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?
My blogs are only subject oriented - Finance, agriculture, MSMEs, Cooperation, Corporate Governance etc. Do not relate to any comments on caste, religion, sex etc.
Saturday, October 24, 2015
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.
No liability this: http://www.thehindubusinessline.com/opinion/columns/no-liability-this/article7430264.ece
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.
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.
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 2014, The 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.
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? 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?
Friday, May 1, 2015
Farmers Hurt
Farmer Hurt and Farming Needs Innovative Push
Priority Sector Credit Policy to Synchronise
The Scenario:
Agriculture, India’s largest employer is
undoubtedly the engine of India’s economic growth. Agriculture is
constitutionally a State subject, but, in practice, all policy decisions in its
activity chain like Agriculture Credit, Procurement, MSP, fertilizer allocation
and subsidy, and relief measures, etc., are in the domain of the Central
Government. Indian farmer and the entire value chain in the farming sector, as
a consequence, is strangulated by regulations of over twelve ministries of GOI
and at least six ministries of the State Government.
While the priorities should be on improving
soil health, conserving water and improving markets for assuring reasonable
prices for the farmer, the present Government misplaced its priorities to
introduce Land Acquisition Bill that now got into the second ordinance faced
with stiff opposition on the floor of the house and in the streets of North India.
Sunday, April 26, 2015
Review of India's Growth Resurgence
Today's Free Press Journal carried a review of the jointly authored book: India's Growth Resurgence: Sectoral Issues and Governance Risks. The book is now available at Amazon.com and Flipkart.
Sunday, April 12, 2015
Mudra Bank for the poor - Confusions Galore
http://www.moneylife.in/article/mudra-bank-confusions-galore/41221/62915.html
Will MUDRA Bank put its stamp on the Indian
Financial System as the institution to resolve the Financial Inclusion dilemmas
in the rural areas?
Piper calls the tunes. Inauguration of Micro Units
Development and Refinance Agency (MUDRA) Bank by the Prime Minister before he
left for Canada, Germany and France on a nine-day tour is being seen as a
landmark akin to ‘Garibi Hatau’ and IRDP of the forgotten decades. People say
that name has a lot to do with institutions. The name and style of MUDRA has
built into it an agency and a bank. It has in it, development and refinance as
functions.
Friday, April 10, 2015
Growth has to pare with human development
Business Advisor, Vol.X, Part 1, 10th April 2015 carried this article of mine.
ile:///C:/Users/dell/Documents/Business%20Advisor%20-%20April%2010,%202015%20-%20Contributor%20copy.pdf
February 2015, towards the
close was crowded with the vision-led railway budget, the release of Economic
Survey and the Union Budget. The next twenty days in Parliament did not have so
much to discuss on the approach to the budget as on amendments to the land
bill, the rape incident of West Bengal and some unholy acts in Haryana. The
most significant budget discussion related to the allocations to AP and
Telangana states and the devolutions under the 14th Finance
commission. The strategic intent and the road map for growth laid out in the FM
Budget speech, would seem to have got full endorsement.
Growth by itself even if in
double digit, would be inconsequential if it escapes the human development. The
300mn poor are not so much worried about how the dollar is moving against the
rupee or how the rupee is globally pared although its consequences will have
definitive impact on them. In an event crowded out during the last few days of
February 15 was the release of a book: ‘India’s Growth Resurgence.’
In spite of the change in
the base year from 2005 to 2012, the CSO credibility of the growth figure is
still in question in the context of lowest/negative manufacturing growth and
not too impressive growth of services sector. The statistical jumble did not in
any case put the human development in a better frame than what was on hold till
2014 with 134th rank out of 183 nations surveyed by the UN.
The near two and half
decades of reform process were literally in waves with turfs and peaks between
1991. Never ever in the past has the Indian economy been so keenly watched by
global community with hope, expectation and anticipation. The sheer size of the
economy and the potential it holds has global investors, multi-national
corporations, and players in different sectors, queuing to take part in the
country’s economic progress and the growth agenda, what with, Make-in-India,
Swatch Bharat and Jan Dhan, the new instrument of inclusive growth.
