Household savings in Physical assets

The UPA's mal administration and its wrong conomic policies have driven the people to save more in physical assets than in Financial assets. The inflation has virtually killed the spirit of people to live is not an exaggeration.The inequality created during the last ten years of ruling by the UPA has created a class of people with lot of wealth and they have all their savings in Gold and real assets which can be easily acquired by black money.  Investments in these categories of assets which are unproductive as far as economy is concerned, brought down the GDP growth drastically affecting the poorest sections of the society and the middle class.  The damage done by the wrong administration by the UPA government is not easily repairable and the new Government will have a very tough time and will have to take very tough decisions without favouring the high and mighty of the country to put back the economy on the growth trajectory.. 

Dr.T.V.Gopalakrishnan

(This comment is in response to the article Household savings  More in physical and not in Financial assets that appeared  in Business Standard on 1st June 2014.) 

Total inaction by authorities cause NPAs in PSBs

The discussions on NPAs have been going on for decades and the fact remains that neither the Government nor the rgulators, nor the banks boards nor the borrowers nor the borrowers' representatives, nor the depositors nor the shareholders nor the tax payers who subsidise the loss on accout of NPAs have done anything seriously to have a permanent solution to tackle this menace on a permanent basis . Though solution is possible and can be easily implemented aiming at disciplining the banks and borrowers without affecting the banks' profitability and taxing other stakeholders. No purpose would be served by highlighting the issues every now and then but without any serious thought as to how to contain the  ever  increasing head ache  involving  only the banks and bad borrowers. 

Dr.T.V.Gopalakrishnan

(This comment appeared in Business Line against the write up Better NPA picture for fourthquarter ).

Make thePS Banks Performing assets of the economy.

The PSU banks are becoming non professional and non aggrssive in their business approach is a fact which cannot be ignored both by the Government as owner of the banks and the RBI as Regulator. The reasons are not far to seek for such a situation in PSBs. The technology in use, the attitude of employees, thewrong age profile of human resources in banks  and the incentives they get , the unprofessional guidance they get from top managemnt etc add to the non performance of banks, Added to this the Government interference in many ways acts as a moral hazard not to perform is also not a secret. Borrwoers take full advantage of this and they also do not perform. Time a very serious view is taken to make the banks  performing assets of the economy.

Dr.T.V.Gopalakrishnan

(This comment appeared in Financial Express dated 30/5/2014).

Make equity market a place for saving money

The reforms in Capital market is long over due. The equity market should transform itself as  

an important source of savings for middle class and lower middle class and for this at least 50%of the equity should be reserved for retail investors.The corporates should introduce incentives to retain retail shareholders by giving them loyalty bonus or  special dividend if they retain the shares for than a minimum number of years.As far as possible, the corporates should attempt to give a dividend at least equivalent to SB rate of interest. STT should emerge as a tool to attract retailers to capital market, to contain speculation and volatility and a source of revenue to the government. The move to replace tax on short term gain with STT is really excellent as it will help to raise revenues to  the Government automatically and compliance by shareholders would be far better.A lot can be done and needs to be done to make equity market a source of easy savings and capital formation keepinng it a healthy and desirable place to participate.

Dr.T.V.Gopalakrishnan 

PSBs and Naik Committee Report

The need to run the PSBs on professional lines is long overdue as the Government cannot any more afford to carry on the burden of running such rotten institutions with tax payers’ money and with other attendant adverse implications on its finances and the economy. The way these banks are run allowing borrowers to loot perennially the depositors' and tax payers money with the solid backing of the Government cannot go on for ever and time has come to have a relook and revamp the banks to make them really the powerful engines of growth of the economy. The model suggested in the report on par with Temasek in Singapore or the UK Governments UK Financial Investments Ltd can be easily replicated and what the economy wants is that banks should play their role of mobilisation of deposits and the deployment of funds for equitable growth of the economy effectively under proper regulation and supervision by a professional body without any interference from the Government what so ever and accountable to the parliament. The Government and the economy should be the beneficiaries out of such banks and not the other way round. Banks are not meant for unprofessional Board Members and bad  borrowers.  No doubt, the unions will have to be taken into confidence and their interest cannot be jettisoned. The need to have professional Boards,effective constructive regulation and supervision is paramount and hope the new Government would take this report seriously and implement the recommendations in letter and spirit. More than any one,the Government would be the major beneficiary is also the moot point.

