What do we bank on?

This with reference to the article, ‘Banks get away cooking the books’ by R Viswanathan (November 27). Of late, the core values in banking have deteriorated. After the arrest of SK Jain, former chairman of Syndicate Bank, we have come to know more about what is happening in the banking sector. It is primarily due to the system of appointments. Besides, the concept of accountability is not strictly followed by the appropriate authorities. In order to plug the gaps in the system, the government recently scrapped the shortlist of eight CMDs and a fresh selection model was framed.

Ravindranath Shetty

Mangaluru

Readers are aware that books of account are audited by a group of auditors appointed according to RBI guidelines. Their findings are given in a transparent and unambiguous manner. They are aware that the balance sheet is being studied by all stakeholders. Banks declaring loss is not new. In a business, loss is as much a reality as profit. Many banks have tunred around after declaring losses. The bank mentioned in the article declared a loss of more than ₹1,000 crore two decades ago. After a few years, the same bank was judged the best by a survey in a leading financial magazine. It has consistently declared decent dividends to shareholders, year after year.

No bank wants to see any account becoming an NPA. Loans become non-performing due to a variety of reasons, for instance, loans being given to the poor and the downtrodden.Banks are mandated to give loans to these sectors. A sizeable number of these become NPAs because poverty alleviation is a slow and painful process. A significant number of agricultural loans become NPAs because agriculture is monsoon-centric. Many loans given to SMEs are also prone to turning bad. For example, the entrepreneurs may not get their payments from big corporate on time or they may suffer from financial illiteracy. Recession impacts these units too.

It’s the same with large corporates. Take the case of the huge loans given to a leading airline. A couple of years ago, the bank declared the account non-performing. The exposure was more than ₹5,000 crore. Did all the banks err in credit judgement? Did they not perform due diligence? Of course, errors of credit judgement and deficiencies in monitoring can also drive some accounts to become NPAs. Provisioning is an accounting entry. Banks have to carve out a lion’s share from their operating profit every year and keep this portion in a separate account, called provisioning account. This accumulated amount is actually ‘profit’ earned by banks in their operations year after year, which they are not able to enjoy. As and when NPAs recovered, they can proportionately reverse the money available in the provision account and take it as profit. We should take a balanced view on this issue.

S Nirmala

Chennai

I agree that banks get away with cooking the books to ‘protect’ someone. The RBI must ask questions of the board to get to the truth. When any other publicly listed company can be taken to task for fudging figures, these banks should not be allowed to take stakeholders and shareholders for a ride.

Bal Govind

Noida, Uttar Pradesh

Wrong signals

A thaw in India-Pakistan ties remained highly unlikely with the leaders of both countries choosing to ignore each other on day one of the Saarc summit. Modi and Sharif sent out the wrong signals by being cold to each other. This does not bode well. Pakistan also threw a spanner in India’s works by blocking three key agreements, including one for a regional power grid, which the Saarc nations need to improve connectivity and trade cooperation in the region.

NJ Ravi Chander

Bengaluru

Erratum

In the report titled ‘Tata Steel, RIL, SAIL shortlisted for corporate governance award’ (November 18), it was mistakenly stated that the awards were instituted by the ICAI instead of the Institute of Company Secretaries India (ICSI) . Also, Sutanu Sinha is the Officiating Secretary & Chief Executive of ICSI and not as stated. The errors are regretted.

An eye-opener

The article by R Viswanathan, ‘Banks get away cooking the books’ (November 27) should serve as an eye-opener for the introduction of a suitable transparent process. The government should also introduce representation for SC/ST and physically challenged persons in line with the recent recommendations for representation of women on the boards of companies.

Vijayasenan P

Chennai

Depositor woes

I am a retired bank employee, now 82. From my hard-earned income, ₹ 20 lakh was deposited with the State Bank of India for a meagre monthly interest. I had to foreclose my deposit last week. The bank recovered all the interest paid to me during the currency of the deposit period. Meanwhile , the bank has cut the deposit rate. As a result, I lost nearly ₹35,000.Already their interest earning is much higher than other banks. In the present inflationary conditions our savings could not cover the rate of interest. The RBI may look into making interest earnings offset the price incurred due to inflation. It hurts senior citizens very badly.

VS Sankaran

Madurai

Nurture talent

This refers to the report, ‘Managing talent is Indian CEOs’ top priority’ by Sangeetha Chengappa (November 27). Since business strategy or use of technology needs human resources for their effective execution, the acquisition, retention and development of talented employees has become crucial for business success. Of these, talent retention is most vital and demanding. When capable employees are provided more training and challenging job assignments, their value goes up not only for the organisation, but also for head hunters so that they become vulnerable to offers from competitors. Their job responsibility needs to be carved out and reviewed carefully in a dynamic manner to continue to get the best out of them. The reward package has to be an innovative blend of financial and non-financial incentives. Too much pampering spoils them as much as keeping them on a tight leash. The task is onerous for their bosses as well as HR professionals, but the returns from retaining them are also attractive.

YG Chouksey

Pune

Basically ambiguous

The Supreme Court’s decision to ask N Srinivasan to furnish details of share-holding patterns of India Cements and Chennai Super Kings to establish whether there was any conflict of interest, raises questions over the selection of individuals for the post of BCCI president, which is a honorary position with no remuneration and calls for individuals with a business pedigree. Moreover, India Cements promoted teams in Chennai even when Srinivasan was state president. The issue of conflict of interest never arose at that time. So there is enough ambiguity in the Supreme Court asking for details to be furnished merely on the grounds of his allegiance to the company.

Vikram Sundaramurthy

Chennai

Golden driver

This refers to the report, ‘IIM-A, WGC set up gold think-tank’ (November 27). If it takes off, the gold think-tank now being established will definitely emerge as a major growth engine of the Indian economy. The exploitation of the potential of India’s surface gold stock in fuelling the country’s economic growth is an idea that has been hovering around the corridors of political power and monetary authority for some time. This initiative will give the necessary research support and professional backing to the efforts of the RBI to make an inventory of India’s domestic gold stock, standardising and making tradable at least a portion of that stock, and creating trust in the minds of the people about gold-backed financial instruments.

Media has already reported the measures being taken by the RBI to ‘standardise’ gold stock maintained with the central bank through swap operations. The successful completion of these measures will build confidence and make things easy for the gold think-tank to move forward in the right direction.

MG Warrier

Mumbai

Same old song

No one should have even an iota of doubt that as far as taking care of foreign investor sentiments in the name of GDP, development and employment generation are concerned, the policies and programmes of both the Congress and the BJP are the same and the reported advice given by the attorney-general to the Centre not to pursue the Vodafone tax demand only reaffirms the same. The conciliation approach in high stake taxation matters involving MNCs is a new trend. It only signals the fast changing dynamics of Indian politics and marked shift from the socialism and mixed economy to pure crony capitalism.

At the fag end of its second term, UPA-II was determined to bring a Presidential promulgation in a whopping I-T case involving Vodafone arising out of cross border merger and acquisition, which ultimately did not materialise. However, the implementation of GAAR was delayed until next year and the stalemate continues. Also in the past, the response from the mainstream opposition parties in this matter will in all probability lukewarm, both within Parliament and outside.

Ettirankandath Krishnadas

Palakkad, Kerala

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