AP State Budget 2012 evokes mixed response
The fourth largest State of the country, Andhra Pradesh has as many credits as discredits at the time of its Annual Budget 2012. It has a growth rate of 9.26% surpassing the National GDP 8.5% in the five-year period 20045-12. Over 40% of its geographical space is farm land and has 22% forest cover. 8744km river length and a coast line of 974sq.km offers scope for port development. It has tainted bureaucracy; Ministers and politicians deeply entrenched in corruption and controversies; though second in the country in mining, the growth of the sector is marred by unholy exploitation. The State saw the farmers queuing up for fertilizers; burning the crops like cotton and mirchi; throwing of onions in the streets for want of better price; crop holiday etc. Several of the recommendations of Jayati Ghosh Committee in the wake of farmer suicides and Mohan Kanda Committee Report in the wake of crop holiday have not seen light of the day. Liquor mafia in the State is under seize of the ACB and the estimated amount is Rs.5000cr and some informed sources place it ten times more.
The Rs.1.45lakhcrore budget of Andhra Pradesh Finance Minister in this backdrop is a hopeful estimate against the poor performance in 2011-12 both on tax revenue and capital receipts. Non-plan expenditure indicates a rise of around 15percent.
Sectorwise Allocation in regard to Economic Services (%) in Budget 2012-13
Sector RE.2012 BE 2012-13
Economic Sectors 36.46 37.99
Agriculture & Allied activities 3.56 4.04
Rural Development 5.93 6.48
Irrigation & Flood control 16.09 16.56
Energy 4.05 4.07
Industry & Minerals 0.70 0.70
Transport 3.05 3.04
Science, Technology & Environment 0.01 0.01
General Economic Services 3.08 3.09
Social Services 22.87 31.74
General Services 40.67 30.28
The tax buoyancy is seen in the expectation of nearly 20percent rise to Rs.66021crores in 2012. The growth euphoria of 9.26percent compared to the National GDP growth rate of 6.88% whittles down when one sees the number of farmers’ suicides and the lowest human development index ranking of the State (10th). Agriculture budget in a predominant agriculture State is a meager Rs. 3175crores (2.2% of the total budget or 3% of the revenue budget). There is no announcement of Market price stabilization fund the farmers have been seeking for the last five years. Regarding drought relief, except looking to central grant, nothing more could be seen.
The best part of the Budget is higher allocation to Education that touched 18% of the Revenue budget, the highest in the recent years. Allocation to Health dropped by a notch over the previous year from 4.16% to 4.04%. Allocation of just Rs.633crores in the backdrop of CII-organized Global conclave that promised investments of Rs.6.48lakhcrores would make the investors turn a nelson’s eye on the State.
Power sector is reeling under weekly power-off for the industry sector; farmers cry foul over the free power/seven hours a day; and severe voltage fluctuations speak of the quality of power. Investments seem trifle in this scenario for this sector too. Budget has long verbose where the allocations are least; the irrigation sector cleverly sticks to whatever was spent last time: it is actually Rs.8459crores against the allocation of Rs.15000croress. This helps in Fiscal Responsibility Budget Management of the State even in the year 2012 as releases are hinted only at the levels attained in 2011-12.
If the Social sector expenditure got a higher share it is only to be expected in the wake of by-elections in Telangana region and the impending General Elections a year after. The unsustaining sops would certainly cast a shadow on the growth prospects of the State. The Chief Minister’s keenness on sports led the Finance Minister to announce well-equipped sports stadia in each District. Legislature Constituency Fund of Rs.382crores goes for non-monitored investments/expenditure. The tiresome speech of the Finance Minister faces trying times in reaching the expected outcome.
Saturday, February 18, 2012
Thursday, February 16, 2012
Budget Blues
‘BEWARE OF THE IDES OF MARCH’
B. YERRAM RAJU
Economic Survey prior to Union budget 2012-13 is slated for 15th March and the Finance Minister started losing sleep in the wake of huge subsidies required for food safety, agriculture, irrigation, and investments. Strangely, he did not batter his eye-lid even once while increasing the MPs’ salaries and the annual largesse from Rs.1crore to 2crore per annum that triggered of chain reaction in States and even Municipal Corporations. The Corporators of Hyderabad were allowed a similar largesse at its Februrary 9th meeting. This largesse has no accountability and responsibility attached to them. The fiscal deficit takes a dip – both States and Centre put together by avoidable percent. FRBM has already reached beyond the promised level of 4.5% this year, with revenues dipping from both direct and indirect taxes in the wake of anticipated modest growth of around 6.9% (this also is doubtful) and expenditure increasing with largesse announcements and fruitless expenditure due to elections in five leading States. These Elections have taken to the Caesar’s predicted death date – 15th March.
CRISIL predicts a slow-down in the agriculture growth from 7.0 percent in 2010-11 to 2.5 percent in the current fiscal. Plagued by high interest rates and slowing economy, manufacturing sector would also decline and it may be less than the predicted decline to 3.9 percent. Mining sector anyway declined due to a spate of scams and Supreme Court directives on further exploration in key areas. Power sector is way behind the requirements of manufacturing and other sectors. The key thermal power in the wake of less explored coal reserves and choked supply channels would continue to shock the infrastructure sector. Equitable and sustainable development demand two essential conditions: respect for human rights and satisfying the basic needs of social development – health and education. The country’s HDI has declined even amidst a growing GDP (lowest in global rankings); there have been gross violation of human rights across the length and breadth of the country. There were anxious moments for the Government in setting its house in order in the shadow of series of scams of huge order. General Elections will be round the corner at the beginning of next year and wooing the electorate with largesse has to be countenanced by him. The challenges before the Union Finance Minister this year therefore are formidable.
