Page 29 - Banking Finance June 2019

ARTICLE

information or bulk of data is either unavailable or hidden Under PCA again restrictions on the expansion of branch
or overlooked. The principle gets its name from the fact that network along with caps on management compensation
only about 1/10th of an iceberg's mass is seen from surgace and directors' fees.
while about 9/10th of it is unseen, deep down in water."
Banks cannot come at the playground of credit
expansion.
That gives a fare idea If we need to melt the iceberg we
For the short fall of the capital adequacy ratio which is
need to work on the iceberg below, under the water line.
below the required standards for this shortfall. If the
That is need of hour that Indian banks need to track the
banks go for capital rising through the public issue in
even every minute reason of bad loans with meticulous care
such depressed condition, loss of reputation is difficult
and resolve them if they want to survive by hitting the
to be fully subscribed because of poor response from
iceberg below the waterline.
the market.
What is above the water line? The tip Consolidation/merger/amalgamation on the way of
meaning less job demand by bank and rationalization
of the iceberg.
of staff.
What is that 10 % which we can be seen above the water
Closure of branches/subsidiaries rationalisation of
line? The impact.
branches.
The impacts are various:
On the Employee
On the Banks
This puts an additional burden on the resources of the
Banks stopped creating any income that is why such
bank as well as on the workload on the employees.
assets are called non-performing assets.
Rather than involving in the increasing of business the
Portion of income on good advance washed out because strength of workforce is being wasted these activities.
of the provisioning to be made against the NPAs, thus
Morale of the employee reaches at the lower level
reducing the overall profits of the banks.
because of all certainties and uncertainties as any
Higher provisions: coming from the profit, again loss reduction in profits deprives the staff of expecting
and a big amount of money become a non-working incentives and hinders the way of career growth.
asset.
Undue/untimely transfers of staff disturbing their family
Suffer from low profit margins. life.
Twin Balance sheet syndrome: Both the bank and the Mental pressure leading to physiological and
corporate sector growth blocked for the investment-led psychological illnesses.
development process.
Employees are facing action for their decision making
Fail to maintain the required Capital to Risk-weighted by the CBI/CVC in many cases.
Assets Ratio (CRAR) which has come to an alarming
Dismissal/punishment/reputation loss in many cases.
point.
Facing the penalties from various regulators which are On the Customer
hitting hard again.
Higher interest rates by the banks to maintain the profit
Most of the workforce energy and attention get margin and filling the loss gap.
consumed on such cumbersome work rather than on
Loosing trust in banking system/government.
the development of the main business.
Not taking risk to invest in financial markets.
Banks are facing the situation like the Prompt Corrective
Higher rate services offered.
Action (PCA) by which back are restricted on distributing
dividends, remitting profits and even on accepting In result more strict rule for taking advance/loan creates
certain kinds of deposits. issues for common people.

BANKING FINANCE | JUNE | 2019 | 29