Last Few Years I have consciously stayed away from PSU Banks,Oil & Steel & Power Companies
Now you’ll know why !
There has been serious wealth destruction for those who had invested in them
So it was always with some degree of amusement I observed many analysts and fund managers and stock market experts recommend these over the years and justify their call even when it was obvious these companies were bleeding profusely
This Post is about PSU Banks
Who is to Blame for this Wealth Destruction ?
I squarely lay the Collective Blame on the various Central & State Governments that ruled & rule,Ministry of Finance Bureaucrats & Finance Ministers,the Board of Directors of all these Banks led by the Chairman & MDs & even the RBI Boards led by the various Governors & their deputies in these last few years….they preach Corporate Governance but do not practice it….how else will vested interests be served
They have deliberately let this come to past throwing caution to the winds when Lending and then not providing adequately and in time for the NPAs many of which were not even identified as such ….and their delay in declaring many defaulters as wilful…Supreme Court has been seized of this danger and have directed RBI to provide to it within six weeks in a sealed cover the list of all defaulters over Rs 500 crs.One Bank Chairman in the analyst meet for Q 3 FY 16 results recently refused to identify the Big Defaulter for which the Provision was made !
If it was not for the aggressive stand taken by the present Governor,Mr Raghuram Rajan and the Asset Quality Review in the second half of 2015,the Banks would have continued under providing for NPAs & even not identifying them in their entirety…the role of statutory auditors too comes under scrutiny here
The result has been a damaging Q 3 FY 16 for the PSU Banks as they have been forced by RBI to provide properly based on the AQR conducted
It is in this context I am astonished at the recent lament by none other than Mr Deepak Parekh who says that if the Banks have to undergo one more quarter of provisioning for NPAs like Q 3 it would tantamount to an Anesthesia overdose & Banks would become comatose !…Come On Mr Parekh !
RBI has asked the Banks to clean up by March 2017
My worry is that NPA Levels may increase on better & proper identification & classification and there will be more pain for these Banks.This would mean higher Provisions for the next few quarters