Tuesday, April 7, 2015
Indian Agriculture - Transforming a Natiion
Can Modi’s eloquence respond to farm credit vows?
Mobile Banking can show the way.
http://www.mlmsoftwarezindia.com/images/mlm-mobile-banking.jpg
“India accounts for only about 2.4 % of the
world’s geographical area and 4 % of its water resources, but has to support
about 17 % of the world’s human population and 15 % of the livestock.
Agriculture is an important sector of the Indian economy, accounting for 14% of
the nation’s GDP, about 11% of its exports, about half of the population still
relies on agriculture as its principal source of income and it is a source of raw
material for a large number of industries.” (State of Indian Agriculture
2013-14, Ministry of Agriculture, GoI, New Delhi)
Policy
Brief
‘Agriculture credit is one
of the main drivers of agricultural production.’[1]
Farming and credit have been highly interdependent for ages because the farmer
would have his cash stashed either in soil or in silo and never in liquid form
for him to spend for both production and consumption requirements. So is the
case for credit at any cost and anywhere for the farmer. This is where the
roots of money lender lie. He sits in the village close to the farmer.
Efforts at
institutionalizing money lender started with the starting of primary
cooperative agricultural credit societies. Post nationalization, nationalized
banks, regional rural banks took to agriculture lending in a big way. NABARD
was established in 1982 to accelerate productive agricultural credit flow with
focus on improving the lot of the small and marginal farmers.
Post liberalization, with
India becoming an important constituent of the WTO, Agreement on Agriculture
and Market Access has also witnessed diversification of agriculture and rural
economy. The wide ranging definition of farming encompassing dairy, poultry,
piggery, fisheries, and all animal husbandry and horticulture activities led to
inadequacies and delays in extension of credit from institutions. Public sector
banks are mandated to extend credit for agriculture that now includes
agro-industry and agri-businesses up to 18 % of the total credit.
Friday, February 27, 2015
Cyber Risks
http://www.moneylife.in/article/the-threat-of-increasing-cyber-risks/40639.html?utm_source=PoweRelayEDM&utm_medium=Email&utm_content=Subscriber%2320149&utm_campaign=Daily%20newsletter%2027%20Feb%202015
Hyderabad City Police commissioner in a press conference recently revealed that the city police registered 21,035 cyber crime cases in 2014 as against 19,011 in 2013 and 18,744 in 2012. A near ten per cent rise in just two years is a cause for alarm. The rise is attributed to the large scale use of technology and mobile phones.
Hyderabad City Police commissioner in a press conference recently revealed that the city police registered 21,035 cyber crime cases in 2014 as against 19,011 in 2013 and 18,744 in 2012. A near ten per cent rise in just two years is a cause for alarm. The rise is attributed to the large scale use of technology and mobile phones.
Social
media contributed significantly with the uploading of fake woman profiles,
online payment frauds, blackmailing, hacking, skimming, identity theft and data
theft etc. The police are trying to use technology again to track and trace the
criminals. Global trends are no different although it cannot be a solace.
Tuesday, February 24, 2015
Budget Discussion - 1
My response to the above article is as follows and can also be seen in the Livemint discussions:
GDP in itself is a poor indicator. It escapes several areas of income in the aggregation that has become the springboard for black money. For instance, all the waste and scrap dealers till date in all the cities deal only in cash. Several jewelry merchants take only self cheques from their clients and not account payee cheques. Several doctors doing private practice do not ever, ever give any receipt for the consultancy. Several leading advocates are no exception. Like this many areas still escape our GDP. All the ratios depend upon such aggregation as GDP suffer credibility.
Second, India's prism of planned economic development rested on the tripod of politics, poverty and patronage. We have traveled a long way from the erstwhile socialistic pattern of society. But inequities still persist.
Areas which are the essential domain of public expenditure - universal education, health, safe drinking water and good sanitation moved to private or public-private domain. It is time that the government looks at what are its key responsible areas and provide resources adequately with periodical monitoring mechanisms as part of the Budget.
All the laws impacting on state finances should be subject to Regulatory Impact Assessment annually and the relative Report should be presented to the first session of the Parliament for discussion and modification.
