DWINDLING TRUST IN BANKS- 20 Steps/ Remedial measures Suggested

The deteriorating health of banks during the past couple of years has shaken the public confidence in the banking systems. The ever-increasing NPAs which at present are estimated to have touched a whopping figure of about Nine lakhs crores sends shivers down the spine of the stakeholders. Every year a fresh and heavy dose is added to the portfolio of bad loans and the trend doesn’t seem to have an end. This volcanic effect if not arrested, will wipe out the important agent of economy i.e. banking from the scene.

Another monster endangering the industry is the increasing incidences of big frauds in the banking sector in the recent years. It appears as if the bankers have surrendered before the fraudsters and the defaulters. The causes have already been discussed in earlier blogs Defects in bank audits and inspections and Bank’s NPAs. The faith and trust of the public in the banking sector is shaken badly. BANK IS THE OTHER NAME OF TRUST. PEOPLE KEEP MONEY WITH BANKS ON THE TRUST THAT THEY WILL GET GOOD RETURNS AND THEIR FUNDS WOULD REMAIN SAFE. However, with all said and done, the following 20 measures are suggested to regain public confidence in the banking sector:-

  1. Remove uncertainty in the banking operations once for all. Clean up the balance sheet and don’t keep any NPAs under the lid. Any evergreening or hiding of NPAs may be a short time solution but its effects are dangerous. BRING COMPLETE TRANSPARENCY IN THE OPERATIONS.
  2. Once done, you can start afresh and can put the progress on track and by moving slowly and cautiously you can regain the lost speed by putting in more vigor, experience, honesty, and hard work.
  3. With speed, you need to avoid accidents by choosing the right tracks and extra vigilance. Make internal inspection and controls more effective and purposeful rather than a mere formality. The concurrent audit is a very effective tool for inspections as it nips the evil in the bud. Make it more effective by allocating the job to experienced and hard working people. More stress should be on spot rectification rather than just pointing out and reporting. Any mistake or an irregularity if allowed to stay for some time takes roots and destroys the system, so spot rectification is need of the hour to stop the spread of the weed.
  4. At present, there seem to be too many inspections by different departments and controlling heads and some of which are an overlapping on one and the other. Too much of everything is bad including the number of inspections. The number doesn’t matter, it is the quality which counts. It is generally seen that inexperienced people and not so good performers are placed in the audit and inspection wings in the bank. This attitude needs to be totally changed, and efficient, knowledgeable and hardworking people should be allocated this job. Unless a serious thought is given to this issue and the inspection/audit deptt. is not strengthened, the chances of intrusions into the systems would continue, thereby adversely affecting the health of the banks.
  5. Specially trained staff should handle credit appraisals, sanctions, and disbursement of loans. Follow up of credit disbursed should be done on time and in a very effective manner. Inexperienced and untrained staff is prone to make mistakes, mishandle, and ultimately land the bank in trouble. Don’t jump into the fields about which you have no experience. Many banks went into trouble especially in the consortium financing because of their lack of adequate experience and blindly following the leader of the consortium.
  6. Controlling offices to be more vibrant and vigilant. Every tier through which the credit proposal moves including the board of directors, must add value to the proposal and share responsibility. No one can shirk responsibility on the pretext of being nontechnical in the respective field. This is a very dangerous attitude. People at the helm should be more serious, accountable and responsible.
  7. Banks should have experts as directors on the boards of the bank who could provide better guidance and direction based on their rich expertise and experience in their respective fields. Persons with political leanings/connections should as far as possible be not appointed as directors on the boards of the banks.
  8. A periodic rotation/shifting of people in the credit wing be done regularly as well as proper training and refresher courses be conducted for the persons handling credit in order to keep them abreast with day to day changes in the credit market, its procedures, and emerging risks.
  9. No proposal should be handled in a hurry. It may be processed expeditiously but not in a hurry. The prospective borrower is always in hurry, make him appreciate that even hurry takes some time. There have been instances when the highest body of the bank i.e. board of directors have complained that sufficient time was not provided for evaluating the agenda of the board meeting and some proposals were introduced as a supplementary agenda item on the day of the board meeting. How can one expect any value addition by any expert to such an item on the agenda?
  10. With the digital and online banking have taken roots, the interface interaction with the customers seem to have taken the back seat. Although the banks have effective complaint redressal systems yet face to face interaction is very important. Banks must conduct periodic customer meets at all levels and listen to the point of view and suggestions of customers and redress their grievances if any. The customer is the working capital of the bank. His suggestions must be evaluated and acted upon on merits of each case.
  11. Interaction with the staff by the executives at different levels helps in knowing their expectations from the bank as well as sharing the expectations of the management with the staff. This needs to be done periodically wherein individual staff targets can be set and evaluated. The concerns and policies of the bank must be shared with the staff as a family and they should be involved in the overall development of the institution and encouraged to meet individual targets. This can help banks to build good teams and induce a sense of responsibility, understanding, and a deep sense of belonging to the institution.
  12. The policy decisions of the board as well as of the regulators must be strictly followed in letter and spirit.
  13. Banks must learn from the past experience and avoid entering into waters whose depth and force of the flow is not known.
  14. Avoid wasteful and avoidable expenditure as you are under the constant public glare. This creates a lot of negative publicity for the institution.
  15. The seniors at all levels have to be a role model for others in the field of dedication, devotion, hard work, honesty, transparency, simplicity, no favoritism, and expenditure control.
  16. Banks should not spare the rod where ever required without any prejudice or bias. They should also be not miser in encouraging and promoting people to achieve the given targets.
  17. Banks must have a workable and sound whistleblower policy. People at the top need to be sensitive to even minor and feeble signals of misdeeds by anyone in the institution. They should read between the lines and make independent investigations where ever required.
  18. Banks should create and strengthen other layers of income from para-banking activities and also try to increase income from fee-based and non-fund based business.
  19. Banks, till date, had been enjoying the luxury of managing comfortable NIM (Net interest margin) which is a ratio of the difference in interest earned on assets and interest paid on deposits to the assets. Since there are a number of well-organized trade and industry association both at the local and national level who manage to get the interest on trade and industrial loans reduced, but unfortunately there is hardly any organized body representing the depositors who can watch their interests. The result is that depositors have no option than to accept whatever is offered to them. The consumers of the credit manage a good deal, banks manage a comfortable NIM, and all this adversely affects the returns for the depositors. This situation is fast changing with more awareness especially through the internet and the depositors are searching for the better green pastures in the shape of mutual funds and other instruments with better security and returns. The shift of capital to cryptocurrencies is a matter of concern for the banks. In such circumstances, the banks may find it a bit hard to mobilize funds except after sacrificing a good part of their NIM.
  20. In view of above banks need to make long-term strategies for managing funds and lay more stress on non-fund based and fee-based income. A more scientific asset liability management and better risk management strategy will go along way in increasing incomes of the banks. The funds locked in bad debts need a special focus of the top management. The recently passed insolvency and bankruptcy act is a boon for the secured creditors though with a cost yet very useful for recovery and cleaning the balance sheets of the banks. The suggestions put forth are not exclusive and the banks can take any other measure to improve its working and image in the overall interests of all the stakeholders and also in order to regain the lost ground.