Dr.T.V.Gopalakrishnan

(This comment appeared in Money Life )

PSBs and Naik Committee Report

The need to run the PSBs on professional lines is long overdue as the Government cannot any more afford to carry on the burden of running such rotten institutions with tax payers’ money and with other attendant adverse implications on its finances and the economy. The way these banks are run allowing borrowers to loot perennially the depositors' and tax payers money with the solid backing of the Government cannot go on for ever and time has come to have a relook and revamp the banks to make them really the powerful engines of growth of the economy. The model suggested in the report on par with Temasek in Singapore or the UK Governments UK Financial Investments Ltd can be easily replicated and what the economy wants is that banks should play their role of mobilisation of deposits and the deployment of funds for equitable growth of the economy effectively under proper regulation and supervision by a professional body without any interference from the Government what so ever and accountable to the parliament. The Government and the economy should be the beneficiaries out of such banks and not the other way round. Banks are not meant for unprofessional Board Members and bad  borrowers.  No doubt, the unions will have to be taken into confidence and their interest cannot be jettisoned. The need to have professional Boards,effective constructive regulation and supervision is paramount and hope the new Government would take this report seriously and implement the recommendations in letter and spirit. More than any one,the Government would be the major beneficiary is also the moot point.

Dr T.V.Gopalakrishnan

( This comment appeared in Money Life)

(This comment appeared in Money Life )

Is there any professionalism in Banks Boards?

Banks' Boards are the major NPAs is not a great news. If Board Members  discuss taxi fare reimbursement more than the recoveries of loans, it is also not a shocking news.Board members can discuss only what they are familiar with and routine matters. When many of the Board members introduce NPAs in banks how can they discuss about the recoveries seriously. Their interests are also on tours, enjoying VIP status, hospitality and Gifts. When no accountability is fixed at Board level and when strict procedures are not adhered to for appointment of Board Members, how can there be professional approach in running the banks? Many of the Board members have no expertise on running the banks, no knowledge of economy and Finance, no knowledge of importance of fast growing technology and mushroom growth of bank products and various instruments of risk controls etc is a ground reality and many manage to be on the Board of PSBs through poltical and other high level Contacts and their Contribution is to share the loot with the borrowers they introduce to banks.Except professionalism, everything else is practised is known to all banks and the results are there for all to see and feel.

Dr.T.V.Gopalakrishnan

(This comment is published in Business Standard agiant the Article Banks Boards are NPAs )

People expect a lot from Mr Modi's Era

Mr Modi's and BJP's Victory ends the era of Congress ruling in India.More than anything else people wanted very badly to end the dynasty rule of Gandhi family. The last decade of Congress rule has ruined the economy and that too under a Prime Minister who happens to be a world renowned economist.Mr Modi is a visionary leader and he wants the people of India a safe, peaceful and comfortable life to enjoy, which the Country's economic and human resources can easily provide, provided both are made to perform. He fought the election only on economic development and equitable distribution of wealth created. This should not be difficult as he has the will and the competence to deliver. Once the leader is non corrupt and has some good and workable ideologies, the problems presently faced by the economy can be easily eradicated. Corruption and Inflation are the by products of black money and Mr Modi knows how and where to tackle this menace. One has to only wait and watch.

Dr.T.V.Gopalakrishnan

(This comment appeared in The Economist E version against the article The Modi  Era Begins on the 19th of May 2014).

Kick-Starting India

A well focussed and comprehensive presntation highlightng all the ills of the Indian economy and suggesting some very thoughful panacea commencing with the banks which are really rotten due to staggering bad debts,forced investments in Government bonds and depleting deposits from household savings. Though the formation of bad debts can be minimised if not eliminated altogether by disciplining the banks and borrwers by introducing a self correcting mechanism, the vested interests have not cared to do anything in that direction keeping the banks as a perennial source of money for many including the Government. The three subsidies Fertiliser, food and fuel need to be discontinued and the APMC act which kills farmers and fuels inflation and corruption in the economy needs to be repealed early.The taxation poicies which generate black money,discourage savings and investments and erode confidence among investors particularly forein investors need to be reviewed and reenacted for improved growth of the economy and equitable distribution of wealth generation. As rightly pointed out, the new Government has to do a kick starting and keep the engine of growth well oiled for effective performance.

