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
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