PLEASURES OF RETIRED LIFE

The golden period of your life starts when you retire from the active service or from active business/profession. This is the period when you can enjoy the Life as per your own choice and with full freedom without any worries, provided:-

  • You have Settled all your liabilities during the active period of your life.
  • Your children have settled professionally and personally.
  • You have a place to live which you can call your own Home; with your family who cares for you.
  • You have suitable pension or an accumulated pension fund to meet your needs.
  • And above all, You and Your spouse have maintained Good Health and a good understanding of each other.

If you look back to your pre-retirement days; You were so tight scheduled and having no time for your life partner, no time for family trips or even pilgrimage. You were always requesting leaves so that you could share time with your loved ones but the boss always frowned upon you with most typical lines,”You have so much of  pending work, how can you even think of going on leave???” and You listened to all this with a bowed head out of sheer compulsion. Your blood pressure rose during supervisor’s visits and his reprimands. The multitasking activities both in office and at home kept you under constant stress. Even when you tried to calm your mind through meditation and tried your best to concentrate, you couldn’t because the angry face of your boss always occupied the upper layers of your mind. You were more loyal to the ticking sound of your clock or the office or factory siren than anything else in this universe.

Now the Life is completely different after retirement, you are free from all those shackles, pulls and pressures? Don’t you now feel yourself nearer to GOD than ever before? Now you have enough time for everything of your choice. Now you are the boss of your own wishes and wills. You are now a free bird, so enjoy your flight of life like a bird. Keep on chirping, land at places you like, eat what you like to eat, and dance with your partner the way you both like.