Dr.T.V.Gopalakrishnan

(This comment is published in The Economist dt17/5/14 in response to the write up The new Government Kick Starting India ). 

Wait for Mr Modi to settle down

Mr Iyer’s change of mind is understandable but he should refrain himself from giving suggestions to the new Government at this point of time. Mr Modi has his own plans and ideologies and as it is he has his own agenda as to how to take the country and economy forward. The economic policies pursued so far by the UPA 1&2 are faulty and created all possible ills in the economy beyond easy solution. Mr Modi has to understand first what is wrong, why it is wrong and where it is wrong? The subsidies and fixation of prices need a total review and the inefficiencies and wastages observed in the functioning of PSUs and PSBs need to be completely eliminated by bringing them under highly skilled, professional and expert management with accountability to parliament. The taxation and other economic policies need to be revisited to generate wealth at the national and individual levels. The gaps between the rich and the poor need to be gradually bridged and this is not an easy task as the economy as it is, is controlled and dictated by vested interests. A lot needs to be done and it is better to wait and watch as to how Mr Modi makes his initial steps.

Dr.T.V.Gopalakrishnan 

(This comment is in response to Mr SA Iyer's article that appeared in ET dated 14/5/14).   

Why not tough action against banks also?

Why this late wisdom on the part of FM? Such an  action should have been and should always be there to prevent formation of NPAs in banks. Even banks should be severely punished for generating and encouraging NPAs. The losses borne by the banks because of NPAs should be recovered from banks and the borrrowers and should never be passed on to depositors, tax payers and other stake holders of banks and the economy. Borrowers are using public Money to enrich themselves  and  this cannot be ignored / forgotten by the authorities as borrowers  have no divine right to loot the banks.

Dr.T.V.Gopalakrishnan

(This comment is given against the report FM for tough action against wilful defaulters that appeared in Business Line dated 13/05/2014).

Take RBI Into Confidence and build the economy strong. 

"I determine the monetary policy. I say what it is. The government can fire me, but the government doesn't set the monetary policy. So, in that sense, am I independent! Well, I am happy to talk to the government. I am happy to listen to the government but ultimately the interest rate that is set is set by me,"  said Dr Raghuram Rajan, Governor,  Reserve Bank of india at St. Gallen Symposium in Switzerland. What made him to come out with  such a statement is perhaps only  known to  him  although there are repeated outbursts in the media that BJP Government if comes to power  may like to change the Governor may have a possible bearing. This statement from Dr Rajan is very  bold and  well timed as there are some loose talks almost every day about  his removal by the new Government  as and when formed. It appears the new Government intentionally or unintentionally  has a  message to the Governor to act wisely reading its mind. How ever, the  response expressed by the Governor is   a clear message to the Government that the Reserve Bank as the central bank of the country has a  role to play and it cannot and  should not be dictated by the Government to satisfy its political agenda ignoring the autonomy the Reserve Bank is entitled to have in achieving its twin objectives of economic growth and Price stability which will ensure maintaining the external value of the rupee and  the financial stability vitally needed to attract investment both  from domestic and external markets.      

The relationship between the Central Government and the RBI has been strained for quite sometime and it all started with the ever persisting inflation caused due to wrong economic policies pursued by the Government for the past few years without worrying the adverse implications that they can inflict on the economy.  Added to this, lack of Governance  resulted in series of scams, paralysis in decision making on very  important areas of policies, lack of confidence in the economy affecting the investments very badly needed for infrastructure development and growth etc. The fundamentals of the economy got weakened fast and the Fiscal   Deficit Current Account Deficit deteriorated. Though the Reserve Bank had warned the Government several times directly and indirectly to step up measures to boost growth through fiscal and administrative measures, everything had fallen on deaf ears although some measures introduced as late as 2012 and 2013, started  yielding some  results. RBI on its part was more concerned to contain the ever persisting double digit inflation through its interest rate policy which has only a limited influence to fuel growth. RBI as a professional institution cannot and should not tune its policies to popular and market demands and through out its history it has played an independent but an active and supportive role to the Government ensuring growth of the economy and price stability.RBI was never blamed  and had never failed the Government in its pursuit of economic growth, is fact widely acknowledged  but of late , there has been a tendency to pass on the buck to RBI for the miserable failure of the Government to run the economy efficiently, effectively and enthusiastically. 