Global economy casts its shadow:
According to the Global Economic Survey, both the World Bank and the UN predicted downward growth prospects:
• The global economy is expected to expand 2.5 and 3.1% in 2012 and 2013 using purchasing power parity weights
• High-income country growth is to be 1.4% in 2012 and 2.0% in 2013,
• Developing country growth has been revised down to 5.4 and 6%
• World trade, which expanded by an estimated 6.6% in 2011, will grow only 4.7% in 2012, before strengthening to 6.8% in 2013.
Post-UN and World Bank predictions during January 2012, the Central Statistical Organisation projected a further decline in India’s growth rate for the current year to 6.9%. It is not unlikely that even this figure may not realize when the actual measure ushers in at the end of the fourth quarter.
The fiscal deficit estimated to be around 6% of GDP would hardly find space for further doll-outs. The ray of hope is that the US economy promises a revival. The bail-out package to Europe also lends some credence to keep the balance swinging in favour of arresting unrest in the economy. However, the domestic undoing in the last two years unfolding scams after scams needs tackling firmly and this is where the infirmity lies.
Markets are not going to behave worse if the FM makes bold to increase the Share transaction tax to at least one percent. The advantage is that there are no tax administration costs as all the revenue goes to the treasury through payment gateways with no loss of time. The initial resistance and the drop in the index and the euphoria of pressures would be just a temporary phenomenon. The FM cannot any way bring back to the country even one fourth of the stashed blackmoney stored mostly by Politicians, to save the economy. Preventive measures lack the guts for implementation. There is no strong legislation to confiscate the properties of the corrupt politicians and bureaucrats. The Reforms may move only at snail space.
Stringent measures are the need of the hour to infuse capital in infrastructure development, agricultural production, storage, transportation and marketing. SME sector needs a boost and that is possible if a separate exchange set up is made functional involving banks and SIDBI.
Transaction tax for all high priced commodities like Diamond, Gold, silver and others needs to be introduced to augment the revenues of the government. Leakage of income by keeping a strict vigilance over Corporates and government institutions itself would give a boost to revenue.
It is time to revamp the whole system of data collection in the economy. More importantly, the farmers must be provided input subsidies of a larger scale than now but with laid out crop planning regionally acceptable; investments in drought proofing the economy; and finding resources for merit goods like education and health at double the rates prevailing now.
He has to rejig the incentives for investments in infrastructure in a manner that their delivery coincides with the actual grounding them. Capital flows would be governed by global financing conditions. It is hoped that the next policy announcement from the RBI may see a southward trend in basic rates. Against an otherwise discouraging year we had a job growth and it is hoped that this would continue, particularly in the manufacturing and services sector.
A slightly controversial measure can be the currency transaction tax mooted by the International Cooperation for Development and Solidarity in 1999 itself. Since this requires international agreement, the proposal can be taken to the G-20 for discussion and acceptance.
The other important area is refurbishing capital to the Nationalised Banks that constitute a little over 80 percent of the total global business. The NPAs have shown a phenomenal surge in the recent years not just because of global integration of financial markets and the recession, but due to lax credit risk assessments and monitoring. It is strange that Banks lent to companies like Rs.4500crores to an airline company should not have appointed a General Manager to monitor its cash flows on an on-going basis. The 2-G scam tainted monies pose another big dent into the public sector banks. If the Government keeps on refurbishing capital just because it happens to be the owner and the tier-1 capital needed increase due to implementation of Basel III migration, it is tax payer who has to take the burden and this is going to be huge in the wake of rising business in infrastructure and manufacturing sectors. The risks arising from lending to farm sector and SME sector seem to be a trifle compared to the risks in lending to the emerging sectors. Why should the tax-payer take the hit on these counts? It is time that the FM makes bold to do away with subsidies to the bureaucracy; fuel subsidies within the government itself – it is government vehicles that enjoy substantial fuel subsidy.
My sympathies are with the Finance Minister this year in the gigantic task ahead.
B. YERRAM RAJU
Economic Survey prior to Union budget 2012-13 is slated for 15th March and the Finance Minister started losing sleep in the wake of huge subsidies required for food safety, agriculture, irrigation, and investments. Strangely, he did not batter his eye-lid even once while increasing the MPs’ salaries and the annual largesse from Rs.1crore to 2crore per annum that triggered of chain reaction in States and even Municipal Corporations. The Corporators of Hyderabad were allowed a similar largesse at its Februrary 9th meeting. This largesse has no accountability and responsibility attached to them. The fiscal deficit takes a dip – both States and Centre put together by avoidable percent. FRBM has already reached beyond the promised level of 4.5% this year, with revenues dipping from both direct and indirect taxes in the wake of anticipated modest growth of around 6.9% (this also is doubtful) and expenditure increasing with largesse announcements and fruitless expenditure due to elections in five leading States. These Elections have taken to the Caesar’s predicted death date – 15th March.
