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Finance Minister Confesses
A nice and praise worthy article
by Rajesh Goyal Executive Consultant,
collected from www.allbankingsolutions.com
On 16th February, 2012, a report hit the headlines "Finance Ministry Asks PS Banks Not to Overstate Profits". Reading this headline, I felt surprised and shocked. It sent contradictory feelings - why I felt surprised when I was aware of this all along. Why was it shocking when we have discussed this issue in detail in these columns on number of occasions? Before I explain as to why I felt surprised and shocking, let us see just one line extracts of the report, which will speak volumes about the state of affairs of our PS Banks, Finance Ministry and RBI :-
The letter to heads of PS banks said "instances of over reporting of profits have been continuing year after year and no corrective actions seem to have been taken to stop the recurrence". It further asks PS banks to provide adequate provisions for bad loans.
The inferences of the above statement are clearly as follows :-
(a) PS Banks have been overstating the profits year after year;
(b) Finance Ministry and RBI are well aware of the fact that PS Banks are overstating profit
We all know that in Banking parlance, when a Manager tries to inflate his deposits / advances by discounting some cheques or bring temporary business, he is liable to be charge sheeted for Window Dressing? Now question arises if EDs and CMDs decide to inflate the profits of the banks, is it merelyWindow Dressing or a Fraud There is no doubt that it is a fraud using the accounting methods and rolling out higher dividends to Government of India (Finance Minister keeps on demanding from PS Banks higher profits from time to time). It is a method of siphoning of money and weakening of the banks. What are the motives for over-stating the profits? Nobody will do something wrong without any motive ?
Now question arises that if Finance Ministry, RBI and other agencies of the GOI were aware of the fact that profits are being overstated, then :-
(i) What action has been taken by them in recent years to stop this fraud with the public and shareholders?
(ii) Who are the people who were responsible for overstating of profits year after year? How many of them have ever been punished for this kind of fraud? We can find many instances of Managers being charge sheeted for Window Dressing, but is there a single instance where any CMD or ED has been censored for doing this?
(iii) Why Mr K C Chakrabarty, Deputy Governor of RBI in the last week issued a statement that there is nothing to worry about NPA figures? He even claimed that stress test in the Financial Stability Report has been done and we don't have anything to worry about this. The advisory of Finance Ministry runs totally counter to DG's statement. Does Governor concurs with the statement of Mr Chakrabarty or he concurs with the advisory of Finance Ministry. Mr Chakrabarty had been CMD of two largest nationalized banks before he was appointed as DG at RBI. Therefore, he is one among the few who knows all the intricacies as to how the Balance Sheets of the banks are inflated. By stating that there is nothing to worry - to whom he is trying to befool ? It appears that he was trying to befool common man as Finance Ministry is well aware these facts. The statement runs counter to his love for Financial Inclusion which is meant for common man.
If you are not bored to read, you may read more by clicking on following link"--
http://dkjain497091112006.blogspot.in/2012/02/finance-minister-confesses.html
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