 The need for a coordinated approach between the Government and RBI has been  all the more  very vital now when there is a change of Government and this is the crucial period to sink   the differences if any in their opinions in policy matters. This is the time to find ways and means to set right the policy lapses and bring back the economy on the trajectory of growth.Confidence building is the need of the hour and the Government and RBI have a major role to play here. The fiscal policies of the Government and the monetary policies of the RBI which together form the economic policies to be pursued are being watched nationally and internationally and there is absolutely no room for both  to display to the world that they are on different directions and they have different objectives to be achieved. High expectations are there from the new Government and every move is very  closely watched, interpreted and pursued by investors all over the world. The Reserve Bank has a recognition world over for its strenuous efforts in keeping the  country's financial system in general and the banking system in particular stable sound and healthy although there are some strains of late  due to staggering non performing loans in banks on account of weak economy and interference of the Government in RBI's functioning in various ways. Despite the fundamentals of the economy not being strong, if at all the rupee has gained strength during the last few months, it is largely due to the professionalism shown by the Reserve  Bank under the leadership of Dr Rajan  who entered RBI when everything in the economy was wrong is a ground reality exhibiting RBI's concern and capability to set things right. Hope the new Government will not err and show the wisdom to  understand the economic and financial issues of the nation  in their right perspective  and take RBI  and  Dr Rajan  into full confidence in building the economy strong and make it enviable for others to watch and wonder.      

Dr.T.V.Gopalakrishnan,                                                 

Inequality and sharing of wealth in India

In india the gap between the rich and the poor widens year after year perhaps due to two major reasons viz;wrong taxation policies and persisting inflation. No serious attempt has been made by the successive Governments to enrich the poor by providing employment opportunities and creating productive assets. Good that the author has highlighted the problem observed in India and hope the autorities will not ignore the findings and find some reasoning to adopt some solid measures to change the trend.

Dr.T.V.Gopalakrishnan

NOn Performing Administration and NPAs

If NPAs refer to non performing administration who is responsible for this?Is not the banks Board accountable for such a very serious lapse which has adverse implications on the economy and its stakeholders particularly the tax payers,share holders of banks and depositors of banks.Generation of NPAs has become the order of the day as both borrowers and banks do not want to be disciplined.The regulator also keeps mum ignoring the the much needed health of the banking system.Unless and until  a self corrective mechanism is introduced to discipline the banks and the borrowers through some workable statistical model, the formation of NPAs, write off of loans and all other consequential expenses like legal charges, maintenance of NPAs in banks books, safeguarding of securities will have to be borne by the innocent  tax payers who have not borrowed a single penny from any bank, depositors, employees and shareholders.The cumulative loss to the economy in the form of loss of production and other accruals to the economy are other losses.It is time a very serious view of NPAs is taken by autorities and all stakeholders and an urgent solution is introduced.  

Dr.T.V.Gopalakrishnan

(This is in response to a write up NPA refers to non performing administration that appeared in BS dated 9/5/2014).

No politics in allowing the Governor ,RBI to continue with his job

The continuance of RBI Governor after May 16th should not have been the subject of gossipping by any one in the media as once some one is appointed based on merits and as per the Constitution,the matter ends. Both the Central government and RBI have common objectives irrespetive of the political partty in power,to achieve economic growth with price stability. Who occupies RBI's chair is immaterial provided, the person occupying is incompetent,inexperienced and indifferent to deliver the goods. As far as Mr Rajan is concerned, he has been brought back to India as an Economic Advisor based on his acdemic and professional merits par excellence and then has been appointed as Governor,expecting him to improve the economy and take it forward to bring it on par with some advanced economic powers of the world. Politics should not play mischief and media should not give ideas to play politics with such vital appointments which are essential to the economy' growth without interference of politics. Mr Rajan has proved his mettle during his last few months of performance particularly in bringing some order in the forex market and stability in the external value of ruppee and he has his own plans to bring back the growth keeping the inflation under control.Hope,the new Government will surely appreciate his idelogies and give him the full cooperation to take the economy forward. Hope Politics will not play spoilsport and take away the much needed condfidence in the Governance Standards by taking vengeance on the Previous Government's appointments and things like that.

