Banks misguiding investors on NPAs

It is a fact that when system identifies NPAs,the figures are more as the system does not discriminate the borrowers and follows the guidelines of RBI.When the NPAs are identified manually,the human intervention helps some borrowers to project a better image and figures get camouflaged.Further there are umpteen ways to hide NPAs which the system may not follow unless the programmes are made that way.There is always a trade off between the Management and Auditors of banks and the NPAs get generally underestimated.When the system generates NPAs,it is bit difficult both for the Auditors and the Management to underestimate NPAs,though it is not fully ruled out.All these years,investors have been wrongly informed of the position of NPAs is a fact which the Deputy Governor also knows as he was all along a commercial Banker before he took over as DyGovernor.The auditors though are independent on paper,as long as they are being paid by the Banks they audit, they get influenced,to adjust NPAs.


 Dr.T.V.Gopalakrishnan
(This comment is in response to the article Banks misguide investos on NPAS in Business Line dated 28/06/12).

IT honchos and wage cut

IT companies honchos take a salary cut is no doubt good news to fool the public and not a scarifice to be worth emulating or taken note of. They are taking dividends in crores of rupees and they do not know what to do with the money they earn. No grouse or grudge on that. They have undergone the trouble and sacrificed a lot to bring up the companies and they deserve what they enjoy.But taking a pay cut in their salaries should not be projected as a great sacrifice they do is not easily digestible to justify deferment or wage cut to their employees. These honchos can sacrifice part of their dividend and take care of employees. Let not them fool the employees or the public as everybody knows that the entire dividend is tax free thanks to the unjustifiable taxation policies in this great economy where every transaction undertaken by common man is taxable under service tax and indirect tax and he is finding hard to make both ends meet because of persisting high inflation and what not? Let the honchos pl not make public the sacrifice they do as employees know how exploitation takes place in each and every company and public are taken for a ride by our so called democratic way of governance.

(this has been piblished in ET dated 27/06/12 in response to the news item IT honchos take a wage cut)

Elites are insensitive to fraud

Our elite are not only insensitive to fraud, they are insensitive to all accpted values and ethics. They can get away with anything with the backing of power and money.Bureaucrats are at their beck and call and they can buy all enforcement authorities.Let us appreciate that Raj Gupta has to go to jail for the insider trading and in US law is made applicable without going into the background of the person and backing of money and influence. Insider trading and malpractices right in the fixing of premium for IPOs and many others are very common in India although SEBI has intentions to stop them.Let us not make the mistake of comparing our enforcement standards with those obtaining abroad. Here the simple thumb rule is show me the person,we will show the rule and its enforceability. Connection and contacts matter here and this accounts for the innummerable scams, corruption and accummulation of black money. Nobody can find fault with our various laws which are free from flaws.

from: Dr.T.V.Gopalakrishnan

 

(This comment  in response to an article by B.S.Ragghavan appeared in BusinessLine dated 25/06/12)

 

Rupee depreciation who gains who loses

The depreciation affects the common man more than any body through inflationary pressures has not been highlighted. Importers and borrowers of money from abroa, students and tourists going abroad are also affected badly and of these some are avoidable. import of gold particularly by banks and the Govt for sale of gold coins can be completely curtailed for sometime. Tourism can be given a go bye for a temporary period. Like that unnecessary imports can be reduced or avoided totally. There are measures but willingness is that matters. The Govt has to take the initiative.
(This appeared in ET dated 23/06/12 in response to an Article Rupee depreciation who gains who loses)

Stupid Rules and smart Indians

''The article reads well . The fact remains that in India only smart people make the life miserable for people other than politicians and VIPs through their stupid rules. Stupidity is for commoners and VIPs escape.These sort of stupid rules are there everywhere in all Government institutions and even in Private organisations. The author can spend his entire life time by writing such matters in India which are in abundance.This is the secret of our Civil services efficiency. so long as people put up, let the tamasha go on is the simple rule followed.''

