Well, well.

State Bank of India got a new Chairman and he wanted to start on a clean slate. Well the new broom cleans well…and it did. He decided to provide for the pensions as well as clean up the NPA requirement. This is a very bad reflection on O P Bhatt who had hidden all this under the carpet. Of course history will record him as the guy who gave good results.

I am now hearing murmurs about other banks also trying to do some clean up.

Not sure about other analysts, but my way of checking out how well a bank is doing is asking the fixers. Well for those who do not know, there are many fixers who can fix up loans for you from any bank that you want. I do not want to get into whether it is a PSU bank or a Private sector bank (that is a seperate post!). And clearly many banks are sitting on a lot of NPAs! Recently one company involved in the manufacturing of certain items got a huge loan sanctioned – at a price of 2% (negotiated down from 4%). It was a term loan and working capital loan limits.

At the current juncture there is so much pressure on profitability that banks are more than willing to lend, but they sure are having NPA issues. One bank in which I have been a shareholder for a long time is involved in such ‘ever greening’ of its portfolio. Another bank which I was looking at also has this problem. I just dropped it like a hot potato.

One bank in which i have been a shareholder for long does not allow this to happen. I may have other issues with this bank, but corruption is not!! So maybe sad as a customer, but happy as a shareholder. No complaints!

And I am not alone in saying this. Our finance minister has said something about NPAs too! read on…

http://www.thehindubusinessline.com/industry-and-economy/banking/article2038215.ece?homepage=true

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  1. happens all the time in financial services.
    the difference is in PSUs the new management gets to wash the linen in public for political reasons- in private sector it is done discreetly. what is chanda kochar upto?
    similarly in general insurance the reserve for motor third party claims are always tweaked depending on what results the chairman of the psu wants to show. recently the IRDA insisted on additional provisioning as it felt the reserves were inadequate.
    In one case is there a link to OP Bhatts staunch resistance to RBI directive to stop teaser loans? and who would be the biggest beneficiary if SBI wings are clipped?
    Same question for insurance companies.

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