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.

Tuesday, November 28, 2017

Resource Efficient Cleaner Production and MSMEs

Can SMEs move to the RECP technologies?

UNIDO and UNEP started working with CII on the propagation of Resource Efficient and Cleaner Production (RECP) in manufacturing with a mission to improve resource productivity, prevention of waste, emissions and efficient use of water. Culturing SMEs in India as seedbeds of manufacturing requires a critical look at the issues and possible solutions.

Friday, November 17, 2017

Recapitalisation, NPAs and Basel III

Post demonetisation, banks were flush with funds and yet credit did not pick up. Blame was on the surging NPAs that decimated the risk appetite of the Banks. The whole country is now aware that NPAs of corporate borrowers is the villain of the piece. Banks for once stopped blaming the priority sector for the unsustainable level of NPAs.

PSBs have their liberal share and therefore FM announced recapitalization of the order never seen before at Rs.2.11trillion. To call these reforms is a travesty of judgement. Average tax paying person has to bite the bullet. It has the potential for moral hazard.

Thursday, October 5, 2017

India's Growth Story

The Apparent and the Real Growth Story of India
B.  Yerram Raju*
There was a chorus from some economists with former FMs joining against the transitory decline in the GDP growth as though GDP is a strong determinant of growth. High growth and high inflation are good friends (see the table below) and the net result has resulted in poor becoming poorer and rich, the richer.
2009-10 to
Real GDP@ market prices (%change)
Inflation (CPI-Industrial workers) (average %change)
Wholesale price Index (average % change





Source: RBI Annual Report 2016-17 and monthly Report September 2017.

Notwithstanding some of the good things that NDA government has done like the laws to regulate the Real Estate sector and the Insolvency & Bankruptcy Code, amending 87 rules for FDI in 21 sectors, abating corruption in some quarters and the GST introduction etc., resounding alarm has been the faulty(ed) demonetization, the GST glitches and the enigmatic oil prices that have lost the relationship with the crude price variations.

In the context of monetary policy announcement there is another chorus for reduction in interest rates as though such reduction in the backdrop of risk aversion of the banks due to the unrelenting NPAs would kick start fresh demand for credit. All the rate cuts thus far failed to result in any fresh credit or a pass through to the existing clients to spur demand. It is doubtful that RBI would have the luxury of another rate cut in the emerging economic uncertainties and falling rupee on the Forex front. Stock markets became nervous with the global undercurrents of rising unrest between North Korea and USA.

While demonetisation set in a trail that closed the a lakh and odd shell companies and disqualified 3lakh directors apart from around Rs.30000cr tax evasion, GST is in the process of bringing in better tax compliance. Going by global experience, GST will take a minimum of two years to stabilise. However, what the GST missed out is a big worry: skipping the petrol, diesel and trade in waste and scrap. A rough estimate says that the city of Mumbai alone has a turnover of Rs.1trn a year in waste and scrap. Huge black money hides here because all deals are in cash even now.

Rising fiscal deficit is another major concern. The States in the emerging political context and certain states by habit have been indulging in distributive justice without productive gains. Gujarat elections are a case in instance where the insurance companies against no fall in agriculture production are in line for responding to unsustainable claim settlements under PMBY.

In addition dragging farm sector despite good monsoon, education and health sectors are the other bigger causes for the present imbroglio in the economy.

Pragmatic government would have started addressing more worrisome issues like the rising unemployment and declining manufacturing, certainly not as a consequence of the reforms but as a cause.

Nation with more young population in the backdrop of consistent unemployment rate of 7-8% during the last three years is also facing the rising aged working population with bulging demand for high pension budget. NSSO 2011-12 Employment Survey – the one quoted by NITI Aayog in its Vision 2017-20 – admits to 51% of the workforce employed in manufacture and services, contributing to 83% share in the economy.

The Vision Document failed to make MSMEs the centre of manufacturing and employment growth.  MUDRA should move to targeting micro manufacturing enterprises in the ‘Tarun’ window. A crore of Rupees investment in manufacturing MSEs would give rise to average of six persons while six crore rupees in medium and six hundred crores in large enterprises would give rise to employing no more than ten and a couple of hundreds respectively. Its emphasis on the high-productivity high-wage jobs in the large industry sector is misplaced while its focus on infrastructure investment is laudable.

Before any strategic corrective interventions are made, the government must listen to dissenting voices both from within and outside. While fresh investments in infrastructure like Rail, Road and Ports are welcome, corrections to the failed infrastructure would require less investments if the Industrial Estates of the yester-era do not turn into havens of real estate instead of manufacturing hubs.

If the next budget typically focuses on elections and fails to provide the much needed investments in education, safe drinking water, health and bolstering manufacturing sector realising that the Make-in-India and Start-Up India remained as slogans both the economy and the NDA are going to witness a decent burial. If every citizen in the country can get safe drinking water health budget of the poor would come down by 70-80 percent. This should be the next mission of the Government.

Saturday, September 16, 2017


Industrial Policy 2017 needs re-discussion to make a stronger case for MSMEs: Expert

New Delhi, Sept 15 (KNN) With reference to the draft Industrial Policy 2017, the government has announced a set of measures for the different sectors of the industry, including the Micro, Small and Medium Enterprises. However this is a need of discussion along several lines in order to make the policy a strong case for the sector, Yerram Raju, Economist opined.

