The Irony of Corporate Excellence

The Irony of Corporate Excellence

Public Sector Banks (PSBs) in India have shown phenomenal growth since their formation in 1969 and account for nearly 70% of the country’s  banking assets against 30% in other emerging economies .Yet they also have accumulated huge non-performing assets (NPAs) over the years. Their volume stood at Rs. 2.67 lakh crore as on 31.3.2015 from 2.16 lakh crores at the end of the previous year and accounted for 5.2 % of their advances ( 4.72% in the previous year). Non-performing and restructured loans are expected to exceed Rs. 500,000 crore . Finance Minister Arun Jaitley has called this increasing volume of NPAs as “unacceptable”.

NPAs are concentrated among some of  India’s biggest companies whose promoters  have taken loans, run their business into the ground and have not paid back the money they have borrowed (some even turning wilful defaulters)and  as Governor RBI Raghuram Rajan says “have no divine right to remain in charge of companies” .  According to RBI the share of large companies in the banks’ gross NPAs was 87.5% in September 2015 up from 78.2% in March.

In his New Year’s message to the staff, the RBI Governor  has exhorted them to be relentless in pursuit of wrongdoers, even if it meant holding the powerful to account. “It has been said that India is a weak state. Not only are we accused of not having the administrative capacity of fretting out  wrongdoing, we do not punish the wrong doer, unless he is small and weak. This belief feeds on itself. No one wants to go after the rich and well- connected wrongdoer, which means they get away with even more. If we are to have strong, sustainable growth, this culture of impunity should stop. Importantly, this does not mean being against the riches or business as some would like portray but being against wrongdoing”. Strong words indeed.

It is therefore ironical that awards are given to some of these big companies for excellence in performance under various categories. A  plethora of organizations like ASSOCHEM and FICCI as well as news and financial papers and magazines give such awards at glittering functions held in five star hotels . These awards have become so numerous and frequent  as to lose their significance. One is even led to suspect that some chiefs of companies may hanker after them. There is more or less  the same jury, the same few chiefs in the race and a few political bigwigs from the ruling party  which makes a mockery of the awards. Like the Padma awards  these too have lost their sheen and covetousness .

 One important criterion for these awards should be a check that a company is not loan defaulter to any bank , public or private, or financial institution. Loan defaults  and excellence awards  do not gel.