CRISIL predicts a slow-down in the agriculture growth from 7.0 percent in 2010-11 to 2.5 percent in the current fiscal. Plagued by high interest rates and slowing economy, manufacturing sector would also decline and it may be less than the predicted decline to 3.9 percent. Mining sector anyway declined due to a spate of scams and Supreme Court directives on further exploration in key areas. Power sector is way behind the requirements of manufacturing and other sectors. The key thermal power in the wake of less explored coal reserves and choked supply channels would continue to shock the infrastructure sector. Equitable and sustainable development demand two essential conditions: respect for human rights and satisfying the basic needs of social development – health and education. The country’s HDI has declined even amidst a growing GDP (lowest in global rankings); there have been gross violation of human rights across the length and breadth of the country. There were anxious moments for the Government in setting its house in order in the shadow of series of scams of huge order. General Elections will be round the corner at the beginning of next year and wooing the electorate with largesse has to be countenanced by him. The challenges before the Union Finance Minister this year therefore are formidable.
Global economy casts its shadow:
According to the Global Economic Survey, both the World Bank and the UN predicted downward growth prospects:
• The global economy is expected to expand 2.5 and 3.1% in 2012 and 2013 using purchasing power parity weights
• High-income country growth is to be 1.4% in 2012 and 2.0% in 2013,
• Developing country growth has been revised down to 5.4 and 6%
• World trade, which expanded by an estimated 6.6% in 2011, will grow only 4.7% in 2012, before strengthening to 6.8% in 2013.
Post-UN and World Bank predictions during January 2012, the Central Statistical Organisation projected a further decline in India’s growth rate for the current year to 6.9%. It is not unlikely that even this figure may not realize when the actual measure ushers in at the end of the fourth quarter.
The fiscal deficit estimated to be around 6% of GDP would hardly find space for further doll-outs. The ray of hope is that the US economy promises a revival. The bail-out package to Europe also lends some credence to keep the balance swinging in favour of arresting unrest in the economy. However, the domestic undoing in the last two years unfolding scams after scams needs tackling firmly and this is where the infirmity lies.
Markets are not going to behave worse if the FM makes bold to increase the Share transaction tax to at least one percent. The advantage is that there are no tax administration costs as all the revenue goes to the treasury through payment gateways with no loss of time. The initial resistance and the drop in the index and the euphoria of pressures would be just a temporary phenomenon. The FM cannot any way bring back to the country even one fourth of the stashed blackmoney stored mostly by Politicians, to save the economy. Preventive measures lack the guts for implementation. There is no strong legislation to confiscate the properties of the corrupt politicians and bureaucrats. The Reforms may move only at snail space.
Stringent measures are the need of the hour to infuse capital in infrastructure development, agricultural production, storage, transportation and marketing. SME sector needs a boost and that is possible if a separate exchange set up is made functional involving banks and SIDBI.
Transaction tax for all high priced commodities like Diamond, Gold, silver and others needs to be introduced to augment the revenues of the government. Leakage of income by keeping a strict vigilance over Corporates and government institutions itself would give a boost to revenue.
It is time to revamp the whole system of data collection in the economy. More importantly, the farmers must be provided input subsidies of a larger scale than now but with laid out crop planning regionally acceptable; investments in drought proofing the economy; and finding resources for merit goods like education and health at double the rates prevailing now.
He has to rejig the incentives for investments in infrastructure in a manner that their delivery coincides with the actual grounding them. Capital flows would be governed by global financing conditions. It is hoped that the next policy announcement from the RBI may see a southward trend in basic rates. Against an otherwise discouraging year we had a job growth and it is hoped that this would continue, particularly in the manufacturing and services sector.
A slightly controversial measure can be the currency transaction tax mooted by the International Cooperation for Development and Solidarity in 1999 itself. Since this requires international agreement, the proposal can be taken to the G-20 for discussion and acceptance.
The other important area is refurbishing capital to the Nationalised Banks that constitute a little over 80 percent of the total global business. The NPAs have shown a phenomenal surge in the recent years not just because of global integration of financial markets and the recession, but due to lax credit risk assessments and monitoring. It is strange that Banks lent to companies like Rs.4500crores to an airline company should not have appointed a General Manager to monitor its cash flows on an on-going basis. The 2-G scam tainted monies pose another big dent into the public sector banks. If the Government keeps on refurbishing capital just because it happens to be the owner and the tier-1 capital needed increase due to implementation of Basel III migration, it is tax payer who has to take the burden and this is going to be huge in the wake of rising business in infrastructure and manufacturing sectors. The risks arising from lending to farm sector and SME sector seem to be a trifle compared to the risks in lending to the emerging sectors. Why should the tax-payer take the hit on these counts? It is time that the FM makes bold to do away with subsidies to the bureaucracy; fuel subsidies within the government itself – it is government vehicles that enjoy substantial fuel subsidy.
My sympathies are with the Finance Minister this year in the gigantic task ahead.
Sunday, January 15, 2012
Mother's teachings: Man earns but woman manages
Managing the House is strategic
My father believed in a large family and he fortuitously balanced the gender at home with six sons and six daughters. By the time he was transferred to Tirupati in 1957, the strength of the family was 8 children. As a Head Cashier of a Bank committed to high ethical standards and principled living, his monthly salary of a little less than Rs.250 was insufficient to meet both ends, particularly when the influx of visitors in the pilgrim town was unimaginably high. My Mother not knowing what to do, one day made bold to tell my father to buy a cow and a buffalo giving one litre of milk per time. My father bought both on credit – a good cow was costing those days Rs.750 and a buffalo Rs.500 yielding per time one litre. Luckily, both came with she-calves.
