Sunday, February 7, 2016

Big Data Helps Banks but should help customers too
Banks collect and use client data for better targeting. They should also reduce operational costs by using technology and pass on the benefit to customers
I recall what Greg Baxter, global head of digital strategy at Citigroup mentioned almost a year back (reported in Financial Times on 1 February 2015) that big data is a big opportunity, making a big difference in how the banks serve their customers in future. Financial health barometer can be read by every customer, not just how much balance one has in the account as much as how much the money is likely to be overdrawn every month.

Thursday, January 28, 2016

MSMEs in the eye of the storm

MSMEs are in the eye of the storm with NPAs reaching 5.90 percent as of March 2015 even though the net accretion to the portfolio has gone down from 12.3% in 2014 in terms of number of accounts to 10.1% with a corresponding decline in amount outstanding from 23.9% to 13.6%. The industry NPA level was 5.47 although at the systemic level both industry and MSMEs represent 4.7%.  Only 7.9% constitute MSME advances to the total advances. (Financial Stability Report No.11, July 2015)
Risk appetite for the MSMEs is very low among banks and their adherence to the guidelines of both the RBI and GoI to identify sickness at incipient stage and introduce corrective action plans is highly suspect. There is reluctance among banks for either restructuring or revival of even viable advances. Their credit origination has also no less to blame. Monitoring and supervision are hit hard by lack of adequate field staff leaving most accounts for arm chair surveillance.

Friday, January 1, 2016

A Year 2015 that could be Better looking for the Best 2016

Reminiscing into the past to move fast on the promises for a bright future is the usual year end exercise. Many soothsayers lend their voices. The year 2015 is just about to close. Not many are jubilant. Farmers in a couple of southern States and Punjab and elsewhere committed suicides in penury, groaning under heavy private debt.
Parliament had two wash-out sessions, courtesy, the Congress, save just nine Bills passed by both the Houses. All the major reforms, particularly the GST the game changer, are on back burner.
Nature’ fury brought a major metropolis to ruble. El Nino caused havoc in several States turning the cool weather of the year into hot climate. Discussions on Climate changes, Environment, containing terrorism carried an imprint of Indian view making history. PM Modi with his birthday greetings to his counterpart in Pakistan on the 25th December, created waves in international relations although moving on rocks in India.
Expenditure on Defense and Police modernization has increased. Yet civic protection is on thin edge. More chain snatchings, more ATM thefts, and money-on-call crimes, gold smuggling surfaced. Most of the states have been galvanizing to digitization to tame the corruption. Not a single economic offence barring the decade-odd Satyam scam has put the culprits behind the bars and not a rupee of black money has been brought back from Switzerland to India. Cyber crimes continue to show their ugly face robbing the institutions and individuals’ wallets.
States are competing for ‘ease of doing businesses’ more through policy tweaking. Implementation issues and gearing the grassroots administration remain formidable. Hikes in pay and slides in rights make labour moving to roads.
Micro and small enterprises are still fighting for their space in credit markets and their contribution in manufacturing Make in India sector is full of tears. Although Bankruptcy Act gave hope to the India Inc there is still no exit route for the MSEs. Decade after winding up the unit, it receives a claim for payment of EPF where as Sec.14 of the BIFR Act provides relief for the corporate units.
Laws leave more for interpretation than for a conclusive ruling. Speed of justice is yet to roll out. The silver lining is that the Judiciary has been able to gear up the administration to timely action responding to PILs – food security for the poor in situations of drought, asserting the domain of Right to Information Act in certain restricted areas and the like.
Inflation has been tamed. Indices maneuvered to project higher growth thanks to a statistical model. The alert finance regulator reasserted his commitment to growth – reduced interest rates. But amidst rising NPAs credit markets are tepid. Volatility of capital markets amidst global concerns continued and the initial surge of investments has become timid.
Fed Rate hike as expected made its beginning as if the recession unwound. Yuan became the recognized third largest international currency. Amidst stable exchange reserves RBI is confident of holding the rupee range bound. Banks are at their wits-end to raise capital to meet the demonic Basel III norms by April 2017.
2015 in review

Tuesday, December 15, 2015

Debt and Disaster

Disasters may be frequenting the coastal regions. But not like the one that we saw in Chennai till yesterday, in the recent history. It may take months for the city to recover from the shock and may need billions of rupees for recovering the lost infrastructure and assets. This signifies that no disaster will be like its predecessors and they manage us and not us managing them.

