Bank license Probable candidates.

Chances are that Corporates linked applicants like Reliance Capital L&T Finance, Birla Finance,and Bajaj capital may not be given license as they may repeat the performance as obtained  during the pre nationalisation period of 1969.IDFC, IFCI, LIC Housing Finance, Power Finance Corporation, Rural Electrification and India Post stand a very good chance from the angle  of spreading banking extensively in the country as Financial Inclusion is the need of the hour to support and justify inclusive growth.Bandhan Financial Services Pvt Ltd may get a license to strenghten the north easten Region which is also becoming politically a sensitive area. Prudence demands that applicants having industrail interest should be debarred even from applying for a bank license. It is neiither good for the bankng industry nor for the economy.

Dr.T.V.Gopalakrishnan

(This comment in Money life is in response to the article New bank licence: Who will be in RBI’s interim list? dated 28/2/14)

Discipline borrowers and banks mercilessly to prevent NPAs

Gopalakrishnan T V 1 second ago

This loot through banks by Corporates and others has been a regular feature and it gets ignored because banks are able to write off of the loans out of profits and they are also able to get capital support from the Government.The write offs seldom get scrutinised. On the contrary , influence works a lot to get the loans written off.Board of Directors who include RBI and Government nominees have no time to seriuosly go through the Agenda items and most of the items cleared as a matter of routine. These agenda include loan proposals and write offs. The auditors of banks seldom make any comment or dissent and there is always a trade of between auditors and the Board of Directors. The banks balance Sheets are drawn as desired by the Chairman and by the influential Board members.It has nothing to do with the ground realities. Chairmen of banks are entitled to draw bonuses based on performance and the performance indicators are window dressed heavily so that they are able to draw a lumsum money on an year to year basis. Employees representatives are also on the board and they seldom raise any dissent or they are not heard adequately on the Board agenda. The Chamber of Commerce and other representative bodies who always fight for concessions and reliefs for their members  are never heard fighting to reduce the bad loans and are never found disciplining the borrowers.The only way to reduce the formation of bad oans is to have a self correcting mechanism by which right from the day of sanctioning of loans the borrowers need to be disciplined by a rating method based on their conduct of acounts. Banks also need to be brought under discipline and should be penalised if they are observed to be lax in the proper conduct of loans. Banks need tight regulation unlike other industries as they deal with money and hunman resources and it is humanly impossible to prevent greed and commitment of irregularities. Banks need a strict vigilance on an ongoing basis as they deal with depositors hard earned money. Tax payers also should object to supporting banks for their failures by using Govt resources.

Dr.T.V.Gopalakrishnan

(This comment is given in Money Life against the article " AIBEA blows the whistle on bad loansof Indian banks "appeared on 26/2/14)

Urgent need for a thorough investigation of NPAs in banks and fixing the problem for ever

The NPAs are creation of banks and there are five categories of NPAs which are caused by the neglect of the top  management and the auditors. There are disclosed NPAs on which only all discussions get focussed.Apart from disclosed NPAs, there are potential NPAs, camouflaged NPAs, hidden NPAs and abinitio NPAs which seldom get noticed and reported. These four categories are there in every bank and this risk because of these is very high not only for the banks but for the financial system and its stability.The detection of NPAs is very crucial and the software used should have been authenticated by the Regulator.There is always a trade off between the management and auditors to hide NPas and this is an open Secret among banks. The losers because of high NPAs are the depositors and shareholders.  The tax payers also make good the losses on account of NPAs through budgetary allocations to support the banks to maintain the capital adequacy. The amounts written off by banks on an year to yaer basis are substantial and these are borne by depositors, shareholders, employees and other stakeholders.It is time a detailed investigation of NPAs of banks is carried out and a self correcting mechanism to contain formation of NPAs involving only banks and borrowers is introduced. Otherwise the banks will suffer, the economy will suffer and finally all stakeholders of the economy also will suffer.    