(This appeared in Times of India in response to an article in Times of India dated 23/06/ 12)

Monetary policy Measure unease

The author has been very forthright in saying that the RBI gave different signals to the market and market being influenced by more of speculative tendencies than the realities and fundamentals of the economy which have been moving from bad to worse,has been projecting reductions both in CRR and Repo rate.Banks and industries always clamour for more concessions and reliefs without going into minute details of their demands and any justification taking into consideration the seriousness of issues faced by the economy.Fortunately,the Reserve Bank kept the policy rates unchanged without giving heed to the FM's directions,markets' expectations,industries'demands and banks appeals.The opaqueness in interest rates needs a serious investigation by the Reserve Bank and the banks'tendency to maintain high NIM without passing on the benefits to genuine and good borrowers has to be controlled The ills of the Economy are not only the problems of the Reserve Bank and all stakeholders have to share.

from: Dr.T.V.Gopalakrishnan

Posted on: Jun 21, 2012 at 21:52 IST

 

(This is in response to an article appeared in BusinessLine dated 21/06/12) 

Should india provide $10 billion for Eurozone Fund

 Dr.T.V.Gopalakrishnan , Mumbai , says: Nothing wrong in extending the financial support to bail out Eurozone. Though it may have repurcussions on our already strained financial position,this can be made good if Eurozone improves its economic performance which is very essential for the entire world paricularly for emerging economies like India.This is a good gesture shown despite the economic crisis the country is at presnt placed.
( This appeared in ET dated 20/06/12).

Status on Policy Rates RBI's right move

In the current macroeconomic environment, any further reduction in policy rates would stoke inflation rather than push up growth.

June 19, 2012:

Kudos to the RBI for a bold mid-quarter monetary policy review, defying the expectations of the market and without yielding to the pressures of the Finance Minister to reduce the rates.

The Reserve Bank has taken a series of measures in the past few years to contain inflation and provide adequate credit for growth. But, unfortunately, neither growth nor price stability could be achieved to the desired extent.

The credit-deposit ratio has all along been above 70 per cent. However, industrial growth has not picked up. High interest rate was cited as one of the reasons for the slow growth, although the facts do not support this claim.

The economy suffered primarily because the Government did not take appropriate measures along with the Reserve Bank to boost the confidence of the investing community by, for instance, improving infrastructural facilities.

The taxation policies pursued by the Government have only added to the inflationary pressures and the Reserve Bank’s measures to contain inflation through dear money policy did not respond well enough for it to ease the policy rates.

Policy paralysis

The policy paralysis on reforms and administrative fronts on the part of the Government coupled with the adverse external factors added fuel to fire. The inflation rate has continued to be high due to both supply-side constraints and external factors. The negative sentiments and worsening fundamentals have led international agencies to lower the economy’s rating.

There, therefore, needs to be better coordination between fiscal and and monetary policies and the Government cannot slack up on containing the fiscal and current account deficit.

In the backdrop of weakening macroeconomic indicators, the decision of the Reserve Bank to keep unchanged the cash reserve ratioat 4.75% and the repo rate at 8 per cent needs to be appreciated and will only strengthen the economy in the long run.

Further, the reason given by the Reserve Bank for not effecting changes in the policy rates is logical. As per its assessment, there are several factors for the slowdown in economic activity, particularly investments, with the role of interest rates being very small. Consequently, any further reduction in the policy rate at this juncture would, rather than supporting growth, exacerbate inflationary pressures.

The liquidity situation in the market has improved. The deposits growth has been picking up. In case of any liquidity constraints, the RBI has open market operations to address the problem.

Banks must buck up

Banks have to do their homework by reducing their NIMs (net interest margins) and non-performing loans, particularly those coming under wilful default.

The recycling of funds has to improve and writing off of loans has to come down by improved supervision, follow-up and recoveries. They have to bring down the cost of funds by enhancing the CASA (current account, savings account) deposits and considerably reducing wholesale deposits mobilised at higher rates of interest.

To improve profitability, the cash-deposit ratio needs special attention. The overall asset-liability management if improved will help to bring down the cost of funds and pass on the benefit to borrowers by effecting reduction in the rate of interest. The banks can do their bit giving a helping hand to Reserve Bank in its effort to prop up the economy and put it back on a growth trajectory.

(The author is a Mumbai-based consultant. The views are personal.)

( This article appeared in Business Line dated 20/06/12).

