“Damned if you do, damned if you don’t” is how a retired banker put the current situation of public sector bank chiefs, referring to their dilemma on whether to opt for a ‘haircut’ in debt recovery or resist such decisions.
By opting for a haircut, bankers run the risk of being hauled up by the CVC and the CBI at a later date. But, if they play safe and refrain from haircuts they run the risk of being transferred for their inability to move quickly towards NPA resolution.
Last week, Punjab National Bank chief Usha Ananthasubramanian was shifted to the smaller Allahabad Bank. Likewise, Bank of India’s Melwyn Rego was shifted to Syndicate Bank. The reason cited for their abrupt transfers was unsatisfactory progress in the resolution of NPAs.
If government insiders are to be believed, these two banks had put a spanner in the works of the Joint Lenders’ Forum (JLF), thwarting quick resolution of stressed corporate debt. The JLF is the preferred mechanism for credit decisions above ₹100 crore.
Bypassing BBB What perplexed many was the absence of transparency on the Central government’s part, as the Boards of both these banks and even the Banks Board Bureau (BBB) were not part of this decision. There is even speculation that HN Sinor, a member of the BBB, quit because of this.
There is still no official confirmation about Sinor’s exit. Speaking to BusinessLine , BBB Chairman Vinod Rai said: “Yes, all kinds of rumours are floating around. I have not been contacted as yet. He is travelling abroad right now.”
Government officials maintain that Ananthasubramanian is an upright and honest officer, but issues have been cited in her decision-making approach.
PNB insiders, however, feel that Ananthasubramanian’s independent thinking may have proved to be her undoing. This included the bold decision of being the first bank to declare Vijay Mallya a “wilful defaulter”, early in 2016.
Last fiscal, PNB recovered as much as ₹20,000 crore from NPA accounts, which is a no mean feat, said a bank official. But, this definitely was not enough to please the government, if the recent transfers are anything to go by, say banking industry observers.
CH Venkatachalam, General Secretary, All India Bank Employees Association , said that shifting of bank MDs without transparency will send wrong signals. All this is playing out at a time when stressed assets in the Indian banking system have reached unacceptably high levels — at last count, they had exceeded the ₹8-lakh crore mark.
Easing JLF norms With one or two banks repeatedly succeeding in vetoing JLF decisions, the government and the RBI were compelled to find a solution to make the debt resolution process effective, say government officials.
So much so, that the government had to issue an ordinance to enable the Reserve Bank of India to tweak the JLF norms, among other things. From a level of 75 per cent of lenders earlier, a debt-resolution package under the JLF can now go through if 60 per cent of the lenders approve it.