State Bank of India is the biggest and the leader bank in our country. SBI is treated as largest bank because of its highest business profile and highest number of branches and it is called as leader bank among public sector banks because other banks follow what normally SBI do. It may be interest rate policy or loan policy or branch expansion policy, SBI normally shows the route to other bank. In the last week RBI deregulated saving interest rate and a few private banks raised interest rate on saving s deposit. But since SBI did not increase savings interest rate other banks are also silent on this issue.
Further SBI claims to be one of top ranked global banks and our government feels proud for it. I however feel that SBI may in near future become one of the most critically sick and sinking bank like Lehman Brother. Moreover when assets of bank like SBI starts ringing alarm signal, one can very well imagine the worst scenario prevailing in other Public sector banks. Credit growth and deposit growth, both have come down in SBI whereas NPA has gone up from 3.38%last year to 4.19% this September. Position of other banks is also bad but their exposure will take place only when fully adopt CBS system and applies honestly prudential norms of income recognition and asset classification as per system only.
It is true that net interest margin has gone up slightly because Public sector banks in general have stopped giving preferential higher rate of interest to bulk depositors. But this is one time phenomenon. Cost of deposit will slowly go up because banks have during last year increased deposit interest rate many times for retail depositors and because of probable increase in savings rate. But banks in general will not like to raise interest on their advances to compete in the market and to abide by government directive or under pressure of Ministry of Finance or to extend preferred rate to preferred borrowers who extend golden gifts to officials of bank. As a result yield on advances will gradually come down and hence NIM will also see considerable erosion in forthcoming quarters. Provisioning will go up and up as bad assets grow in banks and there is no doubt that profit will come down and government will have to infuse capital time and again to fulfill Basel norms of Capital adequacy Ratio.
Obviously when credit growth is coming down, NIM is under pressure, ratio of NPA is going up quarter after quarter, provisioning need is increasing and other income is shrinking, future of not only SBI but that of all public sector banks appears to be bleak. Other banks have also published their balance sheet for the September quarter registering similar growth in bad assets, increase in provisioning and fall in profit.
Still RBI officials and MOF say that health of Indian bank is good. It is worthwhile to mention here that total of bad assets in PS banks as on 30th September 2011 has crossed one trillion rupees. Even Moody had downgraded rating of SBI and in last few days Moody lowered its outlook on banking system, showing slowing credit growth and concerned about asset quality..
It is disheartening that even legal tools are not strong and effective enough to recover amount from willful defaulters. Lacs of cases are pending in various district level courts, DRT and high courts for several years and even if decree is granted by court of law , district administration and police officials are not interested to act swiftly and effectively against bank defaulters because they also get gifts from such recalcitrant and willful defaulters.
To add fuel to fire, politicians use to announce from time to time various loan waiver schemes to enrich their vote bank. Moreover manpower position of all banks is very much poor qualitatively and quantitatively. Human resource management is the worst in public sector banks. Flattery and bribery has become the common culture and mantra for survival. Most of top ranked officials in public sector banks are those who were involved in bribe led lending and who added more and more bad assets in bank’s portfolio to get faster promotion and cream posting.
It is worthwhile of mention here that global financial crisis is also likely to adversely affect the health of already sick bank suffering from cancer of corruption. Most of the banks have sanctioned hundreds and thousands of crores of rupees to big borrowers to increase their loan portfolio and to achieve the target given by MOF. It will not be an exaggeration if I say top 1000 borrowers of all banks have been beneficiary of 50% of total loan portfolio of the bank. As such if due to recessionary pressure any one account out of top 1000 borrowers goes bad , the health of that bank will go beyond control and not only tarnish the image of banking industry but expose the empty or mischievous mind of Ministers and top regulators. It is well known that lending made in power sector, oil and aviation sector, real estate sector, diamond industry, Micro Finance Institutes etc are already on the verge of slipping into sub standard category and undoubtedly these high value bad assets will further add fuel to fire.
I am unable to understand when Government of India will wake up from its deep slumber and ministers will come out of hibernation to suitably diagnose the sick banks, punish top ranked bank officials and for this purpose make effective use of its administrative, police and legal powers.
I however make an appeal to RBI officials and our learned Finance Minister to open their eyes and ears and take corrective steps immediately to take care of banks before it is too late.
I can appeal but I cannot expect good result from any corner because FM or PM or CM or CMD or ED or any bank official, who all are surrounded by corrupt and flatters.
After all who will bell the cat?
Let us however expect some good result from movement launched by Team Anna or Ramdeo like persons and various organisations.
