appropriate time.(Gyan Sangam)

Further AIBOC has given advertisements in leading English news papers
With the heading of “An appeal to PM” detalling the issues (shorter version)

This advertisement brings the issues of Banks/Bank officers/employees to the general public.
Perhaps this is the first time a bank union interacts with the public thro ads.

Following is the Note sent :
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Note submitted by AIBOC to RBI Governor/ Secretary DFS/Chairman IBA on issues listed for discussion in Gyan Sangam scheduled for 2nd and 3rd January 2015
We learn that a retreat of all stake holders in banking industry named GYAN SANGAM is being scheduled on 2nd and 3rd January 2015 to prepare a blue print of reform action plan for Banking Sector.
AIBOC representing 2.80 lakhs officers (85% of total officer strength of the industry) working in PSBs, Private Sector Banks, Regional Rural Banks and Co-operative Banks is a major stake holder in the industry. For the objectives/topics listed for discussion, we wish to present our views for due consideration.

1)Any Platform for formal and informal discussions on issues important for Banking Sector Reforms cannot be considered full forum without the presence of representatives from the Banking Trade Unions, especially representatives of Bank Officers’ organisation. 

The experience and expertise we posses from field level to corporate level of the Banking industry can truly enrich the Platform.

2)Since nationalization in 1969, the business of Government Banks grew to 140 lakh crores with a geographical spread of 80000 branches which largely fulfilled the ambitious social banking concept behind Bank nationalization. 
Even after rolling out economic reforms and liberalization of Banking Sector, the Government owned banks continue to retain about 75 % of the market share. An objective analysis and assessment of implementation of government sponsored schemes/priority sector lending for the last 3 decades will reveal that lion’s share was handled by Public Sector Banks. 
Further, the fact that more than 90% of the 8 crores of PMJDY accounts are opened by PSBs and RRBs reiterate the role Government owned Banks play in inclusive growth. The contribution of Public Sector Banks enabled the nation to withstand the financial meltdown of 2007-08. Hence we `believe that the public sector characteristics of PSBs should continue to be retained.

3)On what has gone wrong regarding public sector banks we feel that the following areas has to be closely looked into
a)Lack of proper vision and consistency before embarking on large Banking Sector Reforms (Eg. Local area banks, suggested consolidation, restriction on recruitment, large scale branch expansion in the last 3 - 4 years, etc.)
b)Multiple Control over Banks
c)Absence of accountability for Boards and Top Management
d)Policies based on political considerations
e)Failure to provide reasonable autonomy to Banks to function as commercial organization.

        f)Role of Banks have been redefined as tool for economic revival and social upliftment for strategic vote bank politics. PSBs are now neither commercial organizations nor Government Department.
       g)Much needed legal reforms did not complement economic liberalization in the Financial sector
       h)Recruitment ban imposed on Banks from 1987 to 2007 and VRS scheme implemented in 2001 effectively decimated middle management in Public Sector Banks, resulting in poor succession planning.
i)Adopting western banking practices without putting in place enabling environment

4)If the word Reform means
a)Privatisation
b)Mergers
     c) Rationalisation of Branches etc., we are of the considered opinion that it goes the opposite direction of Bank Nationalisation. 
Any reform measure should simultaneously address strengthening of the objectives of Bank Nationalisation also.

5)Regarding topics for group discussions we may furnish our views item- wise
1)Consolidation and restructuring of PSBs for better efficiency and capitalization needs
a)The efficiency measured in terms of productivity, profitability, return on assets, return on equity of the Public Sector Banks cannot be equated or compared with that of new generation Private Sector Banks as the clientele profile and activity profile are not comparable at all.
b)Competition is one of the major element of reform agenda. With that intention only granting licenses for new private sector Banks is being proceeded with. In such a back ground, reducing the number of public Sector Banks or rationalizing the branches is contrary. The kind of consolidation considered will create a favourable atmosphere for private sector denying banking services to common man.
c)It is not clear as to how capitalization needs can be met by consolidation and restructuring. The Public Sector Banks does not even need Government funding towards capitalization, if the government creates a congenial atmosphere for speedy recovery of large NPA accounts and thereby enabling release of locked up provisions. Presently, the capitalization by Government is in the form of subsidizing the write offs.
d)As per data presented in the Parliament, the loans written off by PSBs soared from Rs 20,752 crore in 2011-12 to Rs 32,992 crore in 2012-13 and further to Rs 42,447 crore in2013-14. Hence it can be found that during the last 3 financial years a whopping rupees 96191 crores was written off by PSBs.
e)Bringing down government stake to 52 % from the present level itself will fetch an additional Rs.175lakh crores capital. The balance capital requirement to conform to Basel III norms can be easily generated from internal accruals once speedy and effective recovery provisions are put in place.

