United Bank of India - How Simple is projected as Complex

Banking is a very simple business.

You lend money and you recover money. In and Out. That's it.

And you don't need an automated system to tell you that you have not recovered money on your loans portfolio. there will be hundreds of people looking at data, reports, discussion, interactions with clients and so on who will know if there is a delay in payment.

A few examples
1. Did the Top Management not bother to see why the profits are being eroded.

2.Did Credit Risk Monitoring team not see that accounts had no activity during the annual reviews.

3.What about internal audit, which picks up a sample to verify current status of the account.

4.The Credit Head who reviews fresh lending after reviewing data on existing relationship

5.The Relationship Managers / Branch Managers who interact with customers and realised that amounts are not been repaid

6.Some customers themselves who would have told RM that due to troubles, I cannot repay your money this quarter.

The List can be endless. In the whole chain of Banking, there are tens of control points that can easily detect if loans are turning NPA. We can understand a small time lag before detection of NPA, but few years is unthinkable.

A switch off in the automated system will only restrict timely alerts, but then you will really have to close your eyes to not see the glaring data /cues/activities around you to ignore NPA.

Whistle-Blowing
Next is the question of whistle blowing. Banks are run by thousands of employees. Did not one person detect something unusual and escalate the matter. Credit/Risk team preparing money summaries, seeing overdue loans, not flagging them. Banks were run efficiently decades ago without technology.

Is it a mystery of the Black Box or Black Magic (vanishing profits)

Read it all in ET and other leading newspapers.
http://economictimes.indiatimes.com/news/news-by-industry/banking/financ...

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