Friday, February 23, 2018

10-Point Agenda for Rebuilding Trust in Banking - PNB Fraud


Bad banking has now become major concern of the body democratic. PNB fraud of Rs.11300cr proved a saga of utter disregard to responsible banking. Ethics took hard beating and governance in utter disarray in the backdrop of unlearnt lessons of the similar past offences both within the bank and outside. It takes years to build reputation but only a few minutes to destroy.

Saturday, February 3, 2018

Tepid Union Budget 2018

This budget has an increment of Rs.11000cr over the previous outlay. But the direction has changed more to the health and education sectors. The effect of these interventions will be experienced more in future than immediate present. 

In so far as Agriculture is concerned the farmers get some announcements and hopefully, appropriate rules will be made to ensure that the farmers get 1.5 times the cost price for their produce. So far they have not been able to get the dividend out of the MSP. E-Nam spread though welcome has not so far stabilised in delivering the intended benefits to the farmers. 

A non-budget allocation of Rs.11lakh crores to farm credit is again a please all announcement. If NITi Aayog comes up with a modicum of lending to the tenant farmers with the owners' interests duly protected, things may change in the short term credit. Any short term credit not matched with the term lending or investment credit for farm sector as has happened so far, would end up in only irresponsible target chase. 

Agriculture should have been provided a separate budget because of the low growth experienced (just around 2.1%) and the already admitted climate change risks in the Economic Survey 2018. 

In so far as MSMEs are concerned, emphasis on the food processing, leather and apparels would provide great fillip. National Bamboo Mission would provide the bamboo based artisans and small enterprises in rural areas and tribal areas a great opportunity for developing branding and move to export zone. 

MSEs' major problem is availability of land for setting up the enterprise as the land prices everywhere are just soaring to unbearable heights. If he had announced tax exemption for five years for infrastructure and land cost in Rural Industrial Parks - either private or state - it would have been of great help.

In the name of MSME sector, the corporate tax exemption threshold rise to Rs.250 crores would help the medium enterprises and mid-corporates that constitute less than 2% of the total number of MSMEs. This is more an apology of support to the sector.

Mudra Loans target increase by 3lakhs should have been more specific to manufacturing MSEs. So far less than 3% of the total loans have been given to manufacturing. 

SHG credit allocation of Rs.75000 cr - a non-budget allocation would be rebalancing the gender portfolio of banks in the MSME sector.

As a senior citizen I am happy that my medical bill is better met now than before. The FM deserves thanks for this concern.

Friday, January 19, 2018

11 Point Plan for the Union Budget 2018

An 11-Point Agenda for the Union Budget
18 January 2018  
Weighed down by internal pressures from the party to present a Budget that gets accolades from a large voter constituency in the face of General Elections 2019, Finance Minister Arun Jaitley,  has a few ready options to pep up the economy.

1. Go all out to clear the misgivings on the Financial Resolution and Deposit Insurance (FRDI) Bill by incorporating oral assurances given in the Parliament into the proposed Bill.

2. Announce a winding up plan for the sinking PSBs instead of piling them on to those that are working efficiently.

3. Insist on all the banks to stick to banking work instead of selling third party products that carry hefty commissions as these products are invariably dumping unknown and unannounced risks on the unsuspecting users. Restart development banks to finance Infrastructure. Turn banks into growth engines.

4. Announce withdrawal of government funded programmes that failed to take off or made only a symbolic entry. Over 110 schemes launched for the Micro, Small & Medium Enterprises (MSMEs) failed to reach even 0.5% of the eligible enterprises. These resources can be earmarked to finance those schemes that showed performance. 

5. Re-engineer financial incentives to go online only with appropriate safeguards also announced. Fiscal incentives have more transparency than financial incentives. 

6. Scrap all the cess hat have no specific account of expenditure earmarked for them.

7. Appoint a committee to amend the treasury code with its rules formulated during the British Raj. This is the root cause of corruption and delays in the release of funds for government expenditure. 

