Money & Banking

RBI looking into window-dressing by banks

N. S. Vageesh Mumbai | Updated on November 15, 2017


Year-end window-dressing is the norm in public sector banks. Figures pertaining to deposits and loans are inflated to show ‘growth'. This is done by the simple expedient of taking on more deposits and lending more for a very short period, around the balance-sheet date of March 31. After the books are closed both deposits and loans are returned and status quo returns.

Fiscal 2012 was no different. Although one thought it could have been.

A couple of weeks ago, the Finance Ministry had let it be known that annual deposit and loan growth would no longer be considered for performance appraisal of the top brass of public sector banks.

Banks and the Finance Ministry have a memorandum of understanding that lays down various parameters against which performance is benchmarked. If banks meet their targets, bank chairmen become entitled to a bonus. This has often led to a chase for ‘growth'.

Take a look at what happened this year. Credit growth had dropped to 15.4 per cent in February 2012 from 22 per cent at the beginning of the last fiscal. But in March this year, it picked up suddenly. Loans given by the banking system show a jump of Rs 3 lakh crore in that month.

The latest numbers show that credit has grown 19.3 per cent in the last fiscal — much above the indicative projections made by the RBI even a few months ago.

Asked about this, the RBI Governor, Dr D. Subbarao, said: “We do get information on credit growth and we do have a handle on the issue. It has come to our notice that there has been a sudden spurt in credit in February and, more importantly, in March. We don't yet have granular data.” He did not say what would happen after the RBI gets the numbers.


Published on April 18, 2012

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like