Dr.T.V.Gopalakrishnan

(This comment is given in response to an articleThere is more to United Bank of India's problems than Infosys' software that appeared in Business standard dated 25/2/14)

Loot through banks

5% NPAs estimated may be after write off of loans which would be more than 5%. The way banks generate NPAs gets a doubt as to whether there is any Governance in banks. What is RBI doing? Has it lost its supervisory efficiency? The write off of loans and the capital inducted by the Governemnt to save the banks image need to be thoroughly investigated by an outside agency and the depositors and shareholders should know what exactly is bank's health? IMF has also been warning on the deteriorating quality of banks assets and there is some wholesale loot going on with or without the knowlwdge of Banks Board, Auditors and RBI. Time to have a serious investigation by an independent agency?

Dr.T.V.Gopalakrishnan

Directors, Banks and NPAs

The author has brought out in detail the the reasons behind the malfunctiong of banks and corporates due to wrong selection of Directors, Auditors and professionals. Banks have Directors from the Government and RBI and they can be easily silenced by the Chairman in case they raise any objections to the proposals mooted by the Chairman. One inspecting official after inspecting a nationalised bank observed that the government director is in his Shirt Pocket and the RBI director is in his pant pocket and other directors are not in his thoughts even. The appointment of Direcors is erratic and less said the better the appointment of auditors. There is always some trade off between the Chairman and Directors and between the Directors and auditors.The bank has umpteen ways of hiding NPAs whether the system permits or manual intervention permits. There are abinitio NPAs sanctioned by the Chairman and with the Connivance of the Directors,potential NPAs, hidden NPAs , camouflaged NPAs, and disclosed NPAs. The NPAs of banks particularly the United Bank of India under discussion are only disclosed NPAS and other categories if added it would be another 50% more.No seriouys attempt is made either by the RBI or theGovernment or the Chamber of Commerce or  the depositors, or the disciplined borrowers or the shareholders of banks to really find a lasting solution to minimise the imapct of NPAs in banks books. There should be some mechanism to prevent formation of NPAs right from the date of sanctioning of loans and this can be done only by the banks and borrowers cooperation and coordination. Will someone care for such a practical approach.  

Comment given to Money Life.

Bad loans and UBI

Why UBI desrves a life line? Who will bear the cost? The NPAs are the creations of the management by resorting to reckless lending ignoring the very basic principles of lending VIz Safety, Liqidity and Profitability. These loans are abinitio NPAs with the full knowledge of the Board and rest of the management. The entire Board should be made accountable for their lapses and throwing to winds the principles of lending using depositors money raised at minimum cost. These loans in no time turn sticky and board  after waiting for some time strongly recommend for write offs and finally written off. The loss is borne by the depositors, taxpayers, employees , good and disciplined borrowers and shareholders. This has to be brought to an end to improve the health of banks.

Dr.T.V.Gopalakrishnan

( This comment is given in Business line.dated 24/2/14).

The ills of the economy

Dr.T.V.Gopalakrishnan

The article brings out clearly the failure of the Government on various economic parameters. The Current Account Deficit, the fiscal deficit and fall in the value of rupee are all the creation of the Government because of its failure to contain inflation and ensure all round grwoth of the economy. Agriculture and industrial production came down drastically during the last few years. Infrastructure growth has been vastly ignored.The gap between the rich and the poor has widened due to wrong taxation policies. Corruption and black money increased in leaps and bounds tilting the balqance of the economy completely and laxity in Governance standards let loose frauds and scams as an economic activity worth pursuing. Over all the economy lost its steam and has gone back to the pre 1990 period. The reforms witnessed in the early 1990s have been reversed in the same speed with which they were implemented  and who ever comes to power has to start from the scratch.

(This comment in response to the article by T.N.Ninan on " the alternative view" appeared in Business Standard dated 23/2/14). 

