Psu Bankers Gather Guts, Blame Centre For Hiccups

The public sector banking industry is showing the first sign of courage and boldness to blame the owner (read government) for the current mess in the financial sector. An overwhelming majority of the bankers (70 per cent), contacted by the Business Standard on Saturday, identified government interference as one of the causes that ail the financial sector. While the rest -- 30 per cent of the respondents of the BS snap poll -- squarely blamed the government alone for the crisis.

BS spoke to 10 senior bank executives, nine chairmen and one general manger, on Saturday at the annual general meeting of the Indian Banks' Association (IBA). Eight of the respondents -- who spoke under condition of anonymity -- belong to the public sector and one each from private sector and foreign banks. The respondents comprised both 'weak' as well as 'strong' banks.

 

In view of the present financial sector crisis -- encompassing the Unit Trust of India, IDBI, IFCI and a string of weak banks -- the respondents were asked two questions: Who do they blame for the crisis and what is the best way to get out of the mess.

Seven of the ten respondents identified an array of reasons for the present mess: government interference, imprudent lending (by themselves), a weak legal system, slowdown in economy and a legacy of the past. Thirty per cent of the respondents blamed the government alone for the present state of affairs. "The finance ministry must follow a hands-off policy. As the owner, the government should bother about the dividend payout. It should leave the macro management to the regulator (Reserve Bank of India) and day-to-day running to the bank management," said one respondent.

Along with government interference and a weak legal system, 20 per cent of the respondents singled out economic slowdown as the reason for the crisis. "Once the economy looks up, corporates will be in a position to pay up. The quality of assets will improve and the crisis will be defused overnight," said another banker.

Another 30 per cent showed the honesty to take the blame themselves. Three of the ten respondents identified imprudent lendings as a cause for the mess. "We did not have the asset-liability management tools in place. There was no sectoral cap for lendings. No wonder we found ourselves in this mess," they said.

On the question of how to tide over the crisis, the responses were varied. 20 per cent of the respondents said the government must tackle the situation with a iron hand. Even though it amounts to government interference, they said the current exercise undertaken by the finance ministry (review of weak banks' performance) is welcome. "If one is unable to run a bank, he should be fired," said one banker.

A section of them (30 per cent) said the government should not interfere in the running of the banks but must resort to pump-priming the economy which will help banks lend more and bounce back to health. They also want a stronger legal system for faster recovery of bad loans. At least one banker called for a financial sector emergency. "What we want is a dictator: A person who will give direction to the financial sector with the authority of a military general. And the government must keep its hands off from the sector," said another banker.