Keywords: RBI, Interest rates, Monetary Policy, Economy

Agricultural Credit and Nair committee

The Author has been very forthright in pointing out the lapses of the Nair committee's recommendations in extending finance to the agricultural sector.Being a commercial banker, Nair would have felt agricultural financing is not viable and given a chance banks should avoid it.This game of avoiding agriculture has been going on since the implementation of reforms and the effect is felt in the reduced contribution of agriculture to the GDP.Even the investments in agriculture have been on the decline since last two decades and agriculture enjoys only lip sysmpathy even from political class and bureaucracy.The damage to agriculture has already been inflicted and even NABARD cannot claim to have given a boost to the development of agriculture since it has been set up in 1982.The farmers have also no choice but to give up farming and seek shelter elsewhere to eke out some subsistence allowance elsewhere.Agriculture has lost its importance in the economy and this has been a cause for inflation.

from: Dr.T.V.Gopalakrishna

( This is in response to an Article on Farm Credit appeared in Business Line.This appeared in Business Line dated 12/06/72).

Does Planning Commission have a role in India's economy?

Dr.T.V.Gopalakrishnan , Mumbai , says: The planning Commission has already outlived its purpose and it should be wound up early to save the economy and expenditures.Times have changed and the needs of the economy are different today. The people are awakening and they are able to see things in proper perspective. The public cannot be fooled anymore by keeping such institutions and wasting tax payers money.The planning Commission has not done anything worth while during the last few years to take the economy out of the rut. On the contrary, it has been adding to the wasteful expenditures. Eralier The Govt takes the decision to close the Planning Commission, the better for the Govt and the economy.
11 Jun 2012, 1706 hrs IST
(This comment in response to an opinion poll appeared in ET dated 11/06/12).

FIIS pull back Rs 1000crores A news item in ET

10 Jun, 2012 06:18 PM

The FIIS transactions cannot be taken at face value and the analysis based on these has no meaning. They are smart and they always take advantage of the fluctuaions of the economy and the rupee in particular. They make money at the cost of Indian gullible investors and this needs to be scrutinised in depth to come to any conclusion. They are fair weaither friends and they have no loyalty to anything other than money.

( This comment appeared in ET dated 10/06/12)

Dr.T.V.Gopalakrishnan

Is real estate price rise in India backed by fundamentals?

Dr.T.V.Gopalakrishnan , Mumbai , says: The real estate price rise in India is on account of increase in the inequality of income thanks to wrong taxation policies, increased retail loans to middle class people as they are better employed due to IT boost observed in the late 1990s, high level of corruption and prevalence of huge black money. It does not in anyway indicate the strength of the economy and the fundamentals of the economy are in fact going from bad to worse every day.This abnormal rise in real price should be taken as an alarm by the Govt for an endangering economic situation at a later date.
7 Jun 2012, 1849 hrs IST
This commend is in response to an opinion poll in ET dated 7/06/12.

Banking on Commodities?

Banking on commodities?

Business Standard / New Delhi Jun 06, 2012, 00:08 IST

This refers to the front-page news item “Govt backs banks’ entry into commodity futures trading” (June 4). Under the Banking Regulation Act, 1949, banks are not allowed to trade in commodities and amending the law to allow them to do so may not work well. As it is, banks have their own problems with increasing non-performing advances; lack of adequate skilled human resource to meet the challenges of modern banking that involves trading in derivatives, currencies, investments and gold; and finding adequate capital to meet the requirements of Basel-III. In the absence of an autonomous and independent regulator for commodity trading, involving banks will weaken their functioning and the Reserve Bank of India will have to bear the brunt in case something goes wrong with an otherwise sound banking system. Even the selling of gold by banks needs to be reviewed or even stopped to reduce the import of gold coins and save valuable foreign exchange. The government’s move to allow banks to trade in commodities needs to be thoroughly debated.

Rural Economy

The share of agriculture and rural sector as percentage of GDP has been on the decline since the launch of economic reforms in 1991 is a fact which cannot be ignored any more. The financial inclusion is nothing but a wishful thinking and the other employment generation programmes in rural areas have not worked well to prevent the migration of rural population to urban and metropolitan centres.The problem with the economy is not lack of programmes or ideas to improve the economy but the implementation and administration of the programmes are unfortunately missing. The fact is that the village profiles are an ignored lot and how much productive assets have been created in the rural areas have not been adequately captured.The purchasing power of people has increased not through employment generation but through free distribution of essentials and subsidies,sale of agricultural lands,corruptive practices,hoarding and black marketing of agricultural products etc.Rural economy is a failure

from: T.V.Gopalakrishnan

(This was published as comment to Tarapores's article in Buiness Line dated 1/06/12)