Make RBI autonomous and efficient

This article highlights the concerns of the Government very well listing out some of the issues connected with the recommendations of FSLRC relating to RBI. The Reserve Bank has been losing its image of late as an autonomous institution having full grip on monetary and fiancial stability is a fact and this has also been sounded by the IMF when it says the finacial stability can weaken if banks balance sheets get weakened. RBI's professionalism in supervising the banks has been deteriorating and this is quite visible in banks balancesheets. RBI also tends to be ineffective when its powers are cut one by one. Even it cannot improve its own staff's perks and salaries without consulting the Government is an indicator as to what extent the Govt exercises its control over RBI and banks. The pension of retired employees has not been revised for the past two decades although the staff are entitled to get revsion on par with that of Central govt employees.

Dr.T.V.Gopalakrishnan

( This comment in BL dt21/2/14 is in response to Tarapore's article on Interim Budget)

Professional and not superficial Supervision is the need of the hour.

This refers to your editorial System alert (Business Line dated February 21,2014).The rise in banks nonperforming loans at alarming levels has been a threat to financial stability cannot be taken lightly at this crucial junction where the economy itself is not performing. Except perhaps the Dy  Governor of RBI who feels that rise in NPAs is no systemic risk as of now, the professional bankers, financial experts, the Government and the Reserve Bank have been expressing their apprehensions on the instability that the NPAs can cause on the Financial System and the risks thereon. The IMF has been warning off and on the weakening of bank balance sheets expecting a very stern action from the authorities. Though RBI has been seized of the problem, and some steps are on to prevent formation of fresh NPAs and recover the bad loans, the fact remains that  unless  and until both the banks and borrowers are disciplined in a very professional manner, this menace of NPAs cannot be minimized in the banks books with attendant negative results in the economy. The semblance of Governance system in banks has been virtually absent thanks to laxity in RBI’s supervision and Government’s interference.It is time RBI goes highly professional in tackling the NPA issue by some meaningful supervision. 

Dr.T.V.Gopalakrishnan

(Sent to BL as letter to Editor on 21/2/14). 

The demand of bank employees is genuine.

The bank employees demand for increased wages is genuine and banks can definitely afford. The profit is eaten away by bad debts craeted by the Government's ineffectiveness in ensuring that the projects take off on time and the assets do perform for banks. The loss on account off Bad debts has to be accounted for by the Government and the management and employees are not definitely not responsible for reduced profit.The loot by borrowers if given a full stop, banks will have sufficient profit. Like politicians anfd bureaucrats bank employees have no avenues to loot and majority depend on wages and after direct and indirect tax, they get a pittance and this also gets evaporated by inflatioon.Hope FM understands this. 

Dr.T.V.Gopalakrishnan

(This comment is in response to the report that the FM does  not want bank profit to be given as wages to bank employees in BS dated 10/2/12)

Upper berths for senior citizens?

This is a welcome improvement for wait listed passengers.. The railways should also consider the allotment of lower berths to senior citizens as the experience is that earlier the Senior Citizens book, the chances of their getting lower berths are very remote. By chance they get RAC and wait Listed tickets, they have 100 % chances of getting lower berths. This anomaly needs to be eliminated and as far as possible, senior citizens should be allotted lower Berths which is not an impossible task in these days of computerised booking and allotment of berths. This can be done if there is a system to allot berths on the previous date of the Journey instead of allotting as and when booked on line. If Railways can ensure lower berths to senior citizens it will be a great relief to many old aged travelers in their 70s and 80s..

Dr.T.V.Gopalakrishnan

(This comment is given in response to the report   "Now, automatic SMS after confirmation of waitlisted train tickets" that appeared in BL dated 9/2/14).

A good election and economic manifesto.

A good election and economic manifesto worth pursuing even and after election by any party which comes to power. What people need is simple,peaceful,safe and comfortable life with minimum aspirations to have law and order every where to freely move around. What the Government can do is to provide the infrastructure for this physically, financially, administratively and technologically and encouraging the private sector to do the rest under close surveillance. The author has given a very good prescription towards achievement of economic development benefiting all segments of the society.

Dr.T.V.Gopalakrishnan
8/2/14.
(This comment in Business standard is in response to the editorial Economic Manifesto).