Once these are done, the fiscal responsibility budgetary management exercise becomes simpler. The country is currently in transformation phase and this is the right time to plug all the loopholes in the existing system of monetary and fiscal management.
It is good to recall John Stuart Mill: "It must always have been seen more or less distinctly, by political economists that the increase in wealth is not boundless: that at the end of what they term the progressive state lies the stationary state.."
Tuesday, February 17, 2015
Sunday, February 15, 2015
Budget Hopes and Hypes
Fiscal balance |
Union Budget 2014-15 was
more on aspirations. It had to address the legacy issues. But 2015-16 Budget in
the wake of series of policy announcements by the NDA government during the
last nine months has promised to be progressive and inspirational. The recent
statements of FM leave more expectations on this count.
Notwithstanding the hope of the World Bank President
the dragging growth in farm and manufacturing sectors is still a matter of
great concern and this led to pragmatic low pitch by the RBI at 5.5-5.7 percent
growth at the end of this fiscal.
Inflation has come down but the fundamentals are
still weak; gross domestic savings has not improved markedly; credit has not
picked up. The domestic food and vegetable prices are yet to record the type of
decline that would give confidence to the RBI to tame further the lending
rates.
The 14th Finance Commission handed over
its Report to the President. Once it is tabled in the Budget session, the new
formula of dispensation of resources among the States and Union and between the
States and the sub-states would lead the budget formulations.
Expectations on the Finance
Minister:
Sunday, February 1, 2015
Ten Point Agenda for MSMEs in Brand India way
New Year leaves many in
hope with the MSMEs no exception. Their share in GDP at around 8% currently has
prospects of moving to 15% by 2020 according to a KPMG-CII Study in October
2014. Hopes are built on the double digit growth of a few manufacturing sectors
by that time and the FDI interventions in defense, pharma and infrastructure
sectors. Not so encouraging, however, is the decline in credit growth in the
manufacturing sector from 13.7% a year
ago to 7.3% in December 2014.
The Government has no
doubt infused some confidence building measures, like a few start-up Funds for SC
entrepreneurs, revisiting the definition of the MSMEs and credit policies.
Action seems to be far slower than announcements. Even earlier there were 32
Funds announced for the sector at different points of time that did not create
the impact one would expect.
At least ten things need
to be done by the Government if the MSMEs should move to building brand image
for India and they will be all in any case, Make-in-India only.
Saturday, January 10, 2015
New Year Bites 2015
For the New Year:
Year 2014 can be termed as
year in waiting. People waited with bated breath for the policy paralysis to
end and for the economy to start growing to its potential. Post elections, the
wait did not however end. There have been announcements more than achievements
and promises more than performance. 2015 would therefore be a demanding year
for the rulers.
The crude shocks elsewhere
brought some cheer to India in containing its current account deficit and
inflation that touched unsustaining levels in March 2014. Stock markets reacted
favourably with the indices taking the highest ever jump of 6000 since the last
General Elections. They shocked the investors with a peak in the crash on the 7th
January 2015 led by yet another decline in global oil prices and other
commodity prices.
Tuesday, December 30, 2014
Banking on cooperatives is better business
Cooperatives are wealth creators:
The need for
cooperatives in wealth creation arises mainly due to the reason that a
cooperative can create more value or surplus than the individual can.
Conceptually, if a cooperative is well run, it will bring more benefits to its
members. The organization and management of a cooperative enterprise,
however, is complex. It is more complex in the case of rural cooperative
credit structure as (1) this structure is part of the overall financial
structure and has a contributory responsibility to the financial stability (2)
it has to abide by the regulatory policy and procedures and (3) its capital
structure demands continuing infusion of capital under Basel III.
Friday, December 26, 2014
Crude Shocks keep India in Smiles
B. Yerram Raju &
Nitin Gupta*
“The economics of oil have changed. Some businesses will go
bust, but the market will be healthier,” says the Economist (December 6, ’14).
Is this the beginning of cheap oil regime or just an interlude between two big
bumps?
2013, in retrospect, had turned out to be the strongest year of
recovery, with growing US Economy and stabilizing Chinese economy. Commodity
prices were projected to remain flat with an up-side risk due to unexpected supply-side
shocks.