My Mother used cow’s milk to feed the children and buffalo’s milk for curds, butter milk, a little butter -for applying to the faces of the girl-children with haldi-, and ghee. This got a savings of Rs. One hundred per month. The loan raised was repaid in 18months by my father. I was doing my graduation. I used to go to Sri Ramalayam close to our house where under the bright light and serene surroundings, undisturbed by the crying kids of home, I used to complete my day’s lessons. The power consumption at home was under check with my mother switching on the motor only after the maidservant left finishing her day’s work. She was switching on motor only for 10-15 minutes and for four or five times a day. (This is what my wife learnt from my Mother and follows to this day.)
Fortunately, the first two calvings of cow were females. The first female calf of the buffalo did not survive and the second calf was a male calf. So, we had to sell the buffalo at the end of one year to substitute with another with a female calf. My Mother was insistent that I take the calf to the Veterinary Hospital every Saturday for de-worming in the first three-months and thereafter once in a fortnight to ensure that it grew to her expectations to be an yielder after two and half years. Of course, after a decade, my Mother used to say, “I give birth to female children and my animals give birth to male calves – both are uneconomic.” My father had four transfers from Tirupati before he retired and to each place, the cow and buffalo and their calves moved with us. It was from my Mother that I learnt that the economics of a dairy depends upon the progeny. This lesson helped me in financing large number of dairy units to small and marginal farmers successfully when I became the Manager of Agricultural Development Branch of the SBI. Calf rearing is more important than dairy scheme in dairy economics.
We always had a small kitchen garden where greens, chillies, tomatoes are grown. At Bhimunipatnam in Visakhapatnam District, where my father preferred to settle post-retirement, my Mother used to maintain good floriculture, a mango tree, raw banana and banana fruit plants, a pomegranate, and drumstick plant. These with homestead dairy took care of the requirements of evergreen and fully occupied house of grandchildren. Any number of guests for any number of times was most welcome for my Mother thereafter. Managing a house with limited means requires such strategic interventions. Man only earns but it is the woman who manages and manages most efficiently.
My father believed in a large family and he fortuitously balanced the gender at home with six sons and six daughters. By the time he was transferred to Tirupati in 1957, the strength of the family was 8 children. As a Head Cashier of a Bank committed to high ethical standards and principled living, his monthly salary of a little less than Rs.250 was insufficient to meet both ends, particularly when the influx of visitors in the pilgrim town was unimaginably high. My Mother not knowing what to do, one day made bold to tell my father to buy a cow and a buffalo giving one litre of milk per time. My father bought both on credit – a good cow was costing those days Rs.750 and a buffalo Rs.500 yielding per time one litre. Luckily, both came with she-calves.
My Mother used cow’s milk to feed the children and buffalo’s milk for curds, butter milk, a little butter -for applying to the faces of the girl-children with haldi-, and ghee. This got a savings of Rs. One hundred per month. The loan raised was repaid in 18months by my father. I was doing my graduation. I used to go to Sri Ramalayam close to our house where under the bright light and serene surroundings, undisturbed by the crying kids of home, I used to complete my day’s lessons. The power consumption at home was under check with my mother switching on the motor only after the maidservant left finishing her day’s work. She was switching on motor only for 10-15 minutes and for four or five times a day. (This is what my wife learnt from my Mother and follows to this day.)
Fortunately, the first two calvings of cow were females. The first female calf of the buffalo did not survive and the second calf was a male calf. So, we had to sell the buffalo at the end of one year to substitute with another with a female calf. My Mother was insistent that I take the calf to the Veterinary Hospital every Saturday for de-worming in the first three-months and thereafter once in a fortnight to ensure that it grew to her expectations to be an yielder after two and half years. Of course, after a decade, my Mother used to say, “I give birth to female children and my animals give birth to male calves – both are uneconomic.” My father had four transfers from Tirupati before he retired and to each place, the cow and buffalo and their calves moved with us. It was from my Mother that I learnt that the economics of a dairy depends upon the progeny. This lesson helped me in financing large number of dairy units to small and marginal farmers successfully when I became the Manager of Agricultural Development Branch of the SBI. Calf rearing is more important than dairy scheme in dairy economics.
We always had a small kitchen garden where greens, chillies, tomatoes are grown. At Bhimunipatnam in Visakhapatnam District, where my father preferred to settle post-retirement, my Mother used to maintain good floriculture, a mango tree, raw banana and banana fruit plants, a pomegranate, and drumstick plant. These with homestead dairy took care of the requirements of evergreen and fully occupied house of grandchildren. Any number of guests for any number of times was most welcome for my Mother thereafter. Managing a house with limited means requires such strategic interventions. Man only earns but it is the woman who manages and manages most efficiently.
Monday, December 26, 2011
Scripting the culture of change
The Chairman scripting the culture of change
It was 20th July 1972 sunny morning. In Visakhapatnam, no English daily would reach the morning readers to relax with a cup of coffee in the early hours of the day. The cool sea breeze on the long verandah was all that was available.
The previous day was tiresome as I spent the whole day till about 10p.m., in the village near Tallavalasa 30kms East of Visakhapatnam taking documents at the village for 90 crop loans I was to disburse, as Agent, Agricultural Development Branch of the SBI. Suddenly, the telephone rang uninterruptedly in the hall, as if it was a wake-up call. I picked up the phone. It was Development Manager (Agriculture) V.S on the line. First question: Did you see the paper today?’ No: was my reply. He said: ‘There is a box item in all the dailies on what you said in the village.’ I replied: Sir, I do not remember to have told anything to the press as I was only taking documents for the Agriculture Cash credit I programmed to disburse.’ The Box item reads: “SBI takes 400 odd signatures even for a hundred rupee loan. B. Yerram Raju, Agent , Agricultural Development Branch, SBI, Visakhapatnam confirms this, while disbursing crop loans for about 90 farmers in Tallavalasa village.” UNI. (I was told that all the dailies carried the item. Later in the month, all the magazines carried the item as a Box item.)
