Bad debts are nothing but an open loot

5:25 Scheme scheme is an officially permissible evergreening of long term advances which helps banks to sanction fresh loans and camouflage bad loans. In good old days, there was a system of scruitiny of large accounts by the RBI and banks were taken to task when the accounts were found sticky and non recoverable. With liberalisation of regulation and relaxation of supervion, the accountability for wrong doings has been given a go bye and entertainment of bad loans has been an accepted practice as they can be easily covered up. Sanctioning of abinitio bad loans is a known truth and they will eventually appear as NonPerforming and  after a few years they  got written of. The Costs incurred by banks to maintain bad loabns in their books of accounts by way of supervsion of bad loans, legal expenses, insurance and maintenance of the assets of large borrwoers and final write off of loans if systematically calculated , would be a mind boggling figure and unfortunately the tax payers and the depositors are made to bear the brunt. The issue of bad loans, the reasons behind their generation, how they distort banks balance sheets, how they affect the transmission of RBI's monetary policy , how they affect the cost of funds, the profitability, the morale of honest staff, etc if studied would give a great shock and there cant be any justification to keep the bad debts growing year after year under some pretext or other. Time has come to have a practical solution to prevent the formation of bad debts and nip in the bud itself the reasons behind the bad debts formation by bringing in strict discipline both on the bankers and the borropwers. The loot of money through bad debts needs to be arrested completely with immediate effect and this is possible only by being strict right from the appraisal onwards till the recovery of loans on an ongoing basis and by building up sufficient reserves to liquidate bad debts in case of any by levying a fees for wrong doings both on the part of borrowers and lenders. Ethical deficit crept into the system can be eradicated only with strict punishment and penalty and this needs to be attempted without fear or favour. Will it happen in our scheme of things? It is high time the tax payers and depositors raise their voice against formation of bad debts in banks and seek justice as they are the ultimate losers because of bad debts in the banks.

Dr T V Gopalakrishnan

(This comment appeared in Money lIfe dated 29/9/15).

Policy rate cut and the Common Man

Dr Rajan has done the right thing perhaps to give a boost to the economic growth which is unfortunately remaining stagnat for more reasons other than the interest rate. But this lobby of industrialists, market operators and the politicians misses the long term sustainability of the economic growth and inflation which was being nurtured by Dr Rajan all along with his brilliance,professionalism and concern for the economy and the masses. With this recent measure of cutting the policy rates beyond the demand and market expectations, he has virtually killed the depositors with whose money and support the banking system and the economy survives. The argument that the real rate of return has improved because of fall in inflation is only on paper and the common man finds it difficult to make both ends meet because of varities of taxes starting from service tax practically on all items, sales tax, income tax etc and above all corruption and other living expenses like ever increasing retail prices of essential items like rice dal oil vegetables.Fruits the common man is only able to see and come without having it is the reality. Medical expenses are beyond his even  survival thoughts. Every policy ignores the reality of its real impact on the common man and the present rate cut can at best reduce the housing loan by a few basis points. What he wants is an affordable house which unfortunately is not there as the real esate Mafia and builders mafia  are very strong and they keep the prices very high, unaffordable and beyond the reach of an average common man by any stretch of imagination  with or without the support of banks and black money. This policy favours the rich a lot whether the economy grows or not.  The transmission of this rate cut may not materialise as the banking system has never done that anytime in the past. 

