Time to seriously introspect on the neglect of agricuture and farmers.

Farmers are the unluckiest lot in the economy despite the Government paying all possible attention and making lot of pomp and show in atleast recognising them as the vote Bank.Right from the days of 1930s,importance of agriculture does not lose sight of all those who matter. Politicians, bankers, professionals and industries all have lot of sympathies to revive agriculture and provide them all reliefs.Right from the establishment of RBI in 1935 as per the RBI Act, 1934,agriculture assumes significance in the economic schemes and RBI set up an exclusive Department Viz Agriculture Credit Department to give a boost to agriculture. Banks were nationalised in two instalments in 1969 and 1980 to give a special attention to agriculture. Since then several instituitions have been set up as per various Committees' recommendations. Regional Rural Banks were set up in 1975 exclusively to take care of farmers and the rural people with a feel of local feelings and the sentiments of the masses. It turned out to be a miserable failure.NABARD was set up in 1982 with alot of fanfare and what is that they are doing to develop agriculture and rural development, only God knows. Volumes would come out detailing the ways they helped to do justice for their existence. but the taste of pudding is in eating.Local area banks and coperative banks were in existence apart from several agencies doing all possible things as one can imagine to help the farmers. Several state level agencies including a Local Board of RBI have been involved directly or indirectly to take care of regional developments based on their potential. The result is simply agricultural sector stands murdered and farmers commit suicide. The resources and money wasted or spent to revive agricultural  and rural sector in fact could have better been utilised to remove their poverty by direct distribution of cash. It is time for all to introspect what is going wrong and where? Every body's existence depends on the strength of agricultural sector as these products essential for survival cannot be manufactured in an industry. They have to come from the soil and farmers have to be there to toil in the soil.

Dr.T.V.Gopalakrishnan

Understanding Customers through Technology

Understanding customers is more important, than just knowing them

from the development perspective of both banks and national

economies. All the more so, because the age old process of ‘Knowing

Your Customer’ (KYC) has been practically reduced to a ritual of

collecting and archiving documents! Neither has it effectively served

the purpose of combating money laundering among other things,

despite all the supporting international laws - at least not as yet!

KYC is today perceived as a stumbling block, instead of being seen as

a golden opportunity for expanding business and eliminating /

minimizing non-performing assets. It has been used as a device to

keep customers away from banks, especially the not-so-well heeled

and poorer sections of society, resulting in financial exclusion and

stunted growth, more so in the developing world! KYC is used as a

means of collecting documents said to be required for entertaining

customers without seeking to understand them; their background,

their character and their usefulness in furthering business in a healthy

and mutually prosperous manner.

‘Understanding Your Customer’ (UYC) is thus more relevant and

meaningful than the superficial act of KYC. With the onset of digital

transformation, Big Data, the ‘Internet of Things’ (IoT) and supporting

software applications, what was earlier considered to be a tedious and

unreliable process is proving to be a boon to banking in general - all

the more so for those embracing technology with an eager mind, an

open outlook, a discerning eye and a human touch.

Needless to say, every customer is a potential consumer and an

advertiser of the services from banks and thus offers immense scope

for business expansion and growth. The entry of banks into the

insurance business, share broking and consigliere services bears

testimony.

Customers can be individuals or institutions and beyond collection of

documents, the failure to appreciate and understand their strengths

and weaknesses is evidenced by the ever increasing accumulation of

bad debts, losses on account of frauds, generation of black money,

lack of financial inclusion and other ills that plague the economy.

It is time to recognize that UYC helps to address many of the issues

that are regularly faced by banks, governments and economies at

large. The behavior of customers whether they are individuals or

institutions can be easily captured through compilation of their profiles

and intelligent analysis of their operations, interpretation of the inputs

they submit to banks to comply with the various provisions of different

laws and regulatory requirements. Periodical face-to-face interaction

with them has not been given adequate attention in the present

scheme of things, which needs to be addressed through technology.