2)Effective Risk Profiling and recovery mechanisms

Risk profiling
a)In the eagerness to achieve targets as per memorandum of Indent with the Government of India, top management of Banks appear to give risk perception a go-by while considering corporate credit proposals and high value deposits. MOI to be modified suitably giving thrust to sustained growth and strengthening of bottom line, instead of weightage only for top- line growth.
b)CDR mechanism should not be misutilised. For restructuring to be considered, it should be insisted that promoters increase their stake.
Recovery Mechanisms
Of the 2.50 lakhs crores of declared NPAs, about 65 to 70 per cent are big ticket/corporate house NPAs, for the recovery of which no effective mechanism is in place. Recovery through litigations may take 7 to 10 years as there are many loopholes in legal system which allows the defaulters to stall and bring the Bankers to their knees. The rest of the NPAs are from Priority Sector lending, agriculture sector, MSME, Education Loans etc., wherein the borrowers misinterpret the political messages as blanket sanctions for not repaying.
Our suggestions in this matter are
a)Willful default should be made a criminal offence. Law should be amended to this effect
b)Willful defaulters should not be considered for OTS
c)Fast track courts and summary trials should be instituted for recovery of Bank dues
d)Functioning of DRTs should be reviewed and every case should be disposed within a period of 6 months as originally envisaged when DRTs were established.
e)Discretion given to appellate authority of DRT to waive deposit should be revisited. It should be made mandatory that at least 50% of the decreed amount should be deposited for allowing an appeal.
f)There should be clear cut guidance for granting stay under SARFESI. Indiscriminate granting of stay on actions under SARFESI should be stopped.
g)All decisions of OTS / Write offs / Selling to Asset Reconstruction Companies involving accounts with balances of Rs.10 crore or above should be reviewed by an Independent body.
h)All the accounts where the write-off amount is more than 50 lakh, the decision should be subjected to ex-post facto review by an independent body.
i)The details of accounts (including value of securities available at the time of write off) where write offs have been sanctioned should be published on the website of the Bank for the knowledge of general public and the share holders.
j)Bank-wise details of accounts with balance of 1 crore and above where write off has been allowed should be published in the RBI website or a separate website created by RBI for this purpose.
k)The veil of Bankers’ secrecy should be lifted in this matter by amendment to the law.
l)Once an account is treated as NPA, the account should not be given the protection of Bankers’ secrecy clause.
m)No Bank should be permitted to take over accounts from the Banks where the CMD or ED held significant positions prior to their present assignment, or they where party to considering the facilities when they were part of that Bank from which the facility is being taken over
n)Forensic audit for all stressed assets with limit of 25 crores and above to be conducted for ascertaining diversion if any. If loan funds are diverted, promoters should be proceeded against under criminal laws.

3)HR related issues with focus on training and motivations of staff

For motivating the staff proper remuneration package is the first and foremost requirement. Presently Bank Staff are the most under paid category. In 1980s lecturers/and University teachers after putting in 5 or 6 years of service resigned and joined Banks as officers beause monetary benefits were better. Presently the same officers draw about 40% less than the people with same seniority in teaching profession. Similar is the picture if we compare the pay packages of Central Government, other PSUs and most state government staff also. The difference continues in pension benefits too. At the national capital, a newly joined Probationary officer draws less than 2000 rupees in comparison with the salary of Clerical Staff of Central Government. With this kind of disparity, attracting and retaining talented persons or motivating existing staff is near impossible.
Depriving reasonable remuneration citing lack of paying capacity is a thorough demoralization for bank staff, as net profit of banks cannot be improved by their efforts due to many factors . like rising NPAs, lack of proper mechanism for recovery, unremunerative social banking responsibilies etc., which are far beyond their control .
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The other service conditions including massive accountability, unlimited working hours, frequent pan India transferability, compulsory rural & semi-urban service, fear of disciplinary proceedings over stressed assets, etc., are also deterrents in attracting talents. Presently an officer in the age group of35-40 stagnates at Middle management level. Non-cadre promotion as available in central/state services has to be introduced for keeping the morale and motivation level high.
Training
The competency development can be effective in banking industry only through on the job training. On the job training can be imparted by only experienced seniors, and it takes over a period of say 3 to 5 years to train a newcomer. However all the experienced staff are leaving the industry either through retirement or resignations, thereby reducing the number of capable persons who can act as mentors. Efficacy of external training should be subjected to strict evaluation.
4)Financial inclusion, financial literacy and Direct Benefit transfer
All most all the achievements in the above areas are by the singular efforts of Public Sector Banks and its operational staff, though due recognition has not been conferred on them. This is evident from the fact that more than 90% of the 8 crores of PMJDY accounts opened are by PSBs and RRBs. We strongly support and offer our unstinted efforts and co-operation in successfully implementing these schemes which we perceive as matters of paramount national importance.
However the Government Machinery, bureaucracy and political apparatus can make much difference for the systematic implementation of these Schemes. But the kind of involvement that could make a huge difference is lacking and the sole responsibility has been placed on the shoulders of Banks and Bankers. This scenario should be changed immediately.
5)Priority sector lending and interest subvention schemes
Priority Sector Lending
a)The Priority Sector should be redefined
        b)Since contribution of agriculture to GDP had come down the stipulation of 18% credit flow to Agriculture should be reduced suitably.
       c)Classification of rural branches is based on the population of 1981 census. Based on increase in population there is urgent need to revise this on the basis of latest census.
d)Population alone should not be the criterion. If the economic activity of a Panchayat is
predominantly rural in nature, then that should be the criterion for classification even when the population is beyond the cut of limit prescribed.
e) Conscious efforts on the part of Governments to improve repayment culture
Interest Subvention
Debt waivers and interest subventions announced by the Governments (Central and State Government) are being met from the budgetary provisions.
Government has the duty to ensure that the budgetary allocation is expended for the purpose for which it is earmarked.
Banks should be instructed to provide only need based finance for agriculture and should adhere strictly to the prescribed scale of finance. In the name of achieving 18% norm branches are compelled and in the process non-farmers, private money lenders, loan sharks etc derive benefit of unwarranted subsidy. It is a burden on the Government and it simultaneously fuels wealth creation artificially for ineligible people.
Hence borrowers who avail finance eligible for subvention should ensure end use. If found otherwise, there should be penal provisions.
False declarations/certificates regarding income criteria or end use of loans etc should be treated as offences to deter the citizens from making such false claims. Provision for detectng such unhealthy practices should be embedded in the interest subvention schemes.
Concerned sponsoring agencies/Government departments should ensure setting up of units for which subsidy was extended.
6)Miscellaneous
The present practice of burdening the commercial banks with the cost of controlling inflation should immediately stop. Commercial Banks should be given adequate compensation.
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