Independent directors

The appointment of Independent directors based on contacts and influence need to be stopped. The qualifications for Independent Directors and their role and Responsibilities need to be clearly Spelt out. Their remuneration needs to be attractive and as far as possible linked to the Contribution to Company's performance and not to the attendance alone.Their reports after attending every meeting should form part of the minutes of Board Meetings and the Committee's meetings where ever they are members. There should be some system to evaluate the performance of Independent Directors and this needs to be given adequate weight age for continuance of the Directorship after the minimum prescribed period. Contribution to Corporate Social Responsibility should have special Consideration.

(This comment is in response to the Editorial Jobs at the top in Business standard dated 7/2/14).

Is our Monetary authority not aware of our economic Conditions?

The author has very strongly argued against the major recommendation of the Committee that"monetary policy should move away from its narrow focus on inflation towards a multiple target-multiple instrument approach without swerving from a commitment to price stability over the medium term.”This recommendation is okay in advanced economies where there are perfect market Conditions, enlightened people and standards of living are very high with low cost of living.Ours is an imperfect market where demand for goods and services are not / seldom matched by supply and there are, apart from economic policy inefficiencies,there are issues of lack of Governance and accountability. Frauds generate black money, Corruption increases circulation of black money and demand for products and services and greed dictates the pricing of products and services in the market. These need to be tackled  first on a war footing and financial literacy which is virtually absent even among the literacy class needs to be considerably improved.The Committee should have thorough understanding of the socio-econo-political conditions of our economy and then come out with suitable recommendations on Monetary policy reforms.The food products production, storage, marketing and distribution is in total disarray and the manufacturing side is still worse with lack of policy support on land, labour, law ,capital formation and power supply.. As it is, the transmission of monetary policy has not been as effective as desired by the Monetary authorities and this cannot be ignored before new reforms are thought of.

Dr.T.V.Gopalakrishnan

This comment in ET is in response to an article 'Junk the Urjit Patel report' that appeared in ET dated 5/2/14)

The FM and the Governor

The Coordinated approach between the RBI and the Central Government to tackle inflation and maintain Growth has been missing practically for the last few years and this has been very open when Dr Subbarao was the Governor. The new Governor Dr Raghuram Rajan on his initial days gave an impression that there will be a coordinated approach and the growth of the economy with price and monetary stability would be the common objectives of the Governments' Fiscal Policies and the RBI's monetary policies. This cannot happen, was the well considered views of many an economists and financial experts in the country. Who ever occupies RBI's Governor's Chair cannot ignore the price stability even at the cost of slight economic growth as the growth is dependent on several other factors of production where the money plays only a supportive role and not definitely the important role as is perceived by many..Inflation is basically caused because of more money chasing a few goods and the control on money supply is the very essence of inflation control.  Growth  should match supply and demand,and money supply has a pivotal role in ensuring the match. All said, the present problem of inflation is definitely not because of money but because of the total mismanagement of the economy for which the Government is solely responsible.Who ever may be the Governor,RBI cannot do much to contain inflation in its traditional way and having a 4% retail inflation target is simply meaningless and chasing a mirage. The gap between the Government and RBI is bound to widen till a new Government takes over and an understanding is reached between them.

Dr.T.V.Gopalakrishnan

(This comment in response to Rajan virus for PC appeared in Business standard dated 3/2/14).

Need to rebuild the confidence on investment.

The editorial has captured well the weaknesses observed in the economy and the reasons for ever declining GDP growth. The savings and investments in the economy have drastically fallen down because of the Paralysis observed in the Government's Governance and policy initiatives with severe adverse impacts on the infrastructure, manufacturing, production and distribution of food products .The cascading effect of malfunctioning of the Government has its cumulative negative effect in the confidence of investors both domestic and international who build the productive assets and help wealth creation. Hope the government would give a serious thought to the whole issue of investments and accept the valuable inputs given in your editorial for active implementation without further loss of time.

Dr.T.V.Gopalakrishnan
(This comment has appeared in BL  dated 3/2/14 in response to the editorial Investment Atrophy)