Though the regulator has ways and means to stricture the banks for

their failure to comply with the regulatory prescriptions, as recently

witnessed in the case of some banks, they have perhaps not helped to

serve as an important tool to understanding the customer. Things are

however changing:

• Bad debts and NPAs could be dramatically reduced through

judicious credit decisioning using platforms like the ones offered

by Bosch, Experian, Kabbage, OnDeck and others.

• Customers could be guided to improve their credit ratings by

helping them to sincerely understand the evaluation processes

followed by rating agencies such as Brickworks, CRISIL, Experian,

Fitch and ICRA.

• Banks could advice and assist customers in managing their

working capital more efficiently by seeking periodic live access

to their inventory control systems. Even SMEs could be advised

to adopt conventional or cloud based ERP systems such as the

ones offered by CDC Software, NetSuite, TCSiON, Syspro and

others, thus making electronic monitoring and audit eminently

feasible. A stitch in time could thus save nine.

• Hitherto it has been difficult for banks to physically and effectively

monitor the operations of customers located at great distances.

Even distances of 25 to 30 miles have proved to be inconvenient

for various reasons. Remote monitoring through a mix of CCTV

systems, teleconferencing and telecom software platforms like

Skype, Instagram, Google Hangouts and others would

significantly mitigate such inconveniences, militate against fraud

and add some meaningful human touch to the supervision and

audit processes, besides gaining vital insights to the profile of the

customer.

Through the above means, beyond what is garnered from quarterly

operating statements, balance sheets, tax returns and press reports,

even institutional customers and large accounts could be better

monitored and guided to get a firmer grip on reducing NPAs and

raising profitability and growth.

The very idea of understanding the customer is to lend credibility to

the banking operations, ensuring ethical practices and adherence to

accepted standards in the conduct of business leading to healthy and

sound business growth for the benefit of the whole economy. The

adoption of appropriate and state-of-the-art technologies alone would

serve to supplement the human endeavor that is today struggling to

raise allround productivity, profitability and growth. Technology in use

in the banks and other financial institutions needs rapid upgradation if

the merit of UYC is to be established, in letter and spirit.

It is always good to know your customer but it would definitely be that

much better to deal with a known and mutually well understood

customer.

Dr.T.V.Gopalakrishnan

(This article is published in Q Factor BFSI in their April Issue 2015.))

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Bureaucrats need to be role models

Describing political intervention as a necessary element in a democracy for addressing public issues, Prime Minister Narendra Modi on Tuesday advised civil servants against viewing it as a hindrance to their functioning. A very sensible advise by the PM to  the bureaucrats. They can do and undo many things to take the country forward. They should be role models for people to emulate to lead a decent life, committed to work and responsibilities to both family and office , educate the people to fall in line to reduce corruption, black money in all their dealings, comply with the expectations of the authorities to keep the surroundings clean and tidy, maintain utmost civic sense to have a very cordial coexistence in the society, maintain ethical and moral standards to lead a peaceful, comfortable and safe life. A lot can and needs to be done by the bureaucrats and the PM's advice is timely and very appropriate. Dr.T.V.Gopalakrishnan. (This comment is in response to "Political intervention in bureaucracy is neccessary" PM)

Reform the educational sector fast

Educational sectotor is overdue for reforms and in this context allowing forein universities to set up establishments is a welcome step.The setting up of educational institutions in India by polioticians or with the active involvement of politicians to curry favours from the power that be, has brought down the quality of education and the whole society suffers because of that is the ground reality. Those institutions that produce employable candidates prefer to send them abroad or the candiadtes themselves prefer to be employed outside India is an accepted fact . What the country needs is quality educational Institutions encouraging research and capable of producing best of human resources useful for the nation and the society. Ethical standards which have been vanishing fast from business and commerce and also from the Social life need to be fully restored and politics should be kept away from Education, Education is the foundation of a strong nation needs to be recgnised and aimed for. Education should aim for inter-alia skill development, knowledge spreading, good culture, civilised behaviour, high professionalism, good community living, excellent civic sense among all citizens, consideration and peaceful coexistence irrespective of religion, caste, creed or sex. The quality of education should refelect in the standards of living in a peaceful safe and comfortable atmosphere aiming for welfare for all. .

Dr.T.V.Goplakrishnan

Why not some Public Hospitals?