8. Announce the date for incorporating the related Rules whenever the Parliament passes a particular Bill, so as to remove ambiguity and ensure compliance. Every Act must have priority do-ables for all the stakeholders as an Abstract. 

9. Introduce a modicum of agricultural tax, with a threshold of income over Rs25 lakh per annum. All the small and marginal farmers, as well as tenant farmers will be exempt as they would have not earned this much even for a five year period. The rate for them can be 10% over the Rs25 lakhs. Multiple slabs need not exist for them.

10. Manufacturing start ups should be tax exempt for five years or till their turnover crosses Rs2 crore.

11. All corporations spending a minimum of 5% on research and development or incubation centres recognised by the governments shall be exempt for such spend, treating it as Investment.

The FM would do well to make specific allocations for agriculture, education and social services that make good sense not just from the viewpoint of electoral benefits but as overall economic benefits. It is obvious that the Fiscal Responsibility and Budget Management Act, 2003 (FRBM) will be thrown overboard but for some jugglery with numbers. There are a few states like Telangana, AP and Karnataka that have introduced agricultural budgets. It will be necessary for the Union government to go in sync with the states in its ideal of cooperative federalism to ensure the outcomes.  

(The author is Adviser, Telangana Industrial Health Clinic, Government of Telangana. Views in this article are personal.)

Saturday, January 13, 2018

Fragility to Fast Track?

Arun Jailtley mentioned that the UPA’s fragile economy is on fast track now. CSO forecast of GDP growth on the eve of the Budget 2018-19, however, is 6.5%, the slowest of the last four years. What has moved fast?

Union Budget presentation moved from March end to February end. Insolvency and Bankruptcy Code completed its first anniversary. But the MSMEs are yet to get their deal. All the goods carriers from North East to down South Kerala move without any check post hurdles and the palm greasing saving nearly Rs.30000cr for various companies. Indirect Tax Reforms through GST with all its initial hiccups is still with glitches. Tax compliance moved an inch up on direct taxes although only 1.2% of the tax filers paid taxes.

Bring in two-tier cooperative sector

Telangana is a trendsetting State proved its maturity in thinking, policy, performance and reforms. It’s unparalleled digital journey led to TSiPASS, T-Hubs, TIHCL, T-Valet, Ma Bhoomi and many a start up securing first rank in EODB. Its growth rates in agriculture and services thus far have put the state on top in the country.

It has set a new trend in governance getting closer to people with decentralising administration through the 31 districts carved out of 10 at the time of formation of the state. It has become a favoured state for investments. The State is firmly put on global radar with the Global Enterprise Summit and World Telugu Conference.  It is aware that the journey is unfinished and many miles to go. The visionary leadership of the Chief Minister saw a potential in cooperative sector if reformed through appropriate legislative interventions.  Here are a few thoughts for his consideration.

Wednesday, December 27, 2017

Can Cooperative banks be better alternatives?

Cooperative Banking – Hopes on the rise

Banking environment in India structurally has become more dispersed than before with the Small Finance Banks, Payment Banks, Postal Bank emerging on the scene. Mergers and amalgamations in the private and public sector banks and ever increasing NPAs in the commercial banks are threatening the stability of the system. Seemingly strong macro-economic fundamentals notwithstanding, disruptive technologies are also adding fuel to fire. FRDI Bill poses a threat to the security of depositors and leaders’ promises cannot be insurance to what the bill itself holds for the banking clientele. Senior citizens, differently abled citizens, women and several customers of small means feel distanced from the services they were expecting at the hands of the banks.

Friday, December 1, 2017

CIBIL Scores Need Improvement


I was wondering why the lenders keep offering a personal loan in 24 hours to a few persons and how they get to know my mobile number to call repeatedly.  When I looked at my CIBIL score card, I got the hang of it all. Banks subscribe to the CIBIL and access the data.