Enter December 2014 and all the
projections seem little more than wishful thinking. IMF went on record recently:
“the global economic growth may never return to pre-crisis levels” ! All the
Quantitative Easing (QE) from the US (3 till now – totaling over $ 4 trillion
or, twice that of the entire Indian economy) which was supposed to push cash to
banks ended up just in increased valuations and stock indices accompanied by
higher prices of gold and other commodities. Emerging economies like India had
to contend with high inflation. Some even said: it is ‘US Fed exported
inflation’!
Wednesday, December 17, 2014
Rural Cooperatives
Cooperatives with their spread are the best means for reaching the goals of financial inclusion and Jan-Dhan.
Their form and content needs change. Meaningful recommendations of Vaidyanathan Committee have been implemented more in breach. The States that received the reform package have breached on the MOUs and misspent the grant released and NABARD also did not put its heart in the monitoring of the grant assistance.
GOI should recall the grant assistance from all these states or should give them an year's time to re-engineer the rural cooperative credit structure to the promised health.
The vast potential of cooperatives can be fully utilised only through de-bonding them from the politicians and vested interests and by ushering in legal and governance reforms.
Friday, December 12, 2014
SBI should keep its eyes and ears open
Efficiency of banks does not go by the size of capital but by the performance and perception of the customer. SBI chairman, Arundhati Bhattacharya at the Delhi Economic Conclave sidelines has been arguing for freedom to decide on mergers and acquisitions be left to the banks themselves. Yes, it is the banks concerned and their boards that should take a responsible call on the issue. Has SBI taken stock of the issues that came up in its acquisition of the two of its Associates and the HR problems it had to handle and perhaps continuing to handle? Does it have a discussion forum where the customers and clients of the merged banks would also have a say? SBIs' ATMs are most times inefficient delivery points. They bask under the glory of their associate bank ATMs. Their attention to the customers has much to comment. Their corporate loans are the big ticket NPAs because of unperceived credit risks and poor due diligence. They are living by legacy.
Monday, November 10, 2014
Fast Tracking Financial inclusion
Jan-Dhan has been announced from the ramparts of Red Fort on August 15, 2014 and quickly made inroads into the field on no-holds barred approach the first ever, since the announcement of Financial Inclusion by Y. V. Reddy, the former Governor, RBI in 2005. The Committee on Financial Inclusion under the Chairmanship of Dr Rangarajan said: ‘Financial Inclusion is no longer an option, but a necessity.’ NABARD Report in 2008 gave a working definition later: “Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.” Had the Banks implemented the Differential Rate of Interest Scheme[1] (still in the RBI statutes) been implemented by the banks, monitored and regulated by the RBI, the Prime Minister Modi would not have had the good luck of taking this lame duck of financial inclusion under the new garb with such gusto. The credit limit for the Jan-Dhan scheme second dose is incidentally the same as the revised DRI limit of Rs.15,000 in 2010. What R.K. Hazare proposed in 1970s has been disposed by M.V. Nair in 2012.
Tuesday, August 19, 2014
Politician promises and Regulator disposes
Politician promises and Regulator disposes
There is an old adage that a farmer is born in debt, lives in debt and dies in debt. No farmer has liquidity when he wants cash in hand, for it lies either in land or stock. Farmer is today a part of the rule book, both with Governments and the financial institutions and the regulator.
AP and Telangana both the States, after formation, did not lose a minute in negotiating with the RBI the way forward to realising their hasty loan waiver promises. The States tried to bargain hard for restructuring the loans till they could find resources to fully credit the promised waiver amount into farmers’ loan accounts. The logic for waiver could be disputable but the request for restructuring on the sovereign guarantee has less reason to be faulted. This cannot be dubbed away as ’crony socialism’ – the meaning of which the creator of the phrase alone has much to explain.
The history of farm loan waivers – a sad one—politically motivated could have been resisted by the regulator even during the years 1990 and 2008. When the commercial banks were writing off loans of various other sectors but failed to respond to the farmers’ requests even amidst a do-or-die situation, the governments took law into their hands and claimed equity in debt treatment. In a political economy, howsoever puritan the economists are, the will of the politician prevails, particularly in democracy.