The author has well argued with all logics for more public hospitals and the need for such hospitals is paramount to save  the hapless public from merciless loot and fleecing resorted to jointly by the Corporates and insurance companies. Ethics have been given a go bye and cash flows are the yardsticks to measure the success of insurance companies and the corporate hospitals. Doctors with conscience have no place in these hospitals which are managed amd marketed by the MBAs whose only philosophy is to maximise profit by all means. Greed instead of empathy and sympathy is the driving force behind these hospitals and insurance companies whose motto is only to make hay while the sun shines  are providing the needed support..   Patients coming to these hospitals which are spread to nook and corner are subjected to all possible tests whether required or not and  they have been fully exploited to part with their fortune to save their lives or to maintain a good health. Deaths in these hospitals after parting with the money are very common as per reports  without giving any convincing cause for death. In the absence of any meaningful and efective  regulator  for and monitoring of these hospitals and insurers, the people particularly the middle class, are taken for a ride. The Government can very well go in for state of the art technology supported hospitals and use the subsidy well as rightly argued by the author. At least some such hospitals will ensure to bring in some competition to these corporate hospitals and definitly add some checks and balances in the proper diagnosis of diseases,   use of equipments,tools and  subsequent treatments.Time Government gives a serious thought to start some public hospitals with the aid of some philothropists, social scientists and donations from Corpoartes as part of their Corporate social Responsibility. The Government can think of some tax concesions and incentives for such ventures.  Public would definitely welcome and provide all support to the Government.   

Dr.T.V.Gopalakrishnan

 ( This comment is given in Business Standard against the article  Dont subsidise better build).

Always better to encash the hoarded stocks of Gold

The article reads well and offers lot of technicalities to understand the risks involved in the bold bond scheme and the comparative advantages of Gold bond scheme and mobilisation of deposits through monetisation of gold. Being theoritically strong in the argument by taking all possible precautions the Government should expedite its proposed approach to bring the hoarded gold stocks into the market either by way of deposits or outright purchase on a price fixed by the government without any taxes to be levied from the sellers. The physical gold comes to the Government and this should be available to hedge the future fluctuations in prices in case the Government  faces price risks  with the backing of Gold.In any case the objective behind the FM's policy behind issue of Gold bonds and acceptance of gold as deposits is to find resources for the infrastructire development and this should get priority over other nuances and if and buts of various calculations. The only precaution the Government can perhaps take in this aspect is to ensure that the Gold mobilised is safe and kept with a centralised agency preferably a Gold bank under the control of the Reserve Bank of India.The backing of physical gold at any point of time puts away the fear of upward fluactuations in gold prices and the need to import unnecessary gold at an uncertain cost to the nation. What we now require is cash and we have enough of gold stock available at our command. When butter is readily available the search for ghee is a waste of time, money and loss of opportunities. It is better to encash the gold and take care of the very badly needed infrastructure. The fruits of development would definitely take care of the disadvantages if any.

Dr.T.V.Gopalakrishnan

(This comment is given in Business standard aginst an Article on Gold )

Banks resort to heavy window dressing in FY 2014-15.

 Banks have resorted as usual  to  large scale window dressing  towards the end of the Financial yaer 2015 to enhance the balance sheet size and cover up non performing loans. They canvas heavy deposits through some undesirable and unethical means and this can be easily be verified by a deeper analysis of loan books and expenditures incurred by banks. They sanction certain fresh loans and purchase some cheques and bills to clear off some  bad loans, increase the loans and create deposits. They have umpteen ways of  doing creative accounting practices and the Chartered Accountants who are finally signing the balance sheets knowingly  help the banks management to show some impressive performance.The true position should be taken as of  February end for a quality analysis and March end figures should be avoided to evaluate banks and Chairman's performance. The reappointment of Auditors and extension of Auditors for another term should factor the ways the auditors have resortd to window dress the balance sheets of banks. They are covering up the true financial position and  wrongly impress the  government, Regulator, the shareholders, their own associatin, the share market operators, SEBI, and whole lot of banks good borrowers, depositors and employees. Banks have been doing this for decades and RBI's efforts  to prevent them from Window dressing have absolutely no impact. They repeat this year after year merrily and even the rating agencies do not view them critically is a sad commentary. 