Friday, November 11, 2011
Thursday, August 11, 2011
Huge Debt Burden without Repaying Capacity
20 nations with the highest debt
Are the world's superpowers really rich? Well, not really. . .
The trillions of dollars borrowed to build the country's infrastructure and industry have turned into mounting debts. This in turn has tarnished their reputation as the world's economic powerhouses.
The world's biggest economy, the United States and many European nations are struggling with rising debt.
Once the envy of the world, these nations are now posing a threat to the world economy, being on the verge of enormous defaults.
Find out more about the economies that have the highest debt in the world...
1. United States
Debt: $14.590 trillion (9 August 2011)
Per capita debt: $46,929
Debt as in percentage of GDP: 94%
The United States has the world's highest external debt at a whopping $14.590 trillion.
The US public debt burden has become unsustainable and its debt and deficit ratio will remain high for a long period unless the government cuts down spending effectively.
The economic crisis in US began with the subprime mortgage crisis. Following this, the US economy fell into a recession in 2008. Flawed policies allowed lenders to offer loans to subprime borrowers without considering the risk of future default.
External debt (or foreign debt) is that part of the total debt in a country that is owed to creditors outside the country. The debtors can be the government, corporations or private households.
2. United Kingdom
Debt: $8.981 trillion
Per capita debt: $144,338
Debt as in percentage of GDP: 400
Britain's economy has also plunged into deep crisis. The budget deficit has risen to more than 156 billion pounds.
The manufacturing output fell by 0.4 per cent in June from the previous month as there is a drastic fall in domestic demand. The country GDP is expected to fall further.
3. Germany
Debt: $4.713 trillion
Per capita debt: $57,755
Debt as in percentage of GDP: 142
Germany which bounced back from the 2008 recession has largely remained immune to the crisis.
However, the US downgrade and mounting debt on other Euro zone nations could hit its coffers as well.
Germany already bears the burden of the 120 billion euros of the euro bailout fund's 440 billion euros. Germany's budget deficit is 2.3 per cent of gross domestic product.
4. France
Debt: $4.698 trillion
Per capita debt: $74,619
Debt as in percentage of GDP: 182
A crisis is imminent in France as its budget deficit is 6 per cent of gross domestic product.
5. The Netherlands
Debt: $3.733
Per capita debt: 225,814
Debt as in percentage of GDP: 471
The global financial crisis has hit The Netherlands badly. The Dutch economy entered recession in the fourth quarter of 2008.
In 2009, however, the GDP growth slipped by 3.9 per cent. The economy recovered slowly in 2010. In the third quarter the economy grew by 1.8 per cent.
The nationalisation of banks has dented the state's finances.
6. Japan
Debt: $2.441 trillion
Per capita debt: $19,148
Debt as in percentage of GDP: 45
The devastating earthquake and tsunami has pushed the Japanese economy into a grave crisis.
Japan's high rate of growth has also been hit with massive bank loan defaults.
7. Ireland
Debt: $2.253 trillion
Per capita debt: $503,914
Debt as in percentage of GDP: 103
Ireland faced a recession in September 2008, followed by a rise unemployment. Ireland was the first state in the Eurozone to enter recession.
8. Norway
Debt: $2.232 trillion
Per capita debt: $454,768
Debt as in percentage of GDP: 538
Norway escaped largely unhurt from the economic crisis. Unlike other debt-ridden nations, Norway is not a member of the Eurozone. It has its own currency, the Norwegian krone.
9. Italy
Debt: $2.223 trillion
Per capita debt: $36,841
Debt as in percentage of GDP: 108
Italy's economy has seen one of the lowest growth rates in the world. A very high public debt highlights the fact the country cannot repay back its debt. The country lacks the resources to accelerate growth.
10. Spain
Debt: $2.166 trillion
Per capita debt: $47,069
Debt as in percentage of GDP: 154
In Spain, long term loans, realty sector crash and bankruptcy of major companies, rise in unemployment at 13.9 per cent in February 2009 escalated the crisis.
11. Luxembourg
Debt: $1.892 trillion
Per capita debt: $3,759,174
Debt as in percentage of GDP: 3,443
Luxembourg has experienced a severe recession after the global financial crisis.
Luxembourg, being a financial nerve centre was badly affected b the recession. The pace of growth slowed down and unemployment increased.
12. Belgium
Debt: 1.241 trillion
Per capita debt: $113,603
Debt as in percentage of GDP: 266
Belgium is in deep crisis after market traders pushed the cost of insuring the country's debt to record highs.
