Burdened with rising bad loans, mostly given to big corporates, banks learnt it hard way in 2014 that 'if you owe the bank 100 dollars that's your problem, but if you owe the bank 100 million dollars, that is the bank's problem'.
This was stated by legendary American industrialist J Paul Getty - the world's richest private citizen till his death in 1976 - but his words appeared perfectly apt decades later in 2014 for the Indian banking industry, which also had to fight corruption, 'cash-for-loan' scams and irregularities in the appointment of top executives at state-run lenders.
However, it was loans given to big corporates turning bad that kept the banks on their toes and even extreme efforts like declaring the borrowers as 'wilful defaulters' could not yield desired results amid various roadblocks.
As banks were grappling with non-performing loan problem, the CBI arrested six persons, including chairman and managing director of Syndicate Bank S K Jain for allegedly taking a bribe of Rs 50 lakh for increasing credit limit of some companies in violation of banking rules.
CBI alleged that the conduit was the brother-in-law of the CMD and the deal was struck by the chartered accountant who has started his own firm of providing loans to big corporate houses.
The investigative agency claimed to have recovered cash to the tune of Rs 21 lakh from Jain's residence besides gold worth Rs 1.68 crore and fixed deposits upto Rs 63 lakh.
The government suspended Jain after the Finance Ministry received a preliminary report from the CBI on the arrest.
Soon, a fixed deposit scam involving Rs 436 crore came to the fore and the government initiated a forensic audit at Oriental Bank of Commerce and Dena Bank, wherein the lenders had allegedly misappropriated funds from their customers.
The lenders are alleged to have indulged in siphoning off the money (Rs 180 crore by OBC and Rs 256 crore by Dena Bank) received as fixed deposits. Few officials of both the banks were suspended after forensic audit report.
These irregularities prompted the government to look into the entire selection process for top executives. Government scrapped the selection of six PSU bank heads during UPA tenure following a high-level panel finding irregularities in the process followed.
FULL COVERAGE:2014 Year In Review
Besides, selection of 14 executive directors (EDs) for various were also cancelled.
On the business front, non-performing assets (NPAs) continued to soar, thus impacting the profitability of banks.
Of Rs 2.40 lakh crore gross NPAs reported by Indian banking system as on March 31, 2014, a whopping Rs 2.16 lakh crore came from the public sector banks.
As of September 30, gross NPAs or bad loans of public sector banks moved higher to Rs 2.41 lakh crore, while the same for private sector banks stood at 26,571 crore.
With the rising NPAs, banks pulled up their socks as far recovery was concerned. They used all the means to recover dues from borrowers.
Banks have declared a total of 1,600 wilful defaulters (non-suit filed accounts) of Rs 25 lakh and above as on March 31, 2014. Prominent among the list of wilful defaulter were Kingfisher Airlines, Winsome Diamonds and so on.
A robust mechanism for early detection of signs of distress, prompt restructuring in the case of all viable accounts, taking recourse to legal mechanisms like Lok Adalats were the methods used for recovery of loans.
RBI has issued instructions to banks to review slippages in asset classification in the borrower accounts with outstanding Rs 5 crore and above by the board of directors of the bank and review NPA accounts which have registered recoveries of Rs 1 crore and above, he said.
The government has also advised public sector banks to constitute a board level committee for monitoring of NPAs and recovery.
Recognising the importance of capital need in the light of Basel III implementation, Finance Minister Arun Jaitley in his first Budget speech had said that there is a requirement to infuse Rs 2.40 lakh crore as equity by 2018 in our banks.
"To meet this huge capital requirement we need to raise additional resources to fulfil this obligation," he said.
While preserving the public ownership, the capital of these banks will be raised through sale of shares, including to the retail investors.
Keeping the huge capital requirement in the mind, the Union Cabinet earlier this month, allowed public sector banks to raise up to Rs 1.60 lakh crore from markets by diluting government holding to 52 per cent in phases so as to meet Basel III capital adequacy norms.
The Cabinet has also asked the PSBs to broadbase retail shareholding while going in for the fund raising.
Out of 27 PSBs, Government of India controls 22 through majority holding. In the remaining 5 banks, state-owned SBI holds majority stake.
Private sector, which has about 25 per cent market share, did see some important development including announcement of merger of ING Vysya Bank with Kotak Mahindra Bank.
This is the country's first ever amalgamation of a profit earning entity post the global financial meltdown in 2008.
This was all-stock deal worth Rs 15,000 crore.
RBI also selected two new entities - IDFC and Bandhan - for banking licenses, while the new year may see grant two of licences in two new niche categories - payment banks and small finance banks.
Besides, the RBI fixed 70 years as retirement age MD & CEO and other Whole Time Director (WTD) in a private bank as stipulated in the new Companies Act.