Corporate loan recovery, business hit
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Even as the buzz about the rising bad loans of public sector banks gets louder, about one-fourth of these banks remain head-less.
Of the 20 public sector banks (PSBs) excluding the SBI group, six are functioning without a Chairman and Managing Director. They are Bank of Baroda, Canara Bank, Indian Overseas Bank, Oriental Bank of Commerce, Syndicate Bank and United Bank of India.
Further, many Executive Director positions, second in the bank management hierarchy, are also vacant in several banks.
One of the key reasons for the delay in filling up the top slot is the delay caused by the long-drawn general elections before formation of the new government, according to sources in the Ministry of Finance. The Government has a say in the appointment of the chiefs of PSBs.
A panel led by the RBI Governor Raghuram Rajan interviewed 19 Executive Directors of public sector banks in October last year for six CMD positions that would fall vacant between August 2014 and March 2015.
However, the appointment of the new chiefs is likely to be delayed further as the Centre is yet to receive vigilance clearance on the names shortlisted for the posts. CVC clearance takes a couple of months and new appointees will take a month to settle down in their jobs.
Business hit
An Executive Director at a leading public sector bank said the banking industry “cannot afford any delay in appointment of top guns in the context of increasing non-performing assets (NPAs), especially from the corporate sector”.
“I understand that many recovery decisions, including attachment and auctioning of properties of corporates under the Sarfaesi Act, are pending due to political pressure. Nobody wants to take any risk and all are waiting for the Number One to take a call,” he said.
The Bank Employees Federation of India (BEFI) had recently released a list of 1,129 ‘wilful’ corporate defaulters whose loan dues aggregate to about ₹54,000 crore. Companies in the list had defaulted on loans of over ₹10 crore. During the year ended 2013-14, provisioning for non-performing assets accounted for ₹63,591 crore, of a total operating profit of ₹1,27,965 crore.
According to BEFI, most of these defaulting companies were being run by politicians, while bureaucrats and other influential persons were blocking the recovery.
CBI fear
The reported talk of CBI keeping a watch on the movements of CMDs of PSU banks is also having an impact on the decision making process at the top level, feel top bankers.
It may be recalled that SK Jain, the CMD of Syndicate Bank, was arrested by the CBI on graft charges a couple of months ago.
Another quarter of slow decision making at the top will have an adverse effect on the performance of the banks.
This, in turn, can impact the growth of the banking industry in particular and economic growth in general, say industry watchers.