Now, this is the time for you to enjoy the fruits and charms of freedom. Is not this amazing that the entire twenty-four hours of the day and all three hundred sixty-five and a quarter days of the year are your’s and your’s only? Every day is a holiday; a holiday for which you had to wait for five to six days in a week and you were never sure if the boss would call you on holiday for some urgent work. All your plans to enjoy on the weekly off used to be marred by such compulsions. Now no compulsions, as you are boss of your own self, so enjoy, enjoy and enjoy only. Remove all, from the life that comes between you and your happiness, your peace of mind, and GOD; be it a dispute, grudge, hate, anger or a complex.

Always try to remain happy and fearless. Don’t interfere in the affairs of others especially your own children. You may give advice if asked for, but let them have their own way. Don’t try to squeeze the generation gap as it will generate reactions and disturb your and family harmony.

Always be on the path of truth and don’t fear anything, not even your death. Whatever has to happen will happen; you can’t change it, then why worry; face it smilingly. At the same time don’t take much liberty of your freedom because everything will not happen as per your choice  Everyone can’t have similar choices and wishes, these differ from person to person, so let GOD decide what to do for you. The BIG BOSS is boss of the whole universe and loves us all. He takes care of all of us so don’t doubt his intentions. The best is, to surrender before Him and live to His will. You can’t change circumstances but you can change your attitude, so change it according to the times and always remain positive.

You are at the ripe age, so remember that you are the most beautiful human being. A fruit is more beautiful when it is ripe and so are you. Feel this beauty inside and outside you. Don’t expose yourself to risks such as investments in share markets, crypto currencies, Ponzi schemes or in any scheme of volatile nature because a ripe fruit can’t afford to withstand the winds and jerks of risks.

You are now more close to nature. Grow plants and watch them sprout out of the soil, and then growing into plants with tiny and shining leaves, flowering with magnificent colors and then bearing fruits and seeds. The pearl-like tiny dew drops on the leaves of plants and the grass in the morning are an amazing miracle to see.

Some people complain that they have too much spare time so they get bored. Getting bored in the twenty-first century is an impossible proposition. Make use of eighth and ninth wonders of the world if you luckily have both. The eighth wonder is your spouse who in spite being illiterate or less qualified, or even more qualified than you, remained with you through thick and thin when all nears and dears left you in adversity. You at this age have an exceptional understanding of each other. No one understands your mood, feelings and needs better than your better half. How beautifully she/he adjusts to every situation however difficult it may be. Is not that great wonder?

Your mobile phone is the ninth wonder of the world. Through the internet, you remain connected with the whole world. You can have any information available with the touch of a button. You can play games, read books of all types, see pictures of cities and places of the world over, watch movies and listen to music of your choice, share greetings and other messages with your friends and talk face to face with your relatives and friends living in any part of the globe.

So enjoy your retired life in a Smart Way. Don’t remain stuck to TV or mobile phone or your bed. Go for morning and evening walks even if for short distances. Do talk to and play with your grandchildren whenever you are with them. Play with kids of your locality. This will bring freshness and spirit of youthfulness in you.

You are lucky if you are enjoying Retired life, so thank God and keep smiling, meet friends, associates. Do some social service for the society without any considerations. Each day is a bonus for you. No one knows how much time we will get to stay in this beautiful world, so make the best use of whatever little time you have at your disposal. Do as much good as you can and remain as much contended as possible.

 

 

 

 

 

SAVINGS AND THE LIFESTYLES.

Nothing remains constant in this universe and changes do keep on happening without any breaks. Similarly, Life passes through various stages; childhood, adulthood, young age, and old age. For leading a comfortable life we need to generate good income, however without compromising with the principles of life. Our income too keeps on changing with the passage of time and similarly, our needs also undergo a regular change. To keep a balance between our income and expenditures, we need to make proper planning. Saving for all present and future needs such as daily household expenses, meeting any expense of some emergent nature, education of children, family outings for pleasure, marriages, building or owning a house, creating a pension fund for old age etc….etc., is therefore very urgent. For saving, we have to keep a balance between our income and expenses in such a way that there is always a surplus available every month.

