Indian Bankers: Authority without responsibility?

 

image source:rbi.org.in 

By Madan Diwan

NDA I under Atalji granted autonomy to the Boards of Bank. NDA II under Modiji assured zero interference from political establishment in every aspect. In doing so, Modiji put entire onus on the so called elite professional bankers. Little did he know that, the top brass that he had at disposal had very little real field experience. Specific provisions made by NDA I to accommodate and develop specilised caders like Credit, Forex, Agriculture, Law, Risk Functions etc; had not been completely implemented in the field. Proximity of a group of individuals with few UPA politicians and some powerful officers had ensured that talent and pragmatism was a casualty. A club of such blessed Whole Time Directors (WTDs), which is responsible for elite capitalism and loss of national wealth is suddenly feeling betrayed. When they claimed bonus on performance parameter they were happy; but these persons donot want to share national loss. They are unprepared for hardships arising out of their own decisions.

Bad loans actually were a reality post financial Crisis of 2008. So called relaxations granted were actually misused by PSBs and back ballooned solutions were offered. Incumbent WTDs sanctioned loans on such terms and conditions that the trouble for account will be deferred to the next chief. One instance I know where a very large corporate was granted moratorium for non funded interest and installment for 36 months. Inevitable has happened. The account turned NPA in someone else’s regime and culprits are at large who sanctioned and facilitated the loot. Would a small trader ever get such term?

Who should be held responsible for loss caused after accounts turn NPA? What is policy frame worked out by the Boards of Banks or CVC to examine accountability in such cases? Can a small Chief Manager be held guilty for recommending such loans and let go all these elite club members? This is exactly what is happening. For loan of size of over Rs 100 Crores some CMs, DGMs are held accountable. For a little larger size may be a GM is sacrificial lamb. A WTD is certainly not. Staff Accountability Policies of approved by the Board favour the powerful. A committee consisting couple of junior officers hold senior officers accountable. Many times other committee members who participate in this exercise are also part of approval, sanction, disbursal and monitoring of these Loans. Competent Authority or Disciplinary Authority mostly the same person who is sanctioning, recommending and monitoring authority gives punishment. This is a classic case of suspects sitting in Judgement.

PNB Nirav Modi case is classic example of irresponsible WTDs. Who posted Loknath Shetty to the Branch? Who retained him further when his transfer was overdue and allowed him to retire from the Branch? Reporting mechanism for Board of Directors used to have a format where names and designation of officers overstaying in post were presented annually. It was considered as intrusion in operations by WTDs, and today we can see the result in PNB for discontinuing that practice. It is not clear how many more officers were overstating in posts of their choice. A wild guess in PNB puts the figure at 5000. Another aspect is quarterly review of branches. As WTDs you visit large branches and big customers. WTDs regularly review in one to one meeting with Branch Managers. Expenditure, Deposits, Advances and Income is what all you review. It is actually funny to defend anyone, since every WTD has reviewed large branches at-least 4 times year. If they could not notice noninterest income disproportionate to advances of a branch, the question is what is discussed in reviews. Role of internal auditors, external auditors, statutory auditors and RBI inspectors needs to be critically examined. Can all these persons make same mistake year after year, without blessings of the top.

Yet another aspect is reconciliation with SWIFT and other payment modes. All these elite club members site lack of reconciliation mechanism. Who had stopped them from creating worlds best practices in respective Banks? May be world would have been greatfull to some of them for setting international benchmarks. In another PSBs 28 farmers were sent to jail by CEO and MD in a UPI related case, and he is unwilling to accept responsibility of lack of reconciliation mechanism. Fact is that none of these WTDs have very great operational experience. Experienced officers are kept out of loop while drafting tenders for IT services. Tender terms for services ensure attention is given particularly to pass advantage to a vendor. DFS & CVC have taken steps in the past and a few senior officers suffered wrath of disgruntled lobby. Whose responsibility is it anyway? How come Prime Minister or Finance Minister is responsible for such acts of omission? What reply will an IT firm send you on such truncated arrangements?

Constitutional watch dogs are always spared of this wrath. I wrote a 100 page communication about a specific PSB to the worlds’ most celebrated Indian RBI Governor and I have not received any response for last 2 years from RBI. When the regulator has failed the nation what more can we expect. CVC is no different. I have been pursuing with CVC several cases and not a single reply has been received. CVC has created a policy document by which they will never reply to a complaint in details and will only put on website that the complaint is closed. CVOs of PSBs provide inputs in such cases, as are doctored by WTDs and vested interests. Frustration will fly high when you are not replied to and one day you consider that as a best practice in vigilance function. One member of CVC whose role in sanction of few fraud account has not even been examined by DFS, who setting standards of vigilance mechanism in the country. By certainly not creating a policy mechanism for examination of accountability of WTDS (whole time directors), he has made elite club happy. When you prick a little, they will say we are only advising authority and cannot take actions against any guilty on our own. CVO, is present in all Board meetings is expected to ensure preventive vigilance. Loss caused to exchequer is a grim reality.

A scathing article defending one Public Sector Bank top manager did not surprise me at all. What surprised me was the hollowness of content. My fight against accountability of all top brass; be it bureaucrats, technocrat or bankers in public money invested banks and PSUs, has seen different pulls and carpentering by groups with vested interest. However while, defending PSB chiefs, it has been no holds bar battle with powerful lobbies. The first time I discussed draft of policy for accountability of Whole Time Directors (WTDs) of Public Sector Banks (PSBs), with DFS; I read someone saying that PSB heads are doing public service by taking up job at PSBs. Fact is they do not want to accept the accountability that comes with it. Article criticising Modi Government has failed to consider that public money management cannot come without accountability and responsibility.

Sarcasm about inaction on Private Bank chiefs in unfounded. Independent directors after all depend on WTDs to get elected to the post. In Indian Banking history it has been only once that an independent director won election in a Bank despite strong opposition from politicians and WTDs. Efforts to create place for minority shareholder directors has been vehemently opposed by all WTDs. Government nominees and RBI nominees stay away since most of them have little concern about operations. RBI has a mechanism of regular reporting for its nominees. Enquiries have failed to get copies of such reports from regulator. Had even one institutional director followed his instincts, Indian banking would have been in different shape. Real fact is that nobody has any concern for public money.

Policy Document for examining accountability has been submitted to Government. Prime Minister Modiji should ensure that policy is brought in urgently to examine accountability of WTDs of all public sector undertakings or at least Banks in India. Few people are causing damage to wealth of the nation as if it is their Birth Right. This needs to be stopped forthwith, with stringent policy prescription.