Page 31 - Banking Finance October 017

ARTICLE

if government came with new developments in the by the BCBS (Basel Committee on Banking supervision). No
economy and asked to execute at eleventh hour bankers think tank ever dared to question RBI's stand on Basel
have never questioned or opposed or made cost benefit guidelines and its benefit to Indian banking Industry. If we
analysis no matter same were killing experience for them. analyse Basel III guidelines in Indian banking scenario various
issues boggle the mind like-
Demonetisation is a live example to justify what I am trying
to confirm. No matter it was a historic decision with candid All Scheduled commercial banks are maintaining CRR (Cash
objective to squeeze black money and eradicate corruption Reserve Ratio) of 4% with RBI. Here yield is negative because
from the country but the way all big bosses of the banking RBI pays no interest but banks have to pay interest to
industry came up and left no stone unturned to catch eye customers on deposits. Is there any logic behind the same
balls of media is pathetic whether its Finance Minister's and what stops RBI to pay interest to this parked amount?
assurance that banks have sufficient cash available to
disburse in public or frequently modified RBI guidelines, After adoption of Basel guidelines all banks operating in India
every day bankers were sailing through great ordeal even has to maintain LCR (Liquidity Coverage Ratio) which is
their image was also tarnished by media for not providing nothing but ensuring banks Cash flow favorable over 30 days
timely cash to customers through various delivery channels horizon. Moot question is when all banks are maintaining
instead supplying cash to corporates through back door. CRR of 4% on ongoing basis it there any requirement for
the same.
The culprits were handful and suspended or taken stern
action by the respective Banks' management but those Basel compliant banks has to maintain CRAR (Capital to Risk
bankers who really deserved laurels and incentives were Weighted Asset Ratio) of 8% on ongoing basis but in India
ignored by the system and could remain only pawn that RBI has asked all scheduled Commercial banks to maintain
were only used for the fulfillment of task like earlier events CRAR of 9%. Is there need to explain that capital has a cost
as PMJDY, PMSBY launched by the Government. so why RBI is so over enthusiastic and seeking to over comply
Basel guidelines even when PSU banks are in dearth of
Public sector Banks are sailing through tough waters and capital.
on the verge of losing their decades old identity due to
dearth of capital and huge burden of NPA (Non Performing If cost benefit analysis is made by all banks who are
Assets) mainly corporate advances or projects financed on complying Basel not only in India but even in overseas
government's urge and guidance to specific sectors like market too, its only IT and Software companies not banks,
Power sector, steel sector, telecom sectors to fulfill social are minting money and charging hefty amount of complying
objectives. ever changing latest Basel guidelines. In India we too can
easily find various small and mid size banks despite their poor
Guidelines and circulars are frequently covering the space financials have parked huge amount for software purchase
and catching media eye balls but willingness to resolve same for complying Basel and other compliance since last
is still questionable which is quite evident from the decades. They are nothing but eating hard earned profit
government's decision to ask all banks to make haircut of made by these banks.
50% in all stressed accounts which banks want to file under
IBB (Insolvency and Bankruptcy Board) under the insolvency Strike by banks' union has always been questionable and not
and Bankruptcy code 2016. Its same like a person dying due appreciated by the society whether its corporate or common
to anemia is asked to donate blood in order to register person due to problems encountered by them in case banks
himself for treatment. are closed, but none never bothered to understand that if
bankers don't strike and entertain their loss of pay, they will
As per recommendation of regulator all banks are complying never get their salary revision. More interestingly, when
Indian version of Basel III guidelines inch by inch which is bipartite settlement due, bankers are denied to better pay
even more stricter than original Basel III guidelines drafted why, because banks financials are not good in comparison

30 | 2017 | OCTOBER | BANKING FINANCE

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