There is an old adage that a farmer is born in debt, lives in debt and dies in debt. No farmer has liquidity when he wants cash in hand, for it lies either in land or stock. Farmer is today a part of the rule book, both with Governments and the financial institutions and the regulator.
AP and Telangana both the States, after formation, did not lose a minute in negotiating with the RBI the way forward to realising their hasty loan waiver promises. The States tried to bargain hard for restructuring the loans till they could find resources to fully credit the promised waiver amount into farmers’ loan accounts. The logic for waiver could be disputable but the request for restructuring on the sovereign guarantee has less reason to be faulted. This cannot be dubbed away as ’crony socialism’ – the meaning of which the creator of the phrase alone has much to explain.
The history of farm loan waivers – a sad one—politically motivated could have been resisted by the regulator even during the years 1990 and 2008. When the commercial banks were writing off loans of various other sectors but failed to respond to the farmers’ requests even amidst a do-or-die situation, the governments took law into their hands and claimed equity in debt treatment. In a political economy, howsoever puritan the economists are, the will of the politician prevails, particularly in democracy.
Monday, July 14, 2014
This path-breaking Union Budget providing discontinuing continuity on several fronts has concretized all the promises in the BJP manifesto unfolding the vision of the Modi Government. Its allocations reflect pragmatism in that some projects got funds for Detailed Project Reports while others of long term nature that can only make a beginning got symbolic outlays.
Manufacturing sector that is just showing signs of revival with its growth rate touching 4.7% in May 2014 reversing the negative trend of growth till the end of March 2014 got a shot in the arm. Of particular relevance is the attention paid to the MSME sector.
Sunday, June 15, 2014
Emerging Economies, Free Trade and Poverty
All the conferences on poverty alleviation throughout the World are held in Five Star or Seven Star Hotels and in Air-conditioned Conference Halls for hours and days together. Intellectuals gather to discuss their poverty and other’s poverty. Goals in one name or other and common agenda across the nations – e.g., Millennium Development Goals – are discussed and settled. Several researchers, bureaucrats, government and non-government organizations, donor institutions etc., decide to spend billions of dollars on the agenda. So much is the scope for employment provided by the poor across the world. Poor are the biggest employers in the world. Interest keeps renewing on poverty alleviation agenda – and now with focus on emerging economies and free trade. This paper is divided into two parts: part 1, dealing with free trade and emerging economies and Part 2, dealing with poverty with specific reference to India.
Risk Appetite: The pathway for profit.
INTRODUCTION
This fiscal, the whole nation started off with a bang. Election euphoria ended with the grand announcement of single largest party in majority ascending to power after a gap of over two decades. A cultural transformation started off with Narendra Modi bowing before the Parliamentary stairs in reverence. Then there was historical swearing in of the Prime Minister, the first ever in independent India with all the invited SARC countries representing their nations for that ceremony. Minimum government and maximum governance, bringing down inflation, policy stability and clean government are all promises held out. All the Secretaries to the Government have been asked to make a presentation to the Prime Minister the status of various projects, in case of delays causes for the delays, when and how they are likely to be completed and for such closure what plan of action is with them and what supports are needed. To me, it looked as though a new tough CEO is assuming charge of GoI Inc. The risks at the moment would appear to have been addressed up front: first, a change in the culture; second, outlook and third, outspokenness and fourth, firm on implementation agenda. Objectives would be set; strategies would be discussed by the various ministries; tracking and tracing mechanism would be put in place; stress tests would be applied; and accountability and visibility with real time monitors and reports would follow eventually. The PMO website appeared within minutes of the swearing in ceremony beamed by all the TV channels. The whole world watched the biggest democracy in full strength determined to change the destiny of India into a formidable political and economic power. Why am I starting my paper with all this known stuff? The reason: a weak financial sector and strong economy can hardly co-exist; and the biggest deficits of all, the TRUST DEFICIT is fast eroding.
Sunday, June 1, 2014
The New Governments and the Loan Waiver
The New Governments and the Loan Waivers
B. Yerram Raju & M.L. Kanta Rao
Competitive populism compelled Rahul Gandhi while canvassing for the Congress party announced that he would write off up to Rs.2lakhs all individual farm loans. So did KCR, the CM-designate of the upcoming Telangana promised waiver of crop loans up to Rs.1lakh per farmer.
