Ways to solve Indian Banking crisis : Build up skill sets for top management of banks

Ways to solve Indian Banking crisis : Build up skill sets for top management of banks

Sunday, March 11, 2018

As per a recent report by CARE , Indian banking system has achieved a dubious distinction of ranking fifth in terms of NPA ( as a percentage of total loans ) with only four countries ahead of Indian Banking system. The figures are given below :

Serial No
Country
NPA ( as a % of total loan )
1
Greece
36.4%
2
Italy
16.4%
3
Portugal
15.5%
4
Ireland
11.9%
5
India
9.9%

[ Source : Care rating ]

Way back in 2012 , I had the privilege of attending a speech of one Mumbai based PSU bank chairman who was also Executive Director  of Kolkata based PSU bank. He was delivering lectures in one management institute in Kolkata  and the management institute was promoted by a corporate house of Kolkata . In that speech , the then Chairman was criticising global rating agencies . He told that India need not learn from global rating agencies of risk management rather than they should learn from India.  It clearly demonstrates the reason for such mess in Indian banking system . The selection of wrong person to head banks and the arrogance of self denial have been contributed towards this mess of Indian banking system .

 If you look at members of  several decision making committees of banks , you can easily find the  quality of members in terms of banking knowledge. It is simply pathetic. Leave alone  the latest knowledge of banking , most of the committee members are either from non banking back ground or very shallow in banking knowledge .

All along I have  been telling to all my students of IIMC and other management institutes as well as to all my trainees of all banks and NBFIs that Indian banking system is not having proper risk management system at all. I used to completely contradict the opinion of banking pundits who credited the existence of strong risk management system of Indian banks for stability of banking system during Global Financial Crisis( GFC) of 2008. I used to give the following example to substantiate my views that Indian banking system did not face any problem during the GFC not due to strong risk management system but due to some other reason.

 My example :

“ If a person remains in house , the person would never die due to car accident. Indian banking system never ventured out and so question of banking crisis arising from complicated instrument does not arise.” But it does not mean that we have strong risk management system in place . If we have such risk management system , how come within short period of time , we have such high NPA ?

It is high time that we introspect that what went wrong . Unfortunately in the ground nothing has changed at all.

Nothing has changed even after PNB incidence :

 Let me share an experience :

It happened on   9th March ,2018 .  I visited one of the PSU Bank based out of Kolkata . HRD department of this bank wants to conduct a workshop for DGM and GMs. The first condition of the workshop is the duration of workshop should be of maximum two hours . This approach is astonishing . The DGM ( HRD) was mentioning that executives like GM and DGM would be extremely busy and they do not have time to spend more than 2 hours in training . It simply boils down to following things :

  • For these executives , training is waste of time . Accordingly for tick mark activities  only , they  would attend workshop only for two hours.
  • For these executives , no training is required as they know all things .  I came to know from a news paper article that Micro Soft head Satya Nadella completes at least one e learning course in every  week to keep himself  updated. May be our GM and DGM level executives of this specific bank  are more skilled than Satya Nadella .
  • These executives are so intelligent that within two hours they would be able to grasp every thing .

Wake up RBI and Government till  it is too late :

I have seen from very close quarters  about levels of  knowledge of top officials of banks and financial institutions of entire banking sector in India . Most of the senior level executives of banks and financial institutions completely lack the required skill-sets .  At the same time ,  neither regulators not boards of these banks and financial institutions are taking it seriously. It is high time that regulators and governments do not waste any further time . They must initiate a strong training and development programme for senior management of all banks and financial institutions of the country and address the skill-sets gap. Both regulator and government must accept the reality that banking is a knowledge driven industry and unless knowledge is developed at every level , it would be impossible to save Indian banking . I can vouch with high degree of certainty ( as I did in my previous blogs and most of my predictions came true ) that situation would get worse day by day unless you build up skill-sets at the senior level first and without any delay.