Dr.T.V.Gopalakrishnan

(This comment has been given to BS)

Full Convertibility of Rupee Better to wait

The  thought going in for full convertibilty  comes without having full understanding of the implications of full convertibility.Indian Economy has not reached that stage and it will take a few more years to think of going in for full convertibility of rupee.The inflows and out flows of foreign exchange should emanatew fully from trade and commerce and there should be strong economic fundamentals like comfortable inflation level, fiscal and current account deficit,good backing of foreign exchange reserves, tolerable external debt and strong and dependable GDP growth.Here as it is, we have heavy black money accummulation both in domestic and international markets, uneven flows of foregn exchange, and a tendency to divert funds meant for production and infrastructure to short term speculative gains and total laxity in governance standards.Just expectations and rhetoric statments cannot be misunderstood for a strong conducive and favorable  economic and social environment to go in for full converibiity. It is nothing but an iinvitation for disaster which can be and should be avoided. The demand for  conversion of rupee into dollars cannot be easily met and the inflows and outflows of forex  from a speculative angle cannot be predicted and prevented to ensure stability of rupee. Jumping without a safety net from any height can only injure or kill the person.Better to be cautious .

Dr.T.V.Gopalakrishnan

Make the Regulator for real sector really a reality.

This refers to your editorial Real reform of real estate (Business Standard dt 12/4/15).No doubt, the recent move to have a regulator for real estate deals is a plus and can bring in some semblance of order and uniformity in the fixation of rules and regulations to be adhered to by real estate dealers and developers, it should also ensure that the generation of black money through corrupt and erroneous accounting practices comes to an end and the transactions are transparent. The State Governments have a key role to play to ensure that the regulator has a clear understanding of the discretionary laws and they have been adhered to without any ambiguity or scope for misinterpretation and camouflaging vital information. The unsuspecting customers are always taken for a ride while buying plots or flats or houses and they are always asked to shell a lot of money in the name of Registration Charges, Stamp  duty, deposits towards maintenance with a clause that interest would be paid and adjusted towards maintenance, lease charges for car parking etc. There is no uniformity in the collection of various charges and the treatment meted out subsequently are not made transparent  and very rarely the customers get back any money and the account details. The deposits mobilized run into crores of rupees and their whereabouts are not made available nor properly accounted for. Even the multi national companies who are deep into real estate business find such sources of funds as solid resources for manipulation, diversion, and bribing. The appointment of Regulator is a welcome step and it needs to be strengthened and made effective to check malpractices rampant in the Real estate sector.

T.V.Gopalakrishnan  

(This  Letter appeared in  Business Standard dated 14/4/15) .  

Mudra Bank needs to be different from NABARD and SIDBI.

No doubt good Institutions are real strengths for any economy to grow fast, but they cannot remain parasites and turn out to be white elephants in the long run. NABARD and SIDBI were set up with lot of fanfare but a seriuos introspection would reveal that they have not played their role effectively and both agriculture and small Industries have suffered over a period cannot be ignored. NABARD could have done wonders by playing the role of a coordinating agency bringing in the necessary infrastructure to give a boost to agricuture and rural development.Agricultural sector suffers for want of adequate and timely finance, lack of adequate infrastructure like roads, stoarge, transportation , marketuing and exploitation my politicians and middlemen in all possible ways one can imagine. If NABARD had been proactive, agricultural greowth and its share in GDP would not have registered such a steep fall and shamed the nation which is predominantly an agricultural one.The farmers even today suffer for want of irrigation, insurance, timely finance, infrastructure etc which NABARD could have easily taken care of with proper coordination with states agricultural departments, Insurance Companies, marketing and distribution agencies with proper storage facilities and cheap transportation facilities. Instead they concentrated on refinancing ignoring the presnce of Cooperatives, RRBs and other agencies involved in rural development. The fact remains that after creation of NABARD, agriculture and Rural segment has suffered cannot be challneged.Similar is the case with SIDBI. Small Scale sector which is the provider of maximum employment opportunities and which can give a boost to our exports have not been given the required support to grow with all potential it had. Institutions are there to identify the gaps in infrastruture, the potential for growth and provide the required support in terms of finance, professional management for enhanced, productivity with quality and export etc.Hope MUDRA Bank will learn its lessons from the failures of NABARD and SIDBI and will emerge as a unique set up to set up and support new and old micro units. The author has expressed his concern from past experience and seeing perhaps the poor performance of agriculture, Small scale units and micro units with all institutional presence exclusively set up for giving a phillip to the rural segemnt.

