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.

A Consensual Agenda for Labour Reforms


‘Creating an ambience where both workers and managements understand their rights and duties is no tall order’.

The Centre is engaged in serious discussions with trade unions over the new labour code, with a view to improving the ease of doing business. But missing from the debate is the issue of the obligations of workers. During the 1960s and 1970s, workers’ education, aided by the government, provided them with the opportunity to know their rights. But the whole campaign was on rights and not obligations. Once rights are conferred on any group, and they become binding, it becomes difficult to reduce or deprive such rights.

Saturday, October 24, 2015

Mergers and Acquisitions among Indian Banking?


Banking Sector Reforms Committee in 1998 itself suggested consolidation of banks –the SBI and Associates into a big state-owned bank and five or six such big banks through consolidation of other PSBs, mergers of private banks and even FIs with NBFCs. There were noises of consolidation in the UPA-1 government too. And now, the Working Group on mergers and acquisitions set up by the Union Ministry of Finance again called for a similar action.  The major issues relating to capital, assets and human resources need to be looked at from the points of view of growth, financial stability and global experiences. Chairman SBI Arundhati Bhattacharya recently strongly fielded the arguments for large scale consolidation. Is the Indian financial system ripe for the call?

Monday, September 21, 2015

Ending Debt Cycle Suicides in Telangana

http://www.thehindubusinessline.com/opinion/ending-the-debtsuicide-cycle-in-telangana/article7671053.ece

The State government can take a leaf out of Kerala’s book and enact a law against usury
Recently, the Telangana Agricultural Advisory Forum, consisting of a few university professors and scientists, deliberated on the causes and consequences of the drought and farmer ‘suicides’ in the State. The unofficial number of suicides attributed to farm families is 1,152.
An inquiry into some of the recent suicides reveals an interesting picture. The farmers were not indebted to cooperative credit societies or commercial banks. The case of a farmer in Nalgonda district is typical. He took on lease ten acres of land, dug five bore wells — none of which hit water — incurring huge private debt in the process. On top of this, he cultivated cotton. The crop failed without water, and the debts pushed him to suicide.

Thursday, September 10, 2015

Loan Melas Land Again

file:///C:/Users/dell/Desktop/Business%20Advisor%20-%20September%2010,%202015%20-%20Contributor%20copy.pdf

‘Disasters never come singly but in bundles’. This seems to be the position of PSBs in this country at the moment. They are already in the melting pot of nearly Rs. 6lakh crores. Loan melas seem to have come back with a bang – the Mudra Loan melas. It was mid 1970s that Pujari the then Congress Minister started with the loan melas having seen that this is the greatest opportunity to get crowds at no expense of either the party or the government.

It all started when one of the then enthusiastic regional managers of a public sector bank organized such mela at Anantapur in Andhra Pradesh. The Minister was given an elephant ride with the buglers financed under the DRI scheme walking in front to reach the big maidan for distributing agricultural loans, if I recall right in the year 1979. He could see huge crowds in the ground waiting for his honour to arrive. He was amazed for he knew what it meant: loans and votes without the party having to spend for a single vote. Having tasted the meat would the tiger leave it? He ordered such melas throughout the country.  After the banking sector reforms such melas became history. Several of us thought that those dark days would not revisit the financial sector.

Friday, August 21, 2015

Our Decrepit Debt Recovery System

A consolidation of laws and legal processes is called for at the earliest

India’s debt recovery apparatus is an alarming mess. Consider this: we have four Acts, two sets of tribunals, ₹2 trillion worth of debt recovery tribunal (DRT) cases and ₹6 trillion in NPAs. These NPAs are a subject of labyrinthine discussions, appraisals and reappraisals – carried out by the RBI, Finance Ministry and even TV channels. None of all this seems to be getting us anywhere.
To get a fix on the debt problem, we need to understand the tangle of laws dealing with it and the system of courts and tribunals responsible for the implementation of these laws. The four Acts in question are: Sick Industrial Companies Act, 1985 (Act 1 of 1986), Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFA), 1993, The SICA Repeal Act, 2003, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act (Sarfaesi), 2002.
Apart from Debt Recovery Tribunals we also have the National Company Law Tribunal under Companies Act (Second Amendment) 2002 to settle BIFR cases.

Monday, August 3, 2015

NPAs - the perpetrators go scot free

If the RBI and MoF representatives on the Boards of Banks had prevented approvals of some corporate loans and brought collective wisdom to do due diligence, NPAs would not have reached the current unsustaining levels. Otherwise, how could one explain the debacle like that of King Fisher sanctioned on the basis of Brand as collateral thousands of crores on the instance of the then Chairman of the SBI. And this Chairman goes scot free royal. The successors have to cool their heels. 

It is important that the regulators get out of Boards of PSBs. Government of India, as owner, would do well to provide equity and discipline by sending more qualified representatives on the PSB boards and not the persons who are trying to learn the alphabets of banking. By being in the MoF for donkey years does not make one an expert in banking and finance!!

This is my response to Mrs Usha Thorat's article on the subject in Live Mint dated 15th july 2015.


