Removal of Embargo on Lending by Dena Bank

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Dear sir,

We are concerned about the Reserve Bank of India’s recent directives to Dena Bank clamping total ban on all lending and sanction of any loan by the Bank. Hence we wish to submit the following for your attention.

Like all other Banks, Dena Bank is also facing problems of high level of bad loans, lower earnings and consequent higher provisions and net losses. But Dena Bank has been making Operating Profits in all years.

There are 11 Banks which are currently under PCA norms of RBI and Dena Bank is also one amongst them. There is nothing specially alarming about Dena Bank and the management as well as the entire workforce are on the job to work for the recovery of the Bank to better health.

In terms of the MoU signed by the Bank, Unions and the Government, all steps are being taken to turnaround the Bank to better performance.

The following figures on financial performance of the Bank will reveal that the Bank has been consistently making Operating Profits.

                                             Rs. In crores
Operating Profits Provisions Net Profit
/ Net Loss
Mar. 2010        840         329      + 511
Mar. 2011      1,223        612      + 611
Mar.2012       1,528        725      + 803
Mar.2013       1,739        929      + 810
Mar.2014       1,774     1,222      + 552
Mar.2015       1,330     1,065      + 265
Mar.2016          925     1,860       - 935
Mar.2017       1,390     2,254       - 864
Mar.2018       1,170     3,093    - 1,923

Thus, it can be observed that the Bank is doing well in terms of Operating profits and only due to increasing bad loans, the profits have been eroded.

Dena Bank has a burden of bad loans of about Rs. 16,500 crores. The following figures will reveal who is the main culprit.

Total Bad Loans/NPAs 16,500 crores
Bad loans of 250 big borrowers 13,000 crores 80 %
Dues from 1,25,000 small borrowers 3,500 crores 20 %

Thus, it can be observed that the main culprits are the big borrowers. Instead of punishing these major defaulting borrowers, the Bank and its workforce are being penalised.

At this juncture, RBI has clamped a total embargo on the lending of the Bank by which no loan can be sanctioned by the Bank. This will hit the Bank severely if it is continued. Dena Bank is an important Bank in many part of the country like Gujarat, Maharashtra, and in other States.

They have lead responsibilities and as a public sector Banks, Dena Bank has the obligation to lend to priority sectors. By this embargo, all lending even to priority sectors, agriculture sector, small and medium industries, education loans, retail loans, Mudra loan, etc. have been stopped.

What is needed is effective measures to recover the bad loans, reduce wasteful expenses, increase interest income and other revenue, conserve capital to bring the Bank back to its normal health. Crippling the Bank is not a solution, rather it would be suicidal. When all Banks are facing similar problems, it is not fair to isolate Dena Bank with such directives and harsh measures.
One can understand shedding high cost deposits and discourage low cost advances.

One can understand some caution in sanction of big loans. But can a Bank avoid lending at all ? Can a public sector Bank stop loans to priority sector and stop social lending or run away from its social responsibilities ?

In the name of RBI directive, there are attempts of indiscriminate branch closures. Even profit making branches are sought to be closed down. We can understand merger of unremunerative branches or relocation of branches to better places. But we cannot agree for large scale closure of branches because branches are the business points and profit centres for any Bank.

Similarly, adequate manpower is a pre-requisite for business development. Already employees and officers are doing their best to uplift the Bank’s health and are willing to extend further co-operation in all measures to restore the Bank to better health. But the workforce is being demoralised through ban on recruitments and even appointments on compassionate grounds are being prohibited. Without adequate staff, who will implement the revival strategies?

We strongly feel that Dena Bank is being singled out and isolated while the problems facing the Bank are similar to the problems in many other Banks. Hence we submit to you, Sir, to reconsider the discriminatory directive and withdraw the embargo on lending by the Bank and other restrictions.

Thanking you,

Yours faithfully,