The estimate for the insurance sector outflow for the rescue has been put at a measly Rs.500cr.  It may have excluded the assets insured in the financial sector. Several industries, export-oriented auto components industry, leather industry, several MSMEs alone have assets worth around Rs.2lakh crores in and around Chennai, the marooned metro for a century.

Friday, November 27, 2015

SpiceJet becomes SourJet

A Travelogue

Jetting off to Tirupati ?
‘Air India’ – Not liking to be in the air
Feels homely on the land;
‘SpiceJet’ – ‘seating’ – sorry;
Mistakenly spelt – ‘cheating’;
‘Checking in’ – you are checked out;
Baggage – gaming in numbers;
‘Free meal’ – Damn it you paid for it;
‘Bag out first’ – Pay up first;
‘Enjoy extra leg space’; keep your legs short;
Long legs? Choose the first two rows;
Just it costs you only five hundred bucks!!
‘Smiles’ Miles apart for, they are spicy;
Crew, Arrogance is their virtue;
‘Convenience’ – a dream;
‘Comfort’ – whose is it any way?
Merry ride? Nay, a dreary ride;
SpiceJet  joining the Sourjet league!
Any way the stocks are fully subscribed.

 * SG 1042 27.11.2015 - Tirupati to Hyderabad 

Economics of Education

Volume XIII Part 4 November 25, 2015 Business Advisor

Economics of Education

B. Yerram Raju

National Education Policy is scheduled for release shortly. The fears of FDI in education are looming large. Already the privatization of education during the last two decades has eroded the values and loaded the backs of children with loads of books. Lower middle class bemoan that qualitative education is unaffordable.

Several private schools even at kindergarten charge a lakh of rupees for admitting a child. The non-public ‘public schools’ charge the fees much above. At the high school and college levels per candidate fees is touching the roof. And there is no guarantee for quality delivery of inputs. Most have teachers less than deserving qualifications.

Government schools and colleges have poor infrastructure and poorer delivery mechanisms. Had all the civil servants, elected representatives chosen to send their wards to the government schools, their plight would be not what they are: with no toilets, no power, no play grounds, and in several of them even no teachers!! Yet, the threat of transfer or other punishments to teachers make them adopt unholy means to assure pass for all their wards.

Banks have no time for customer

What you get instead are hidden costs for supposedly myriad services, most of which don’t seem to exist.

One leading new generation private bank does not disburse cash other than through ATM/debit card withdrawals. Yet it charges Rs.1,000 annually for issue of the debit card, on top of keeping the minimum average balance of Rs.10,000 for a basic savings bank account for a customer.

Why choose such a bank? Because other banks, though with lower minimum balance requirements, are worse when it comes to customer service.

I credited a couple of cheques to my pension account with the SBI drawn on another local PSB branch on November 6. While one of the instruments for Rs.10,000 got credited on the same day, the other for Rs.70,000 was credited only six days later after relentless pursuit. A complaint email gets the standard response: “This is a system generated response. Your complaint takes 48 hours to respond. Please do not reply.”

Sunday, November 1, 2015

Capital Infusion in PSBs – Need and the Deed

Capitalization of Public Sector Banks has been incorporated as one of the seven items in ‘Indra Dhanush’, dubbed as part of Banking Sector Reforms.  Before addressing the issue of such capitalization it is important to understand some of the historical developments in banking globally and the way different countries responded to addressing the issue of refurbishing capital in the banks.

As part of the global financial system, Reserve Bank of India made us to believe that banks in India have to fall in line with capital adequacy norms under Basel regulations. Even prior to the embrace of capital regulations of Basel India had CRR and SLR as regulatory instruments to safeguarding the financial stability of banks. 70 percent of the Banks’ assets in India are in the public sector.