13. Switzerland
Debt: $1.200 trillion
Per capita debt: $154,063
Debt as in percentage of GDP: 229
Many of the European nations living beyond their means by borrowing huge funds are struggling to streamline the economy. Swiss banks that suffered from the financial crisis were bailed out.
14. Australia
Debt: $1.169 trillion
Per capita debt: $52,596
Debt as in percentage of GDP: 95
The Australian economy's slow performance resulted in a sharp fall in the Australian dollar.
Australia's real GDP growth will be 2 per cent this calendar year and 3.5 per cent next year.
15. Canada
Debt: $1.009 trillion
Per capita debt: $29,625
Debt as in percentage of GDP: 64
Though battered by the 2008 global financial crisis, the Canadian economy has emerged as one of the strongest advanced economies in the world.
16. Sweden
Debt: $853.30 billion
Per capita debt: $91,487
Debt as in percentage of GDP: 187
Sweden went through a bad spell between 1990 and 1993. Its GDP went down by 5 per cent and unemployment rose to record highs. The real estate boom also crashed adding to its economic woes.
17. Austria
Debt: $755 billion
Per capita debt: $90,128
Debt as in percentage of GDP: 200
Austria's economic growth received a jolt with the global financial crisis in 2007-2008.
Falling domestic employment, fall in spending by households and enterprises pushes the economy into crisis.
18. Denmark
Debt: $559.50 billion
Per capita debt: $101,084
Debt as in percentage of GDP: 180
Denmark's economic woes started in 2007 with the crash of the housing sector. Housing prices dropped in 2008-09.
The global financial crisis further hit its prospects. In 2010, Denmark saw a slight recovery.
19. Greece
Debt: $532.90
Per capita debt: $47,636
Debt as in percentage of GDP: 174
Greece is going through its worst years. Uncontrolled spending and cheap lending has seen its debt levels zoom to scary heights.
Also, the failure to implement financial reforms has resulted in losses of $413.6 billion, much larger than the country's economy.
Greece and Ireland have the highest poverty rate in the 15-member EU, while Sweden has the lowest at 9 per cent.
20. Portugal
Debt: $497.80
Per capita debt: $46,795
Debt as in percentage of GDP: 217
Portugal's economy has posted an average annual growth of less than 1 percent over the past 10 years.
The country faces a huge foreign debt owning to reckless spending without generating any returns. Portugal is set to introduce austerity measures including tax hikes and pay cuts.
Are the world's superpowers really rich? Well, not really. . .
The trillions of dollars borrowed to build the country's infrastructure and industry have turned into mounting debts. This in turn has tarnished their reputation as the world's economic powerhouses.
The world's biggest economy, the United States and many European nations are struggling with rising debt.
Once the envy of the world, these nations are now posing a threat to the world economy, being on the verge of enormous defaults.
Find out more about the economies that have the highest debt in the world...
1. United States
Debt: $14.590 trillion (9 August 2011)
Per capita debt: $46,929
Debt as in percentage of GDP: 94%
The United States has the world's highest external debt at a whopping $14.590 trillion.
The US public debt burden has become unsustainable and its debt and deficit ratio will remain high for a long period unless the government cuts down spending effectively.
The economic crisis in US began with the subprime mortgage crisis. Following this, the US economy fell into a recession in 2008. Flawed policies allowed lenders to offer loans to subprime borrowers without considering the risk of future default.
External debt (or foreign debt) is that part of the total debt in a country that is owed to creditors outside the country. The debtors can be the government, corporations or private households.
2. United Kingdom
Debt: $8.981 trillion
Per capita debt: $144,338
Debt as in percentage of GDP: 400
Britain's economy has also plunged into deep crisis. The budget deficit has risen to more than 156 billion pounds.
The manufacturing output fell by 0.4 per cent in June from the previous month as there is a drastic fall in domestic demand. The country GDP is expected to fall further.
3. Germany
Debt: $4.713 trillion
Per capita debt: $57,755
Debt as in percentage of GDP: 142
Germany which bounced back from the 2008 recession has largely remained immune to the crisis.
However, the US downgrade and mounting debt on other Euro zone nations could hit its coffers as well.
Germany already bears the burden of the 120 billion euros of the euro bailout fund's 440 billion euros. Germany's budget deficit is 2.3 per cent of gross domestic product.
4. France
Debt: $4.698 trillion
Per capita debt: $74,619
Debt as in percentage of GDP: 182
A crisis is imminent in France as its budget deficit is 6 per cent of gross domestic product.
5. The Netherlands
Debt: $3.733
Per capita debt: 225,814
Debt as in percentage of GDP: 471
The global financial crisis has hit The Netherlands badly. The Dutch economy entered recession in the fourth quarter of 2008.