Sunday, July 19, 2015

Limited Liability Partnership no good for banks


Last six months have been harrowing for a few SMEs who registered as Limited Liability Partnerships with the hope that they would sail more comfortably in their financials with equity and debt in good balance. But all of them faced the wall when they approached the financing banks for working capital loan. They advised these entrepreneurs to convert into private limited companies or partnership companies where the liability is not limited.

You can find the edited version of the article in the Hindu Business Line of 17th July.

Thursday, July 9, 2015

Banks threatened with huge NPAs

There is a report in First Line that a Collector from Amravati threatened action against bankers for not reaching agricultural loan targets in a quarter under IPC. This is sheer arrogance on the part of the District Collector who does not know his job. There is another report of the UBS on the mounting NPAs in the Live Mint of 7th July 2015. Reading together becomes necessary.
UBS Report has been contested by 'Yes Bank.' while the other banks chose to ignore. The fact remains that the corporate debt today occupies major portfolio of banks. There is excessive interference from the administration in public sector banks.
Take for instance, the story of Maharashtra Government where one of the district collectors audaciously threatened the banks for not achieving the targets in farm lending as per his dictate just a couple of days ago. The news appeared in First Line. The banks in the coordination forums - District level Consultative Committees of which the Collector/DM is the chairman, have never pulled up the district administration for failing to provide reliable land records, for failing to provide the credit related infrastructure for farm schemes to succeed and they mention in their Annual Credit Plans and NABARD in its PLP for the administration to respond adequately. The Administration never adequately responded.

When the 20-point programme was introduced initially, District Collector, Guntur reacted similar to that of Maharashtra District Collector threatening with criminal action for failing to reach the targets under the programme in 1979. The entire banking community walked out of the DCC asking the Collector to go ahead. The then Secretary Planning Govt of AP had to counsel the Collector to behave!!
Thanks to the Live Mint for the chart.

Such interferences do not mean so much as unseating the top executives for not lending to the corporates or for taking any action on the NPAs of delinquent corporates that today reached unsustaining levels. The action on the top executives range from transfer from the portfolio handling to transfer out of place. These are taken without demur as no person would like to be at the risk of his career. The obliging top executives and Chairmen get the plum posts. Such games from the Banking Department should stop. Narasimham Committee -1 recommended in 1991 in its maiden report itself, that the time had come for the banking department of the GoI be wound up and stop regulating banks. This recommendation should be revisited by the GoI in the interest of healthy reforms to the financial sector. .

Wednesday, July 1, 2015

Slashing Centrally Sponsored Schemes

Different states have different poverty levels. Prudence and diligence in spending on social sector schemes would emerge with the centre taking minimum share and allowing states to carve out their budgets in a manner that their poorer citizens require. 

One thing that baffles me is the enormity of social expenditure budgets by states like Andhra Pradesh and Telangana with the percentage of poor in total population in the range of 10-12 percent spending more than 50 percent of their budget on populist schemes. They are not focusing even at that expenditure levels on giving free education to the poor by improving infrastructure in all the government schools on a mission mode and providing health care at the door step by improving the primary health care centres in villages.

Small, marginal farmers and lease holders should get protection from the wild market fluctuations through price buffering, beyond the horticulture crops.

Tuesday, June 30, 2015

Growth of the economy at 8%?

250mn poor of India are being ruled by over 500 crorepatis in the Parliament and thousands of such legislators in states. Arvind Panagariya, Vice Chairman NITI AAYOG would like to believe that the growth of the economy would hit 8% by the end of this year.

AGriculture with its 13.7% share in GDP providing sustenance to about 50% of population still is posing risks to growth. So is the MSME sector, not still the darling of credit agencies. Exports did not rise significantly during the first quarter.

One consolation is that on the external front we seem to be doing fine.Watch this in the backdrop of one week's closure of Greece Banking and Stock Markets.


 In fact, while one would very much like to be optimistic, the dreams of make in India being still in the dark, uncertainties on the farm front, manufacturing yet to gain, the buoyancy of tax collections still to surface, the sovereign debt continuing to rise, and the hidden inflation at embarrassing level, the hope of 8% for 2015-16 that too from the Aayog Vice Chairman is really fond. Adding fuel to fire is the current Greek Debt Crisis impacting on our engineering exports and rising exports is the hope of Arvind Panagariya.

