Monday, July 8, 2013

Corporate Governance

Kumar Mangalam Birla is on the Board of RBI at the time of applying for a license to open a bank under the new licensing policy. He was the Chairman of the Committee that worked on Corporate Governance for SEBI and the same was adopted by SEBI. He should have practiced what he preached by stepping down from the Board on the day of signing the application for license. 

Calgary, nay Coolgary!

Calgary, nay Coolgary!

Lush green lawns front-end most houses
Flush out discomforting mind
Fresh thoughts walk into the doors of happiness
Moved out in hot Sun
Trapped in the drizzle midway
Drenched in rain reaching the destination
Threatened stampede a damp squib
Fun and frolic rule roost in jostling crowds
Ran into the train to reach back Edge Valley
The gateway to Hampton Heights
Lovely and short journey to become shorter
As Calgary turned Coolgary
La, la, la La Vita: The home of the near and dear.


Saturday, July 6, 2013

VITALINFO: Kaun Banega RBI Governor ?

VITALINFO: Kaun Banega RBI Governor ?
Dr Subba Rao has passed through a critical phase in the economic history of the country with unabated inflation, intransigent and mute fiscal regime, rising CAD and governance deficit. He ran with legs and hands tied with speed that any person would have hardly expected. There are serious undercurrents at reducing the autonomy of the central bank and he may be really wanting to have rest for a while.

Greed untamed builds Casinos and breeds chaos

The huge Casino towers on the Canadian side of Niagara Falls stand tall to assert that the soothsayers have long life to bring seeming riches to some, standing riches to the investors of Casino and catastrophe to millions. Over 66 percent of the Toronto citizens voted against its entry as they are convinced that their hard earned valets vanish in a jiffy and move to unknown territory of unpredictable and unproductive investments.

Real money is being bet on the strength of computers. The mobiles did it all for the betting on IPL in India. Several reputed players stand in the jury box if the investigations go right ere long. All the betting is done on a  series of predictions in simulated situations and several won and most lost. This is just akin to trading on derivatives of sorts that had no originating asset in the pre-crisis 2007.

Human behavior is never consistent. Riches get entrenched in greed. Greed can never be regulated nor can virtue. But the system can halt the greed if rightly regulated. Ethics can tame it. Riches are visible but ethics are invisible though inherent. Every person looks at the visible and goes after it. A 'Narayana Murthy' takes over two decades to build an ethical empire in Infosys for another person to bring it down in three years!

How do we develop consistency in hierarchy and governance? When can we have institutions to have choices instead of individuals to positions that matter for growth of institutions?  When can we have ecstasy instead of agony in choosing persons who refuse to identify themselves with caste, creed or religion, reserved or unreserved category to claim positions of leadership in organisations and governments? When can Indian Constitution that is tethering with more than 100 amendments outpaging the original constitution be re-written to provide the next generation protection of a strong tripod of democracy? These questions do not defy an answer if at all the people are willing to find an answer. It starts with good education and building healthy minds from the childhood.

The problem of excess greed has become universal. Even Mr Carney, while assuming charge as Governor of  central bank of Canada said: " Trust has screached out of the parking lot  with the collapse of the investment bank that left the global financial system teetering." He added: "Integrity cannot be legislated but it also certainly cannot be bought in a market place however free the markets are." A change in culture is individual's responsibility.

The aim of the blog is to set people thinking on these issues and acting in their own limited spheres to bring the needed change in thinking and approaches.

Sunday, June 30, 2013

Lake Louise:wonder wanders in splendor

Lake Louise: wonder wanders in splendor

Wonder wanders in splendor
Thunder blows cold
Grandeur greets the lake
Humility dancing on its lips
Thou art Lake Louise.

Beauty in bounty waves its lily white hands
Smiling skies beckon thee
To the snow-clad mountains
Lush green meadows
And windy pines dance to your tunes
Thou art Lake Louise.

Life is lovely
Views are piety
Misty mountains
Green valley welcome
Thou art Lake Louise.

Wearing the white gowns
You Rocky Mountains
Marry the green meadow
Only to divorce on a shining Sun
Leaving waters high
Into the lakes to turn jade
Thou art Lake Louise.

As the day gets into dusk
Clouds gather to shower
Defining their joy with nature bounty
Thou art Lake Louise.

Returning to Calgary
 The memories of the Lake
Enchant the mind
Pristine glory unwinds
Thou art Lake Louise.

Snowy mountains shine
Sun feeling shy
Waters soft stunt the rocks on shore
Pines in heights in humble the flowing water
Waves’ silver streaks all in smiles
Thou art Lake Louise.

Greeting hands clasping with nature
Hills of Louise clad in while
Drill in shrill send no shivers
Waves’ silver streaks all in smiles
Thou art Lake Louise.

Shriya’s locks of hair
Down her lovely looks
Chintu on heights of joy
Hiding on smiling lips
Gunnu laughing wanting to mount the glaciers
Daunting and daring
Put on hold by loving mom and dad.

Drenching the feel in freezing waters
A joy forever
Lovely lake Louise waters in all its charms
Greeting hands clasping with nature
Hills of Lewis clad in white
Dancing kids jumping into waters
Put on hold by loving mom and dad.