Then I said: I remember that the UNI Correspondent having come to know that the Bank is going to the farmer instead of the farmer coming to the village came to the village and sat through the whole day and must have sent the dispatch. I only confirmed his observation. Then he said: “dear raju: You know the Chairman Shri R.K. Talwar is here in Hyderabad. Yesterday, the Union Minister for Finance, Y.B. Chavan and the Chairman inaugurated the State Bank Staff College and the PR people had put in lot of efforts to put the picture in the front page and down below the photo this box item appeared.” Then I realized what the item caused.
Quickly followed a few more calls: from the Staff Superintendent, District Superintendent, the Regional Manager VNVP Rao – all calling, as if, for my explanation!! My RM said: The Chairman would like you to fly to Hyderabad today and see him by lunch hour.’ There was only one Dakota flight of Indian Airlines from Vizag. I immediately rushed to the Airport after managing the ticket.
I reached at 1p.m and went to the Local Head office to meet my RM and Development Manager. They accompanied me to the Chairman, who was about to go for lunch. “Oh, Yerram is here. Come; let us talk over lunch, he said. My shiver in the pants ceased. Then he asked the Development Manager: did you count the number of signatures on the cash credit document and Demand Promissory Note with the take-delivery letter that the farmer had to sign to get crop loan from us?” He said: “yes sir: it numbered to 427.” Then he asked me: how much time you took to complete the documentation for the 90 farmers? Sir, I and two of my field officers took about 13 hours in the village. We have to complete the disbursement before the cropping season ends in another week to ten days and we have 2000 crop loans to disburse in 30 adopted villages of the bank; even the appraisal form is nine pages , I said. What is the solution?
Sir, “Canara bank takes only a four-page simple document. When the law of the land is same for every bank, why should we take a cumbersome 9-page cash credit agreement? Each blank filled, addition, alteration, etc require the borrower’s signature and under group guarantee, the guarantors’ signatures or LTI. Each illiterate farmer’s thumb impression needs witness of two known persons. All this makes up for the number 427. We have to disburse tens of hundreds of loans in a number of villages ahead of the season.” The doyen of bankers understood the problem. He asked the Development Manager to go over to Bombay Central Office, the next day along with the solicitors from Madras. The team was to work out simple crop-loan documentation within a week’ time. I was to go along with the team to perfect it.
The result: simplified documentation and appraisal procedure for crop loans. This anecdote left an indelible impression on my career as a banker.
It was 20th July 1972 sunny morning. In Visakhapatnam, no English daily would reach the morning readers to relax with a cup of coffee in the early hours of the day. The cool sea breeze on the long verandah was all that was available.
The previous day was tiresome as I spent the whole day till about 10p.m., in the village near Tallavalasa 30kms East of Visakhapatnam taking documents at the village for 90 crop loans I was to disburse, as Agent, Agricultural Development Branch of the SBI. Suddenly, the telephone rang uninterruptedly in the hall, as if it was a wake-up call. I picked up the phone. It was Development Manager (Agriculture) V.S on the line. First question: Did you see the paper today?’ No: was my reply. He said: ‘There is a box item in all the dailies on what you said in the village.’ I replied: Sir, I do not remember to have told anything to the press as I was only taking documents for the Agriculture Cash credit I programmed to disburse.’ The Box item reads: “SBI takes 400 odd signatures even for a hundred rupee loan. B. Yerram Raju, Agent , Agricultural Development Branch, SBI, Visakhapatnam confirms this, while disbursing crop loans for about 90 farmers in Tallavalasa village.” UNI. (I was told that all the dailies carried the item. Later in the month, all the magazines carried the item as a Box item.)
Then I said: I remember that the UNI Correspondent having come to know that the Bank is going to the farmer instead of the farmer coming to the village came to the village and sat through the whole day and must have sent the dispatch. I only confirmed his observation. Then he said: “dear raju: You know the Chairman Shri R.K. Talwar is here in Hyderabad. Yesterday, the Union Minister for Finance, Y.B. Chavan and the Chairman inaugurated the State Bank Staff College and the PR people had put in lot of efforts to put the picture in the front page and down below the photo this box item appeared.” Then I realized what the item caused.
Quickly followed a few more calls: from the Staff Superintendent, District Superintendent, the Regional Manager VNVP Rao – all calling, as if, for my explanation!! My RM said: The Chairman would like you to fly to Hyderabad today and see him by lunch hour.’ There was only one Dakota flight of Indian Airlines from Vizag. I immediately rushed to the Airport after managing the ticket.
I reached at 1p.m and went to the Local Head office to meet my RM and Development Manager. They accompanied me to the Chairman, who was about to go for lunch. “Oh, Yerram is here. Come; let us talk over lunch, he said. My shiver in the pants ceased. Then he asked the Development Manager: did you count the number of signatures on the cash credit document and Demand Promissory Note with the take-delivery letter that the farmer had to sign to get crop loan from us?” He said: “yes sir: it numbered to 427.” Then he asked me: how much time you took to complete the documentation for the 90 farmers? Sir, I and two of my field officers took about 13 hours in the village. We have to complete the disbursement before the cropping season ends in another week to ten days and we have 2000 crop loans to disburse in 30 adopted villages of the bank; even the appraisal form is nine pages , I said. What is the solution?