In 2009, however, the GDP growth slipped by 3.9 per cent. The economy recovered slowly in 2010. In the third quarter the economy grew by 1.8 per cent.
The nationalisation of banks has dented the state's finances.
6. Japan
Debt: $2.441 trillion
Per capita debt: $19,148
Debt as in percentage of GDP: 45
The devastating earthquake and tsunami has pushed the Japanese economy into a grave crisis.
Japan's high rate of growth has also been hit with massive bank loan defaults.
7. Ireland
Debt: $2.253 trillion
Per capita debt: $503,914
Debt as in percentage of GDP: 103
Ireland faced a recession in September 2008, followed by a rise unemployment. Ireland was the first state in the Eurozone to enter recession.
8. Norway
Debt: $2.232 trillion
Per capita debt: $454,768
Debt as in percentage of GDP: 538
Norway escaped largely unhurt from the economic crisis. Unlike other debt-ridden nations, Norway is not a member of the Eurozone. It has its own currency, the Norwegian krone.
9. Italy
Debt: $2.223 trillion
Per capita debt: $36,841
Debt as in percentage of GDP: 108
Italy's economy has seen one of the lowest growth rates in the world. A very high public debt highlights the fact the country cannot repay back its debt. The country lacks the resources to accelerate growth.
10. Spain
Debt: $2.166 trillion
Per capita debt: $47,069
Debt as in percentage of GDP: 154
In Spain, long term loans, realty sector crash and bankruptcy of major companies, rise in unemployment at 13.9 per cent in February 2009 escalated the crisis.
11. Luxembourg
Debt: $1.892 trillion
Per capita debt: $3,759,174
Debt as in percentage of GDP: 3,443
Luxembourg has experienced a severe recession after the global financial crisis.
Luxembourg, being a financial nerve centre was badly affected b the recession. The pace of growth slowed down and unemployment increased.
12. Belgium
Debt: 1.241 trillion
Per capita debt: $113,603
Debt as in percentage of GDP: 266
Belgium is in deep crisis after market traders pushed the cost of insuring the country's debt to record highs.
13. Switzerland
Debt: $1.200 trillion
Per capita debt: $154,063
Debt as in percentage of GDP: 229
Many of the European nations living beyond their means by borrowing huge funds are struggling to streamline the economy. Swiss banks that suffered from the financial crisis were bailed out.
14. Australia
Debt: $1.169 trillion
Per capita debt: $52,596
Debt as in percentage of GDP: 95
The Australian economy's slow performance resulted in a sharp fall in the Australian dollar.
Australia's real GDP growth will be 2 per cent this calendar year and 3.5 per cent next year.
15. Canada
Debt: $1.009 trillion
Per capita debt: $29,625
Debt as in percentage of GDP: 64
Though battered by the 2008 global financial crisis, the Canadian economy has emerged as one of the strongest advanced economies in the world.
16. Sweden
Debt: $853.30 billion
Per capita debt: $91,487
Debt as in percentage of GDP: 187
Sweden went through a bad spell between 1990 and 1993. Its GDP went down by 5 per cent and unemployment rose to record highs. The real estate boom also crashed adding to its economic woes.
17. Austria
Debt: $755 billion
Per capita debt: $90,128
Debt as in percentage of GDP: 200
Austria's economic growth received a jolt with the global financial crisis in 2007-2008.
Falling domestic employment, fall in spending by households and enterprises pushes the economy into crisis.
18. Denmark
Debt: $559.50 billion
Per capita debt: $101,084
Debt as in percentage of GDP: 180
Denmark's economic woes started in 2007 with the crash of the housing sector. Housing prices dropped in 2008-09.
The global financial crisis further hit its prospects. In 2010, Denmark saw a slight recovery.
19. Greece
Debt: $532.90
Per capita debt: $47,636
Debt as in percentage of GDP: 174
Greece is going through its worst years. Uncontrolled spending and cheap lending has seen its debt levels zoom to scary heights.
Also, the failure to implement financial reforms has resulted in losses of $413.6 billion, much larger than the country's economy.
Greece and Ireland have the highest poverty rate in the 15-member EU, while Sweden has the lowest at 9 per cent.
20. Portugal
Debt: $497.80
Per capita debt: $46,795
Debt as in percentage of GDP: 217
Portugal's economy has posted an average annual growth of less than 1 percent over the past 10 years.
The country faces a huge foreign debt owning to reckless spending without generating any returns. Portugal is set to introduce austerity measures including tax hikes and pay cuts.
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