Sunday, September 3, 2017

Guru Brahma Namonnamah

Remembering my Teachers

Guru Brahma Gururvishnu Gururdevo Maheswarah:

Parents take the throne on the Teachers’ Galaxy. My Pranams.

Indraganti Hanumatsastri, my Telugu Teacher in 8th standard at District Board National High School, Ramachandrapuram, East Godavari District guided me to win a district level debate competition at Rajahmundry in 1952 on the subject – ‘Is Adult Franchise good for India’s Body Politic?’ in Telugu.
S. Radhakrishnan, my English teacher and Head Master at the Board National High School, Bapatla laid firm foundation and he never spared the cane when it came to correcting grammatical errors. He introduced Wren & Martin English Grammar as part of our regular curriculum.

Diwakarla Rama Murthy, brother of Divakarla Venkatavadhani of Osmania University taught us writing poetry in Telugu while at Intermediate in Mrs. A.V.N. College, Visakhapatnam (1957).
Greater fortune blessed me in the higher studies at Sri Venkateswara University College to have been taught during my graduation course by Rayaprolu Subba Rao and Pingali Lakshmikantham; M.V. Rama Sarma, old poetry (Milton’s Paradise Lost); Mrs. Suryakantam (Thomas Hardy’s Return of the Native and Galsworthy’s Strife); Shakespeare’s ‘Macbeth’ and ‘As You Like It’.

Luckier still during my Post Graduation in Economics – Prof E.K. Warrier; Prof. M.S. Prakasa Rao who laid foundation in the  subject by making me read the original authors: Adam Smith’s Wealth of Nations; John Maynard Keynes – General Theory of Employment; Kenneth Boulding – Economic Analysis that earned me distinction in M.A (Economics) in 1962. It was Prof. Prakasa Rao who advised me that if I do not have an idea to contribute on my own, I should not attempt an article. He guided me into publishing my first article on ‘Governance in Cooperatives – A Case Study of Tirupati Town Cooperative Stores’, in the Madras Cooperative Journal in 1962. This foundation saw me as author of hundreds of articles and 15 books in Economics and Management.

Greatest of my youngest teachers is C. Venkata Ratnam who adorned Gitam Institute of Foreign Trade during its formative years and International Management Institute later who guided me for doctoral thesis in 1984. He sent out the Application for admission to Andhra University Ph.D. Course in 1981 when I was Lead Bank Officer of the SBI at Sangareddy. I completed my Ph.D course in commerce and management studies with the subject – Credit Planning in Medak District.

It is my teachers who made me what I am today with positive outlook, unblemished career, humility and happiness in life. All the errors and omissions are truly mine.

On this Teachers’ Day I am greatly beholden to them. I seek their eternal blessings.
“గురువులు, శబ్దబ్రహ్మ
స్వరూప లలితాశ్రయులు,  రసవదిష్టార్థ
స్ఫురదమృతకంఠులు,  కవీ
శ్వరులు, తదుద్బుద్ధ చరణ చరితము నెంతున్‌. మాతృ గీతా; Acharya Rayaprolu Subbarao

Saturday, July 29, 2017

'For Whom the Bell Tolls?' Bank Mergers

Consolidation, Convergence and Competition of Banks in India

Cooperative Banking suffering weak governance, poor legal framework, dual regulation, and excessive politicisation is in search of sustainable solutions and the consolidation move in the three states rightly highlighted by Bloomberg in its article a few days ago is perhaps the right move. Following the recommendations of Vyas Committee (2005) NABARD amalgamated the 196 RRBs established under the Multi-Agency approach to rural lending in the country during a fifteen year period till 1990 into 64 by 2013. This amalgamation has only partial success as the RRBs are still distant from the objectives of their creation in 1975.
1991-2001 saw bank disintermediation in the wake of financial liberalisation, prudential norms and profitability focus. Directed credit program was blamed for the rising NPAs till then. I recall Dr.Y.V.Reddy mentioning in his latest book ‘Advice and Dissent’: “the seeds for bad times are always sown in good times.” 2003 was the year of ‘crazy credit’ that took the route of CDRs in 2010 and 2011. This grew into a immature NPA adult and aged along to reach the unsustainable level of around Rs.8trillion. Courtesy this situation, lazy banking had set in.

Wednesday, July 19, 2017

NPAs of MSEs Need Alert Banking

NPAs of MSEs Need alert Banking

Grouped under unorganized sector, micro, small enterprises (MSEs) are suppliers to the organized medium and large enterprises. With GST they would migrate from unorganized to organized territory ere long.

Many entrepreneurs have been wondering about their future as their working capital cycles shake up. Credit to them has been on the continuous decline from the banks. In spite of GoI guidelines of June 2015 and master directions of the RBI, several deserving non-willful defaulters’ accounts have not been revived/restructured. Zonal Committees for MSME stressed asset resolution continue to make an apology of their presence. The remedy suggested by the RBI in its master directions with SMA(0,1,2) proved worse than the disease going by the analysis presented below based on the data in RBI Bulletin January 2017.