Seemandhra farmers are in a mood to rejoice: Voter bait won’t be voter wait – Chandrababu Naidu promises to sign the crop loan waiver for farmers as the first file as CM of Seemandhra (it would be however nice to christen the new State as Telugu Nadu). in Navyandhra and Nava Bharat where from now on people would be counting on the election promises of the winning parties, there will be no compromise on the promise. The NDA that met in Delhi on the eve of electing the leader of the BJP parliamentary party Viz., Narendra Modi, declared unequivocally that the poll promises would be realised and all the partners of NDA promised full support for the same.
B. Yerram Raju & M.L. Kanta Rao
Competitive populism compelled Rahul Gandhi while canvassing for the Congress party announced that he would write off up to Rs.2lakhs all individual farm loans. So did KCR, the CM-designate of the upcoming Telangana promised waiver of crop loans up to Rs.1lakh per farmer.
Seemandhra farmers are in a mood to rejoice: Voter bait won’t be voter wait – Chandrababu Naidu promises to sign the crop loan waiver for farmers as the first file as CM of Seemandhra (it would be however nice to christen the new State as Telugu Nadu). in Navyandhra and Nava Bharat where from now on people would be counting on the election promises of the winning parties, there will be no compromise on the promise. The NDA that met in Delhi on the eve of electing the leader of the BJP parliamentary party Viz., Narendra Modi, declared unequivocally that the poll promises would be realised and all the partners of NDA promised full support for the same.
Thursday, May 22, 2014
The Winner and the Vanquished
The Winner and the Vanquished
Decidedly the World’s greatest democracy has just finished its biggest General Elections – the fifteenth in a row. It attracted lot of attention of the western media – the Economist, the Financial Times, The Guardian, The New York Times just to name a few. Money, liquor and raining promises like never before greeted the electorate. It was however the last NDA alliance – the TDP-BJP combine with an emotional entrant into the political confabulations that has been greeted with enthusiasm from some and contempt by several. Narendra Modi the first ever PM designate to bow to the Parliament stairs before his entry, demonstrated cultural excellence unparalleled setting the tone for virtuous move forward.
Decidedly the World’s greatest democracy has just finished its biggest General Elections – the fifteenth in a row. It attracted lot of attention of the western media – the Economist, the Financial Times, The Guardian, The New York Times just to name a few. Money, liquor and raining promises like never before greeted the electorate. It was however the last NDA alliance – the TDP-BJP combine with an emotional entrant into the political confabulations that has been greeted with enthusiasm from some and contempt by several. Narendra Modi the first ever PM designate to bow to the Parliament stairs before his entry, demonstrated cultural excellence unparalleled setting the tone for virtuous move forward.
Wednesday, May 21, 2014
An Open Letter to Modi
Prime Minister designate Narendra Modi inherits bad governance; almost empty treasury as the UPA-FM has drawn in advance all the dividends of the PSUs six months in advance (2014-15 first half) to arrive at the magic figure of fiscal deficit of 4.5 percent promised by him; inflationary economy contributed by more the supply side factors; lowest growth of manufacturing sector continuing for the preceding two quarters; the burden of Food Security Act and the MNREGS to which the BJP is also a party; chaotic primary education to higher education; scamsters sitting right in front of him in the Parliament benches; election promises of the NDA partners hitting the roof and unnerving agriculture sector. At the moment, on the external front, the issues do not pose urgency.
Prime Minister designate Narendra Modi inherits bad governance; almost empty treasury as the UPA-FM has drawn in advance all the dividends of the PSUs six months in advance (2014-15 first half) to arrive at the magic figure of fiscal deficit of 4.5 percent promised by him; inflationary economy contributed by more the supply side factors; lowest growth of manufacturing sector continuing for the preceding two quarters; the burden of Food Security Act and the MNREGS to which the BJP is also a party; chaotic primary education to higher education; scamsters sitting right in front of him in the Parliament benches; election promises of the NDA partners hitting the roof and unnerving agriculture sector. At the moment, on the external front, the issues do not pose urgency.