Dr.T.V.Gopalakrishnan

(This comment appeared in Money Life dated 11/4/15 against the article Mudra Bank Confusions Galore)

Banks need to change

RBI's policy is on expected lines and there is a clear message for banks that they have to have a drastic change in their approach to transmit the monetary policy changes for their own benefit and for the benefit of the economy. Banks' survival depends on their professional apprach to intermediate the savings of the society and deploy them profitably through investments, credit and asset generation. The fact that deposits and credit have not been picking up and their investments in government securities at more than the required level only indicate  the banks  pursue lazy banking.The accummulation of NPAs and investments of their resources in assets other than Government securities at lesser than even perhaps the base rates only indicate that banks are not run on professional lines and this has been more than highlighted in RBI's  latest policy. Depositors are not happy, borrowers are not happy, the RBI and the Government are not happy the way the banks are run these days reflect poorly on the management of banks and this is the right time for them to introspect and take some concrete measures.The whole land scape of banking has changed but the management remains where they were situation needs a faster change is what is all about the recent credit policy.   

Dr.T.V.Gopalakrishnan

Where is RBI's autonomy?

Where is RBI's autonomy? The Government has appointed two Directors on RBI's Board in the place of one to dominate the Board and over rule RBI's approach to policies. The setting up of FSDC has taken away RBI's supremacy and is made equal to SEBI and IRDA which have only limited regulatory / supervisory role on stock market and insurance market respectively , where as RBI' responsibility includes ensuring economic growth with price stability, monetary stability which encompasses regulation of the entire financial system which comprises of various markets, institutions and products. The interference of the Government by way of issue of Directives to banks directly and advising them or influencing them to tune to the Government's thinking is a violation of RBI's powers in terms of Banking Regulation Act. The setting up of FSLRC is only to clip the RBI's wings and the report is as desired by the Government. The Governor has expressed his reservations against many of the recommendations of FSLRC which do not seem to have been taken seriously both by the Government and the bureaucracy. The Government has all intentions to take away the  main function of RBI ie deciding the monetary policy by appointing a Committeee to be exlusively set up  for the purpose. The position of RBI in having a say in the appointemnt of the Committeee is unclear and the way the Government treats RBI these days, chances are that Government will have its own choices of members. The interests shown by the Government to do away with RBI's powers to manage Forex business and Public Debt managemnt are nothing but to make the Institution as any other white elephant of the GOI. Further , the management of staff welfare which is generally on par with the Government of India rules has been taken away by the Government and the pension of RBI's retired staff has not been updated periodically despite an agreement to that effect with the Central Government in 1990 itself. Though  RBI does not depend on Government's resources for extending pension to its staff where as, the Government manages to transfer huge resources  from RBI by way of transferring its surplus. Pensioners also suffer due to inflation and non revision of their pittance pension somehow seem to have been merrily ignored by the Government using its power of dominance over RBI. The bureaucracy's ego and jealousy on RBI's professionalism, honesty, excellent name in the market for its non corrupt practices cannot come in the way of RBI's autonomy. The pensioners have stopped themselves identifying with RBI as the pension drawn by many senior most officers are less than even that of class d and c categories of the Govt. The FM should make an independent analysis of RBI's contribution and take his own stand. Keep away bureaucrats from RBI. The Government will be strong  the RBI will be strong supporting the Government and the economy will be on the growth trajectory fast.  

Dr.T.V.Gopalakrishnan

( This cooment a bit modified has been sent to Indian express on 4th April 2015).