Dr.T.V.Gopalakrishnan

(This comment appeared in Money Life)

Bad debts affect investments

The losers because of NPAs in banks are Investors, depositors, shareholders,general customers of banks, employees and general tax payers in the economy. The beneficiaries are borrowers, corrupt offcials, lawyers, directors of banks, auditorrs, regulators and some directors of banks.The loss on account of bad debts is substatial to the economy and this has been an organised loot.Though borrowers and banks need to be disciplined and this is posssible with some simple mechanism by rating the Standard assets and levyibg a penalty on the potential bad  borrowers and banks for their failure to discipline the bad borrwers, no serious attempt has been made as there are many vested interests in  having bad debts and write offs.  

Dr.T.V.Gopalakrishnan

Banking business

Banking business

Banking business


This refers to the article “Don’t expect much from new banks” (May 5). Though the issue of new licences by the RBI may add to the number of banks, it cannot meet the objective of licensing of more banks, which is to add to the competition and improve financial inclusion. As it is, the geographical spread and concentration of banking is fairly sufficient to make financial inclusion a reality and generate constructive competition.



While the PSBs are weak with deteriorating financials, the cooperative banks and regional rural banks are too weak to make their presence felt adequately. They have not been able to fill the gaps in banking needs in their areas of jurisdiction. The private sector banks perhaps are more into businesses other than banking, and they seem to be moving without any proper direction and long-term objectives.



It is time the Government and the RBI strengthen the existing set-up before experimenting with new licences.



TV Gopalakrishnan



Bangalore

Improve the work culture among the Government Employees and develop the economy

Dr.T.V.Gopalakrishnan

The article is well written and highly focused. Administration has failed beyond anybody’s imagination and the result is there for all to see. Corruption, inefficiency, indecision, indolence, incompetence etc have become the order of the day and anybody can get away with anything without any accountability is what is bothering everybody.Mr Manmohan Singh's failure to tighten administration let loose series of scams leading to all sorts of ills in the economy, the most serious one being the loss of confidence in the entire Governance Standards. I had a very short stint in the MOF and I can fully vouch for what ever has been highlighted in the article. Except a very top few, the contribution of many in Government Offices is virtually nil.They have all activities other than office work and in many sensitive areas , the work is carried out by drafting officials from outside agencies where the Government has authority and control to dictate. The new Government's major responsibility should be to bring back efficiency in administration and once this is done, the other jobs are easy. Will the Modi Government achieve this? Then Modi's period will be a golden period for the economy. We have talents and other resources, but no commitment and accountability and we perennially suffer.How long we should tolerate is the question the new Government will have to ponder and act.

(This is in response to the article Government Employees the biggest Chaallenge for the new PM that appeared in Business Standard on the 2nd May 2014) 

Life Insurance and Private Sector)

Like banking, insuance sectorparticularly Life insurance segment is also dominated by the Public sector  LIC plays almost a monopolistic role as it has the backing of the Government.The private sector has not captured the market significantly despite their aggressive marketing and advanced technology just because of the fact that it is neither transparent nor accountable to the policy holders and the role played by the IRDA unlike the RBI in the Banking side has either not been convincing or effective to attract the confidence of investors in insurance. The feeling that the investor is taken for a ride by the private players is very much prevalent among those who have tried their hand in Private insurance. They are after 

profit at the front end itself and the investors are left high and dry once they part with the money. Either their approach is wrong or their motive is not very convincing is a fact which IRDA cannot ignore for long if insurance business has to spread fast and wide,

Dr.T.V.Gopalakrishnan

(This comment appeared in Business Line in response to an Article  on LIC )