Young age is the best period to save because we have the energy to work more and earn more and our expenses are comparatively less as compared to the advanced age. Our lifestyle has a correlation with our saving styles. We can increase or decrease our ratio of savings to our income by pursuing different lifestyles. It is as such advisable, especially for the youngsters to pursue a healthy and affordable lifestyle. The parents have the responsibility to teach their children as to how to imbibe good habits and encourage a healthy lifestyle, which would help them to use their income and resources in a judicious manner so that they could build their own portfolios for meeting any future needs and live a comfortable and peaceful life.

Everybody knows that our wants and wishes are unlimited whereas the income and resources are limited, so we have to strike a balance between the two in such a way that it always results in suitable savings. We have to use the principles of good Economics to manage our incomes and expenditures in a manner which assures good life and development without compromising with the basic needs of the family.

Although there has been more flow of funds in almost all the economies of the world and with that, the lifestyles of people have also changed. The new generation seems to have learned less about savings and managing the personal economy. There are market forces and techniques which lure the youngsters to the different lifestyles by providing them with more purchasing power, like credit cards of different types, personal loans against future salary, and finance for acquiring costly mobile phones, motorbike, car or any other item with the press of a button. Today’s market is seller’s market loaded with very attractive advertisements in print and electronic media. This is coupled with freely available purchasing power, that lures youngsters to gather junk and get trapped in never ending credit cycle. Their income is spent before it has actually accrued. The EMI’s eat away their income like a grasshopper. Unable to clear their credit card dues within the interest-free period, they are compelled to pay a very heavy interest and penalties which further add to their expenses.

One can save even with little income by managing the expenses in a manner that always ensures a surplus every month. Always prepare a budget before you spend. Note down every item of expenditure and analyse it at different intervals. It will give you a sense of your way of spending. You can mark items of wasteful expenses or those which have better and comparatively cheaper alternatives. There is no dearth of better alternatives. Cut all wasteful expenses and buy items for necessary use only.

Apparels, garments, and other items of daily use should be purchased in limited number because the fashion changes very frequently and better substitutes come on the market. Don’t buy just to store these items. These items simply fill your cupboards to be eaten by the termites. Please note that all items for good health and all beautiful clothes are much cheaper than items which spoil your health and presentation. Simple homemade food is cheaper and healthier than the junk food or food from the hotel or eateries. You may sometimes go for dining out, but very sparingly. we wear clothes to cover the body and also to look presentable. All such clothes are much cheaper than the torn out jeans which hardly cover 40% of our body and are very expensive.

Always understand the value of money and don’t spend just for the sake of spending; spending should always be purposeful and worth spending. you must have a vision in life for your future needs and accordingly, you should plan to save separately for every targeted future need. You have to decide your priorities and plan your savings accordingly.

Youngsters these days keep a bunch of credit cards just to ensure that they never fail to buy anything that they intend to buy. If one credit card fails to be a success, they try second, third and so on, till the transaction is successful. This attitude is ok in case of emergencies only but not otherwise. Such a misuse of your purchasing power without a supporting income will lead you to a debt trap, and once you are trapped a vicious circle sets into motion. One should not be a miser and compromise with his basic needs and qualities of good life, and at the same time, he should also not be a spendthrift.

Credit cards are a very useful financial instruments: the problem is with their misuse. They do provide purchasing power but not income. These should be used only to bridge gaps during some emergent circumstances, when you are short of funds for a short period and are sure to cover the gap from your income shortly. Credit cards these days are offered along with a lot of benefits attached to them like cash backs, bonus points and interest-free credit for some time. These freebies are in fact bait on the hook and once you swallow it, you can’t resist the pull of the string. The result may be a dangerous debt trap depending on your own lifestyle.

Just think of the time when you would grow old and get retired and suddenly you cease to earn. Who will support you? Do you think your sons will support you? They may, but not with grace. Why should you depend on others and make yourself miserable at the fag end of your life? The old age is the golden period of your life when you should be free from tensions and worries and live with respect and dignity.

SO, PURSUE A HEALTHY LIFESTYLE DURING THE YOUNG AGE, MEET ALL LIABILITIES, AND BUILD A SUITABLE PENSION FUND TO TAKE CARE OF YOU DURING THE OLD AGE.