Sunday, May 4, 2014
Manifesto for Agricultural Sector: Agenda for Future
Manifesto for Agricultural Sector: Agenda for Future
‘If farming fails nothing else succeeds in this country.’ Economic growth of this predominantly agrarian country depends on agricultural growth.
Target 6% growth of farm sector for an assured double digit sustainable growth of the economy.
Allocate Budget – at least 10% of the outlay should be devoted for agricultural sector.
Present Agricultural Budget in all the predominantly agricultural States preceded by Agricultural Survey.
Sunday, April 27, 2014
The Myth of Poverty Alleviation
The Myth of Poverty Alleviation
When the General Elections to clearly the biggest democracy in the world are on cards with the participation of over 83million voters all eyes will be on the agenda of the contesting political parties. One item, for sure, is poverty alleviation. The UPA during its decade rule has been trumpeting on taking the growth trajectory northwards and as a consequence reduction of poverty. Claims and actual achievements apart, is it possible to eliminate poverty in any part of the world? Has economic growth contributed to its elimination in any part of the World ever since the end of Second World War?
Wednesday, April 9, 2014
Managing NPAs: Cure worse than the Disease
RBI started anew a failed initiative in an amplified form after a make-believe consultation document. Not all the perfumes of Arabia would clean the stench of INR 5trn. The SMA categorization for monitoring the stressed assets had its origin in 2002 itself.
But the moot question: is micromanagement going to be the solution that failed to impose a regulatory information system? The pressures on the senior Managers in attending the DLBCs, SLBCs and host of others would leave little time for the now introduced JLFs which in turn have to seek investors for stressed assets’ buy.
Monday, February 17, 2014
If wishes were horses voters would be riders.
The Budget is neither Vote Catching nor Vote on Account
Vote on Account Budget 14-15 presented today is more an accounting than budget as all the income and expenditure for the next six months has to be spent on account. What the Union Finance Minister has done is gimmicks or jugglery of figures when it came to Fiscal Deficit. He postponed payments due during the last three months and demanded advance payments of dividend from all the banks and the PSUs and even asked the RBI to transfer its surplus to contain the deficit. In the process what would happen is that the government that comes to power has a responsibility to pay up all the pent-up dues and forego all the receipts for the six months April –October 2014 if they are at the expected level because they were all on the basis of some assumptions of revenues and expenses projected for the next financial year. He is for sure going to handover empty treasury to his unknown successor.
Nobody knows how the domestic and global environment would turn out. But the hope is that it would be better if we are to go by some global trends.
Wednesday, January 29, 2014
Sunday, January 19, 2014
2014 A Tough Year for the Indian Economy
A tough year ahead for the economy:
First decade of the century had witnessed greater height and steeper fall in global economy the same has been true for Indian economy. The greatness of Indian economy, though at pains, is that it kept on expanding twice the global economic expansion rate during this period. Some even say that the economy is moving more by sentiments than fundamentals, because we do not have the rate of savings and investments moving up as was the case five years ago.
Friday, January 3, 2014
VITALINFO: Why FinMin wants public sector lenders to rush into selling insurance
VITALINFO: Why FinMin wants public sector lenders to rush into selling insurancePSBs to sell the insurance products and invest in training of its staff already overloaded with other regular banking work and not having time to spare for training off their operating desks, would end up selling soaps of TATA by Proctor and Gamble. The bancassurance itself has not take off as a corporate agency model successfully. Most staff today know only the system and not banking domain. If they are asked to get into another domain insurance as well, the banks' balance sheets will take a big hit. It is time that the banks are allowed to do banking more efficiently and in a more customer-friendly manner and also devote more time for innovation of new deposit and credit products competitively in the emerging rural areas. It is also important that the human capital should be allowed to add its weight for strengthening Basel III emerging capital requirements. 'Let not thy winged days be spent in vain, where gone no gold can try them back again.'(Oliver Goldsmith) It is time to revisit the recommendation of the First Financial Sector Reforms of M. Narasimham on the Government diluting its hold over public sector banks, particularly in not getting into micro management. Let the banks decide for themselves what business they should do and what they should not and hold themselves responsible for all their decisions.
Subscribe to:
Posts (Atom)