Lo and behold!
From the bottom of the lush green farms
Raise the full scale rainbow
What a sight!
The lovely bow wanted to see unto itself
Mirrored in the sky a wider reflection
The sight you can never erase in life
Thou art the Lake Louise.






Monday, May 27, 2013

Governance in Banks is hollow

Corporate Governance in Banks?
Reserve Bank of India recently reiterated the Risk Based Supervision would be pursued vigorously in the backdrop of Basel III. All Bank Boards have put in place Risk management committee and Audit Committee as a regulatory compliance measure. Now most District Central Cooperative banks and the State Cooperative banks under the supervision of NABARD are also expected to fall in line with such regulatory compliance measures. Apparently it looks as though that the financial sector in India is way ahead of several emerging economies in Basel III implementation management.
Go deep into the functioning of Boards: one realizes that the measures are hollow. The seriousness of these measures fall flat when one realizes that the Supervisor who does annual audit, namely, NABARD sits on the Boards of the State Cooperative Banks and so does the RBI representative sits on the Boards of all public sector banks. In respect of one-time-settlements as out-of-the-court compromise settlements in respect of the non-performing loans, there would seem to be regulatory arbitrage.
The difference between the market value of realizable securities and the loan outstanding plus interest due till the date of settlement, could be negligible. But because of the delays in the judicial process, a series of discussions take place to compromise the loan amount taking into account the ability of the NPA account holder to pay up the amount immediately after considering all options, so that the bank’s balance sheet becomes cleaner and capital provisioning gets humbled. Here lies the catch: the assessment of the CEO in regard to the ability of the enterprise to honor the commitment after providing for all the guarantees and counter guarantees and other collaterals depends on the support that he or she gets from the Board and the willingness of the Board to write off the difference between the outstanding dues and the compromised amount. In several cases such gap runs into huge amount – millions of rupees.
Illustratively, the outstanding loan amount is INR40mn. The easily realizable market value of collaterals and guarantee is INR 110mn. But the CEO convinces the Board: the Court is likely to take a long time to settle this and therefore a compromise is desirable as it would save the bank the ordeal of delay, court expenses, advocate-briefings etc. etc. the compromise amount arrived at is INR6mn, meaning thereby that the Board has to write off INR 34mn. The Board signs off the proposal and accords approval for this write-off. The supervisor sitting on the Board is a party to this transaction. In several cases, the actual amount that the borrower settles is a few notches up over the six million rupees. The difference between the actual settled amount and that appearing in the books as long as it is far below the outstanding amount, the borrower is comfortable. The sharing of this booty between the CEO and the Board could be anybody’s guess. Such cases are more in cooperative banks and in respect of medium and large enterprises as well in corporate loans of commercial banks. It is not unlikely that somebody accuses me of a wild and senseless allegation against responsible Boards. But if one goes through the OTS settlements that were cleared by the State Cooperative Banks’ Boards, within a few months after the elections to the Boards are announced, the allegations have a chance to stand the test.
Since the supervisors/regulators are on the Boards, even if some intelligent auditors bring to light such losses the remarks have the chance of being either ignored or expunged lest the RBI or GoI can pull them up for being party to the resolution that resulted in the loss!!

The best way to arrest these types of transactions is to strengthen the corporate governance by the regulators/supervisors at once disassociating themselves from being on the Boards of all categories o f Banks. Will this ever happen? The non-executive directors abound in Indian Boards but they end up as spectators and rubberstamp signatories. 

Inflation - the index and the real

Inflation – the index and the real:
Chidambaram-Montek led inflation index came down to push for a rate cut from the RBI in its impending monetary policy. The inflation indexed bonds (IIB) making their corporate entry initially would ere long move to individual investments as well, to distract from investments in gold. But this IIB is linked to wholesale price index instead of Consumer price index.

Just this week when I went to buy my rice and vegetables I noticed that my valet emptied in no time and had to resort to my credit card. Fine rice is at Rs.50 a kg. Dals range from Rs.60 to 80 a kg. Oils range from Rs.80-220 for Til oil. Vegetables soared to the highest with just two vegetables in the range of Rs.25 a kilo and the rest are all at Rs.40 a kg. Small savings are getting eroded fast, more painfully for the retired.
Politicians take comfort either in jails or public meetings not withstanding the soaring day temperatures. They keep on making promises that can hardly be fulfilled. 

Middle class are fast moving into the lower stratum. This is the level playing field of the government. Governments that indulge in this luxurious game may have to pay a very heavy price in the days to come when elections would be round the corner.

Thursday, May 2, 2013

VITALINFO: Can the RBI innovate?

VITALINFO: Can the RBI innovate?It is not just in the area of credit risk assessment, measurement, management and the rising NPAs that require innovative and out-of-the-box thinking. sometimes it is better we go back to the basics and introduce new measures that would have relevance for future and the present. 
Even after the core banking solutions are across the board in all the banks, why should different accounts have different cheque books? One cheque book should be adequate that can be used against all the deposit accounts of the account holder. This would save a few millions of rupees of secured stationery apart from the customer having to face litigation for issuing a cheque in one account where the balance dried up  on account of application of a standing instruction or even some miscalculation but having adequate balance in other account. This is a very simple innovation that can be immediately introduced. 
There will be many more simple customer friendly innovations that existing technologies can bring forth saving costs for both the bank and the customer.