HOW AND WHERE TO INVEST SAVINGS

THE YIELD OR THE RETURN ON INVESTMENT IS DIRECTLY PROPORTIONAL TO THE RISK YOU TAKE. SO YOU SHOULD TAKE A WELL CALCULATED RISK AND IT DEPENDS UPON YOUR OWN JUDGEMENT AS TO HOW MUCH RISK YOU ARE PREPARED TO TAKE. PLEASE AVOID TAKING HIGH RISKS UNLESS YOU ATTAIN EXPERTISE IN MARKET FORCES

Once you are in the habit of saving, you should start investing in different schemes of different financial institutions. Four things are to be taken into consideration before deciding to park your saved funds in different schemes. Financial institutions/mutual fund companies have all types of tailor-made schemes for different maturities and you can choose those which suit your requirements. The issues to be considered before investment are:-

  • Safety of your funds.
  • The risk involved or quantum of risk you are prepared to take for your investment.
  • The rate of growth of your invested funds.
  • The maturity period of scheme you intend to invest in.

You may have bulk funds available or a regular monthly salary/income. Options available for investment of bulk funds in order of safety and risk are:

  • Sovereign Gold bonds.
  • Real estate.
  • Banks term deposits.
  • Debt linked instruments of the reputed mutual fund company.
  • Equity-linked instruments of the reputed mutual fund company.

For savings out of regular monthly salary/income, the available options are:

  • Saving bank account of banks
  • Recurring deposit account of banks
  • Debt linked SIP(Systematic investment plan) of the reputed mutual fund company.
  • Equity-linked SIP of the reputed mutual fund company.

THE GOLDEN RULE OF INVESTMENT

THE YIELD OR THE RETURN ON INVESTMENT IS DIRECTLY PROPORTIONAL TO THE RISK YOU TAKE. SO YOU SHOULD TAKE A WELL CALCULATED RISK AND IT DEPENDS UPON YOUR OWN JUDGEMENT AS TO HOW MUCH RISK YOU ARE PREPARED TO TAKE. PLEASE AVOID TAKING HIGH RISKS UNLESS YOU ATTAIN EXPERTISE IN MARKET FORCES.

Then there are high-risk options such as Equity market. It is always advisable to avoid investment in equity market directly unless you fully understand the nitty-gritty of the Equity market as well as the movement of local as well as world economies and political climates. Investment in the equity market is advised through equity-linked mutual fund schemes.

Ponzi schemes promising very high returns don’t have any sound base and support systems and people have lost their fortunes in such schemes. Don’t get lured by such schemes.

RECENTLY BITCOINS HAVE COME INTO GLOBAL MARKET WHERE PEOPLE HAVE ALTHOUGH MADE EXTORBITANT PROFITS YET IT IS HIGHLY RISKY TO INVEST IN BITCOINS BECAUSE THEY DO NOT HAVE ANY BASE. NO GOVT. OF ANY COUNTRY HAS RECOGNISED BITCOIN AS A SOUND INVESTMENT.
IT IS CRYPTOCURRENCY HAVING NO SUPPORT. IT’S BUBBLE CAN BURST ANY TIME RESULTING IN VERY HEAVY LOSSES, SO DONT BE LURED BY SUCH RISKY INVESTMENTS.

60% of your net monthly saving is advised to be invested in reputed mutual fund companies in the ratio of 50% in debt and 50% in equity-linked SIP or Recurring deposit scheme of banks for a period of 15 years. 40% of net saving every month be kept in saving bank account. Amount so accumulated in this account be converted into term deposit of 50 thousand or one lac or 5 lac as the case may be for the period of your of your choice. Keep on renewing the term deposits on due dates or invest in any high yielding scheme of financial institutions. You should not keep all eggs in one basket.

And above all, there is an investment which we should never forget to make whenever we receive an income or salary and that investment is CHARITY for a good cause. The amount of investment/donation depends upon your own will; no bindings. However, some religions have mandated a percentage of income as charity, like Sikhism, which advice to donate 10% of your income in the charity called DASWANT and in Islam the limit is 2.5% called ZAQAAT. Charity purifies your income provided it is out of honest means, and purely organic in nature. Any income out of dishonest means, corruption, cheating or any illegal means is inorganic in nature which may infect your organic and healthy income. No charity of whatsoever amount out of such income can purify your wealth. No one can get peace of mind in life out of such income and it always leads to problems and problems only.
Slowly and steadily you will accumulate enough wealth to take care of your future needs.

Till you are in active service/earning stage, you should continue parking your savings in growth schemes and meet your social and moral responsibilities. And once you retire, better keep saved funds in monthly yielding schemes of financial institutions to augment your monthly income and live a peaceful life with financial independence.