Sir, “Canara bank takes only a four-page simple document. When the law of the land is same for every bank, why should we take a cumbersome 9-page cash credit agreement? Each blank filled, addition, alteration, etc require the borrower’s signature and under group guarantee, the guarantors’ signatures or LTI. Each illiterate farmer’s thumb impression needs witness of two known persons. All this makes up for the number 427. We have to disburse tens of hundreds of loans in a number of villages ahead of the season.” The doyen of bankers understood the problem. He asked the Development Manager to go over to Bombay Central Office, the next day along with the solicitors from Madras. The team was to work out simple crop-loan documentation within a week’ time. I was to go along with the team to perfect it.
The result: simplified documentation and appraisal procedure for crop loans. This anecdote left an indelible impression on my career as a banker.
Sunday, December 25, 2011
A great legacy indeed
The legacy I enjoyed:
After a couple of years as Assistant General Manager of a Textile Mills immediately following my post-graduation in Economics made me sterner stuff having handled a strike by a 450-labour and later the management declaring a lock-out for 24 days. My fatehr desired that I should become a Probationary Officer in either RBI or SBI or get into civil service. I could fulfil his wish preferring SBI PO to IPS where also I got selection. The grooming I got from my dad made me hold my head high.
My father, a banker who joined the Imperial Bank of India (IBI) in 1936, had his grooming at the altar of efficiency in banking and finance. He was an upright cashier and the most loving and yet most feared Head Cashier of the Bank in the composite Madras Circle of the IBI. I used to carry coffee flask to the main branch of Visakhapatnam when I was seven years at 12noon – his coffee hour for the entire 94-year life he lead. One day, he asked me to wait and there was lot of anxiety in his face. He went to the Agent to report that he gave one section in excess to the captain of a ship and the ship was about to sail in the evening at 4p.m. The Agent telephoned to the Port Authorities to allow this cashier, i.e., my father to reach the captain. He gave his car to go to the port. My father could go to the captain. He seemed to have told the captain of the excess payment. The Captain said: “I did not count: young man, for a IBI cashier never faults. He pulled the cash cover and asked my father to recount and take if the amount was alright. My father recounted and showed to him the excess one-rupee note section (Rs. One hundred in all – and this was a big sum for a cashier whose monthly salary was just Rs.36 with a biennial increment of four annas (quarter of a rupee). That was the image of a bank cashier in that by-gone era. My father was later cautioned by the Agent but the Captain insisted on the British Agent R.L. Wishart to reward the young cashier that accelerated his increment by an year!!
He was posted as Official-in-charge of a Pay office at Ramachandrapuram in East Godavari District and was given ten days time to take over the charge of his official position. During the take-over period, the person-in-charge was supposed to verify all the stocks and gold ornaments pledged to the bank to confirm that the drawing power was well within the drawing power. The predecessor was known to be lax in all the official matters. My father was examining the stocks – and they were supposed to be oil drums. He took a wooden stick and started beating all the drums and asked the owners to break open the seals. Initially, there would appear to be lot of resistance and later there were veiled threats. Unrelenting, he insisted and one drum opened, revealed that it was water and not oil. He lost no time in advising both the branch controlling the pay office and the Madras Local Head Office while serving a notice on the borrower firm to make good the entire advance within 24hours. The Agent who had a hand in perpetrating this fraud became angry at his reporting to Head Office but could not find fault in calling up the advance. The event led to the suspension of the predecessor. The Agent, however, transferred my father even before the complete take over to another pay office. This incident was narrated to me when I was undergoing training as probationary officer. Another lesson I learnt from him was the way I should do physical inspection of stocks of wooden logs and iron and steel. The length, tensile strength of the steel measured in weight and the quality of wooden logs – measurement and volume etc.
At another branch, he noticed that a cashier working at the counter, for whose omissions, commissions and intromissions’ he is responsible by virtue of the Agreement that the Head Cashier had with the Bank, was opening the clipped notes at the cash verification table. He lost no time in asking him to quit the table by dislodging him from the work. He recommended that cashier’s suspension and the Bank had to conduct the enquiry and on admission of the guilt, the cashier was let off with a cut in increment. He used to say that a cashier who cannot see the cash in the safe or counter at work as pebbles or insects, that person was unfit for cashier’s job. Such rigidities have no place today. But the legacy he left and the lessons he taught me held me in good stead during my nearly three-decade career in the State Bank of India – the legatee of IBI. I had the unique opportunity of serving his retirement letter as I was posted to the branch as Branch Manager where he was serving as sub-accountant (both son and father cannot serve in the same branch and his posting to another local branch was also issued but he preferred to retire having only an year left for his actual retirement in 1974). The Regional Manager processed his application for retirement during my one-month taking over period. On the day of my assuming charge, he retired from the same branch. The most fortunate legacy, I thought worthy of recall in these days when corruption and bribery are being fought in streets.
After a couple of years as Assistant General Manager of a Textile Mills immediately following my post-graduation in Economics made me sterner stuff having handled a strike by a 450-labour and later the management declaring a lock-out for 24 days. My fatehr desired that I should become a Probationary Officer in either RBI or SBI or get into civil service. I could fulfil his wish preferring SBI PO to IPS where also I got selection. The grooming I got from my dad made me hold my head high.