Wednesday, June 17, 2015

Still too many go hungry

http://www.thehindubusinessline.com/opinion/still-too-many-going-hungry/article7322506.ece


Despite the high growth years, malnourishment stalks the countryside. This calls for a small-farmer led focus
At a time when India’s GDP growth is hopefully pitched at 7.5 per cent this fiscal, touted to be higher than China’s, three global reports of significance also grabbed the headlines: The Global Findex Data Base 2014The Global Food Policy Report of the UN and the State of Food Insecurity in the World, 2014.
Ahead of all these, the IMF and the World Economic Forum reported that 25 per cent of India’s population still remains poor.
The Global Findex Data measured the financial inclusion around the world. The other two reports dealt with the food insecurity and the measures to tackle them.
It must be remembered that the data is mostly up to March 2014. The findings are of great import to this government for designing policies tackling financial inclusion, hunger and malnutrition.
The government would like to measure the poor by the JAM method — Jan Dhan account, Aadhaar, and the mobile. It has been acknowledged universally that there were no deaths due to hunger. But the farmers who produced food committed suicide were burdened by excessive debt.
The undernourished poor, like the Jan Dhan accounts, showed an impressive decline in the reports and these are counted once every three years.
A range of indicators can be used to measure a nation’s food security. These include average dietary energy and protein supply, access in terms of road and rail line density, domestic food price index, prevalence of under-nourishment, stability measured in terms of cereal import dependence ratio, political stability as well as absence of violence and terrorism, undernourished children below five years, anaemia among pregnant women, and vitamin A and iodine deficiency in the population.
Measuring insecurity

Malnutrition is redefined to include obesity and overweight. In India, child stunting (under five years) is 47.5 per cent while undernourishment is 15.2 per cent; whereas overweight population is 11 per cent. The country witnessed an average GDP growth of 8.7 per cent in 2003-08, 6.7 per cent in 2008-09, followed by 8.6 per cent and 9.3 per cent in the next two years.
When the growth of GDP was high and food inflation was also high, there was a decline in the percentage of under-nourished population.

Sunday, June 14, 2015

Health insurance


Whose health are we insuring?
 
 
thehindubusinessline.com · The new health savings plan appears more advantageous to insurers and agents than consumers
My comments as posted in the article:
Insurance industry in this country is just evolving. Neither the operators nor regulators nor the insured know the intricacies in full. Not that I also know something great. All I know is the risks attached to insurance are far different and have varying dimensions across ages and sex. Premium as the insurance companies say is measured by the risk associated. So as one ages, the risks become larger and therefore, the premium is charged higher equivalent to an ageing automobile. Women become more vulnerable to certain health problems far different from after a particular age - say 40-45years. Both men and women while they are earning more could be charged higher premium for insuring risks to cover those that become larger when they age or when they retire and for women after 45 years. The moment one says he is insured in a corporate hospital, the list of tests become longer; charges become hefty to take the maximum in the insurance pie. This exploitation should be stopped by IRDA.

Tuesday, June 9, 2015

Can Gold Monetisation Scheme succeed?

Gold Monetisation Scheme:

Some Suggestions:
I used to have my batch mate in the SBI, retired as MD of an Associate Bank, who used to buy Rs.100 worth of gold every month during his first ten years of service. Later, he may have increased it to Rs.500 or even Rs.1000 a month. Such is the urge for having gold in domestic vaults in India. South India or people from the South in the North invariably have gold in the shape of jewelery. Every village household, how so ever small it may be, has at least 500-1000gms of gold in the shape of jewelery. There are certain traditionally rich families where every day in a week has certain set of jewelery to wear for the house wife inherited from the mother in law. Such ornaments are at least 20-30kgs. These are invariably kept in the lockers and taken out for the festivals. This is a huge idle gold reserve in jewelry.

Thursday, May 7, 2015

Time for Governments to deliver

The year of coronation of the NDA Government is close on the heals of completion. People have seen lots of promises in the air. Corruption continues; delay in delivery of the benefits also continues; expectations of the people on various fronts are unfulfilled. Transparency is yet to be seen. What is the remedy?

Remedy:

Whenever a scheme is introduced by either the State or Central Government, it should also announce the mode of delivery: The department and officer concerned with contact number and email address; any legitimate charges for availing the benefits of the same, the window for payment - on line or physically at the department counter and the time that would be taken for delivering the announced benefit should also figure in the announcement. 

Grievance Redress:
In case of difficulty which authority should be approached, again with the email and telephone/mobile number details should also be announced. This is the only way in which correction could be minimised.

Wednesday, May 6, 2015

Bank Employees and Social Banking

Bank Employees and Social Banking
  


Bank employees and unions will have to recharge themselves to a new set of objectives that would enhance the business of banks on one side and help the society on the other.

May Day is usually the day to recall the assertion of their rights. For a change, the All India Bank Employees Association (AIBEA) during this 70th year thought of taking the initiative of enjoining social responsibility. Gone are the hard days of militant agitations as means to achieve fair compensation, safety, security and comfort in work places. Workmen and officer representatives are today part of the governance and management of banks. Machines dictate the employees’ ways of working. Discretion has less relevance now than in the past. Technology dictates the employees’ ways of working and management processes. But are the customers, a happier lot? The response is discouraging.

Ever since the introduction of banking reforms following the recommendations of Narasimham Committee 1 and 2 and the alignment with the global regulatory architecture through BASEL I, 2 and 3, technology and capital adequacy have become the prime drivers of growth in banking sector.

Mobile banking and micro finance institutions (MFIs) moved into the space left by the RRBs, weakened cooperatives, and rural branches of commercial banks. Banking correspondents and customer service points, White ATMs surfaced.  Who should we blame for providing this space excepting the lack of commitment and motivation of staff to align with the objectives of the nationalisation of banks?