My father, a banker who joined the Imperial Bank of India (IBI) in 1936, had his grooming at the altar of efficiency in banking and finance. He was an upright cashier and the most loving and yet most feared Head Cashier of the Bank in the composite Madras Circle of the IBI. I used to carry coffee flask to the main branch of Visakhapatnam when I was seven years at 12noon – his coffee hour for the entire 94-year life he lead. One day, he asked me to wait and there was lot of anxiety in his face. He went to the Agent to report that he gave one section in excess to the captain of a ship and the ship was about to sail in the evening at 4p.m. The Agent telephoned to the Port Authorities to allow this cashier, i.e., my father to reach the captain. He gave his car to go to the port. My father could go to the captain. He seemed to have told the captain of the excess payment. The Captain said: “I did not count: young man, for a IBI cashier never faults. He pulled the cash cover and asked my father to recount and take if the amount was alright. My father recounted and showed to him the excess one-rupee note section (Rs. One hundred in all – and this was a big sum for a cashier whose monthly salary was just Rs.36 with a biennial increment of four annas (quarter of a rupee). That was the image of a bank cashier in that by-gone era. My father was later cautioned by the Agent but the Captain insisted on the British Agent R.L. Wishart to reward the young cashier that accelerated his increment by an year!!
He was posted as Official-in-charge of a Pay office at Ramachandrapuram in East Godavari District and was given ten days time to take over the charge of his official position. During the take-over period, the person-in-charge was supposed to verify all the stocks and gold ornaments pledged to the bank to confirm that the drawing power was well within the drawing power. The predecessor was known to be lax in all the official matters. My father was examining the stocks – and they were supposed to be oil drums. He took a wooden stick and started beating all the drums and asked the owners to break open the seals. Initially, there would appear to be lot of resistance and later there were veiled threats. Unrelenting, he insisted and one drum opened, revealed that it was water and not oil. He lost no time in advising both the branch controlling the pay office and the Madras Local Head Office while serving a notice on the borrower firm to make good the entire advance within 24hours. The Agent who had a hand in perpetrating this fraud became angry at his reporting to Head Office but could not find fault in calling up the advance. The event led to the suspension of the predecessor. The Agent, however, transferred my father even before the complete take over to another pay office. This incident was narrated to me when I was undergoing training as probationary officer. Another lesson I learnt from him was the way I should do physical inspection of stocks of wooden logs and iron and steel. The length, tensile strength of the steel measured in weight and the quality of wooden logs – measurement and volume etc.
At another branch, he noticed that a cashier working at the counter, for whose omissions, commissions and intromissions’ he is responsible by virtue of the Agreement that the Head Cashier had with the Bank, was opening the clipped notes at the cash verification table. He lost no time in asking him to quit the table by dislodging him from the work. He recommended that cashier’s suspension and the Bank had to conduct the enquiry and on admission of the guilt, the cashier was let off with a cut in increment. He used to say that a cashier who cannot see the cash in the safe or counter at work as pebbles or insects, that person was unfit for cashier’s job. Such rigidities have no place today. But the legacy he left and the lessons he taught me held me in good stead during my nearly three-decade career in the State Bank of India – the legatee of IBI. I had the unique opportunity of serving his retirement letter as I was posted to the branch as Branch Manager where he was serving as sub-accountant (both son and father cannot serve in the same branch and his posting to another local branch was also issued but he preferred to retire having only an year left for his actual retirement in 1974). The Regional Manager processed his application for retirement during my one-month taking over period. On the day of my assuming charge, he retired from the same branch. The most fortunate legacy, I thought worthy of recall in these days when corruption and bribery are being fought in streets.
Monday, December 19, 2011
Future need not be rosy but not reddish either
Markets are tizzy at the moment. The economy looks down the drain in the backdrop of global debt crisis; falling rupee; rising inflation; political paralysis and less than estimated GDP growth. But what holds promise is the concern of all and the anxiety to resurrect the sagging economy. Finance Minister has a tough task ahead in the Budget 2012-13, with just an year to go for the General Elections. The fiscal deficit would hardly find space for further doll-outs. The ray of hope is that the US economy promises a revival. The bail-out package to Europe also lends some credence to keep the balance swinging in favour of arresting unrest in the economy. However, the domestic undoing in the last two years unfolding scams after scams needs tackling firmly and this is where the infirmity lies. Markets are not going to behave worse if the FM makes bold to increase the Share transaction tax to at least one percent. Second, the farmers must be provided input subsidies of a larger scale than now but with laid out crop planning regionally acceptable; investmetns in drought proofing the economy; and finding resources for merti goods like education and health at double the rates prevailing now. The year ahead may not be rosy but need not be reddish either.
Tuesday, December 13, 2011
The falling rupee - domestic policy paralysis or global clues?
Let us look at the falling rupee in the context of inflation. Pare it with the value of rupee - you will notice that the fall is fatal. There is no dispute that there is decision deficit along with the rising fiscal deficit. We have to rise above petty politics and create conditions conducive for attracting investors. To blame it all on FDI - retail is looking the problem through a coloured glass. There is decline in IIP on a continuing scale and this is in the backdrop of unceertain future in the farm sector - what with the rising rate of suicides of farmers and crop holiday in one of the leading agrarian states in the country. Let me now take the point of Euro crisis and its impact on Indian economy. Despite our not so strong exports to Euro Zone, the refusal or absolute lack of resolve to tackle fiscal indiscipline by the Euro Zone with London,Berlin and Paris ganging up against any reasonable support clearly direct a worse recession in the next six to twelve months. This is bound to adversely impact, notwithstanding the stable domestic savings and investment ratios thus far. While it would be injudicious to provide the sort of stimulus that the Government announced in 2008, the Government should create conditions for a steady flow of investments in infrastructure sector. The country has blurred in continuing to support thermal power in the context of unsupporting coal reserves and has done little to create a power grid of varietal sources of energy. Energy risk management speaks volumes of the failure of government economic pundits. This has scope for drastic improvement and this does not depend upon global recession. It is time that the Government wakes up to realities. Whatever the RBI could do has been done. It is for Government to do what it has to do to contain inflation and brace up for better governance, both political and economic.
Being a Co-author
BEING A CO-AUTHOR: B. Yerram Raju
Having been a co-author for five of my fourteen books in my four and half decades of teaching, training and learning career, introspecting into such experience unfolded many lessons worthy to share. My first co-authored book on rural banking was with my boss, where I wrote most of the text and the boss gave a second reading and scripted five chapters himself. He being the boss became the first author and highly competent and understanding as he was, there was no regret. He took the lead in its propagation. The second was a co-edited book with a trainee-bureaucrat on a theme we settled upon. We invited articles from distinguished writers on the subject; we edited them; the first author took the lead in extending invitations to writers; he wrote the introduction to the book and I suggested that he should be the first author. Then came the third co-edited publication: it was the proceedings of a Seminar on the subject on VISION 2020 in a State Agriculture Economy. The co-author was a reputed Agriculture Scientist and a retired Vice-Chancellor. Though most of the work relating to conduct of the seminar and compilation of articles presented at the seminar was done by me, my highest regard for the person of eminence who chaired the seminar and who went through the script for arranging them in an order appealing to the reader, resulted in giving him the rightful first place among the co-authors. The fourth was again the summary of the proceedings and presentations of a Seminar on Corporate Governance organized by me and my co-author. The co-author was the person who suggested for publication of proceedings and took lead in tying up with the publisher of repute. Naturally, the first among us was he. The fifth publication was on Small Enterprises, a subject close to my heart. I requested an old colleague of mine, who is an expert on International Banking, to script a chapter on international markets. He did it in good time. Though he initially did not agree to be co-author, I invited him to be on rolls and he took the second place.
The latest one is a cut different. The co-author and I got in touch with each other through the mediation of his Professor who enrolled him for Ph.D. His dissertation was reviewed by me. The request to be co-author for a different kind of research effort took me close to him. The themes were exchanged; the script went up and down; there were additions of experiences; there was review and re-review and it was an year and half work on the net and a year-and half of research by the co-author with his team of research. The whole concept and thought process took shape at the research desk. It was only when the first draft got ready, both of us happened to see each other to run through the script together. It was the work behind the book; the passion of the co-author in the whole script; his zeal for being an author of global repute in the very first script – all together, put him as the first author.
The pride and prejudice of the first authorship and the humility of the second authorship in the journey of experiential learning are worthy to share, I thought.
Having been a co-author for five of my fourteen books in my four and half decades of teaching, training and learning career, introspecting into such experience unfolded many lessons worthy to share. My first co-authored book on rural banking was with my boss, where I wrote most of the text and the boss gave a second reading and scripted five chapters himself. He being the boss became the first author and highly competent and understanding as he was, there was no regret. He took the lead in its propagation. The second was a co-edited book with a trainee-bureaucrat on a theme we settled upon. We invited articles from distinguished writers on the subject; we edited them; the first author took the lead in extending invitations to writers; he wrote the introduction to the book and I suggested that he should be the first author. Then came the third co-edited publication: it was the proceedings of a Seminar on the subject on VISION 2020 in a State Agriculture Economy. The co-author was a reputed Agriculture Scientist and a retired Vice-Chancellor. Though most of the work relating to conduct of the seminar and compilation of articles presented at the seminar was done by me, my highest regard for the person of eminence who chaired the seminar and who went through the script for arranging them in an order appealing to the reader, resulted in giving him the rightful first place among the co-authors. The fourth was again the summary of the proceedings and presentations of a Seminar on Corporate Governance organized by me and my co-author. The co-author was the person who suggested for publication of proceedings and took lead in tying up with the publisher of repute. Naturally, the first among us was he. The fifth publication was on Small Enterprises, a subject close to my heart. I requested an old colleague of mine, who is an expert on International Banking, to script a chapter on international markets. He did it in good time. Though he initially did not agree to be co-author, I invited him to be on rolls and he took the second place.
The latest one is a cut different. The co-author and I got in touch with each other through the mediation of his Professor who enrolled him for Ph.D. His dissertation was reviewed by me. The request to be co-author for a different kind of research effort took me close to him. The themes were exchanged; the script went up and down; there were additions of experiences; there was review and re-review and it was an year and half work on the net and a year-and half of research by the co-author with his team of research. The whole concept and thought process took shape at the research desk. It was only when the first draft got ready, both of us happened to see each other to run through the script together. It was the work behind the book; the passion of the co-author in the whole script; his zeal for being an author of global repute in the very first script – all together, put him as the first author.
The pride and prejudice of the first authorship and the humility of the second authorship in the journey of experiential learning are worthy to share, I thought.
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