Dr T V Gopalakrishnan 

Interest rate and common sense

Common Sense says and demands that Common Man has a right to have a peaceful, safe and comfortable life which the Govrnment is expected to provide. Common Sense also says that there should be equality of opportuninies for every one to survive with the aid of Public Sector Undertakings' efficient and unbiased approach to provide the service at a reasonable cost. Public sector banks have miserably failed to provide an efficient and excellent service is a  well acknowledged fact and they have frittered away the savings mobilised from the masses on the corporate borrowers who have taken an easy route through banks  to loot the public. The public have common sense to understand the atrocities committed by PSBs and the Government in exploiting the hapless depositors and tax payers to cover up the NPAs accummulated in banks. The deposits' rates are coming down whereas the banks Net interest Margin are remaining high and the advances rates seldom get adjusted to the policy rates announced by the RBI .Retail Inflation has come down in terms of index but the actual prices paid by the retailers have no relationship with the index is the ground reality. Ask a common  man as to how much he pays for his dal, rice, onion, fruits, oil, and other food items apart from other maintenace expenses on a day to day basis. He is finding it extremely difficult to make both ends meet is the reality and to understand this, no common sense is required at all. Dr Rajan knows better the sufferings of common masses as the inflation supposed to have touched below 4% is not sustainable and he has  abundant common sense to understand the market  demands and other extraneous pressures to bring down the policy rates. More than anyone, Dr Rajan takes care of the interests of the economy is a fact and given the freedom he will ensure that the economy moves forward with an excellent trajectory of growth and keeping down the inflation. If the inflation is down the cost of funds in the economy which include the interest rate component also will drastically come down. The real strength of the economy is to keep down the costs and make all essential commodities and services  affordable to the vast majority of the people.

Dr T V Gopalakrishnan 

Why not regulate the farm lands and find lands for eco social development?

The land mafia is very active in many places and are able to acquire land from farmers and develop  these  as Farm land clubs  perhaps with  the active involvement of politicians, business men , thugs , goondas and black money holders. They acquire farm lands in bulk from farmers and develop them into clubs, convention centres and what not? They have enough of land and if the government is seriuosly after them, the required land for economic development would be available in plenty. The loss of agricultural production due to such acquisitions  to the economy and the farmers is substantial and the conversion of such lands into  residential plots to amass wealth has been a business in and around major cities.The so called farm land club owners  dictate terms to the plot owners as if there are no laws in the country to be complied with. The urban middle class and those who are neo rich get tempted and purchase such plots and the financial savings which otherwise would have gone  formally to  the Financial system get vastly diverted. The loss to the economy is considerable  in terms of loss of financial savings, loss of agricultural production , generation of black money and degeneration of ethics and values in the society in different ways. It is time seriuos attention is paid in the area of acquistion of huge parcels of farm lands by land Mafias operating in and around major metropolitan centres. It has become a major buisness to amass wealth through extraction  and extorttion of money from  people in the name of social development with social clubs, restuarants , convention centres, marriage halls etc and multiplication of investments.There seems to be no law operating to regulate the land mafiaa and farm land clubs. 

Dr T V Gopalakrishnan

Dr Rajan at the Right place at the Right time

The author has some axe to grind and he thinks that by just cutting the RBI policy rates,the economy will revive. It is nothing but absurd and reflects only on intellectual deficit to assess the over all position of the economy. The infrastructural bottlenecks, like power, land labour and capital which attract investments has been lagging behind in the economy and dirty politics pursued by the opposition without seeing the rhyme and reason to pass certian essentail bills like Land and GST has  an adverse effect to push the economy.The interest rate cut is insignificant in the over all costs and other supporting systems required to revive the economy. Why not the author do something to get rid of the inherent weaknesses seen in the bankning system which is driven by political aspirations, financial loot through Non performing loans, etc. It is easy to blame Dr Rajan who has been doing an excellent job in the interests of the economy and its people. For Dr Rajan this job is a challenge and not a necessity. He has a vision and a misson to achive for this great nation and Central Bank is the most appropraite place for him. Mr Modi will be the most happiest person on Rajan's achievements and performance as his dream of having ache din for all can be realised only through people like Dr Rajan. 

Dr. T.V.Gopalakrishnan

(This comment is given in eET dated 12/09/15 against the article  biggest threat to Modi's threat to ache din is Dr Rajan)  

Pension Updation How long to wait?

RBI maintains its professional standards in what ever it does and it is well acknowledged world over. Though it enjoys autonomy or not it carries out its functions professionally and not getting influenced by external pressures particularly from the Government. However, the bureaucracy which is unable to digest the RBI's professionalism and the Recognition it gets both from the Country and abroad, is creating uncalled for and unjustifiable problems by exercising some powers over the internal matters of RBI particularly in the management of human resources. The RBI employees emoluments and perks need a clearance from the bureaucracy which has no rationale what so ever. Its retirees pension updation has been withheld by a speaking order or so although there is a clear understanding and written agreement to the effect that pension can be updated on par with Central Government employees pension and as and when RBI serving employees salary gets revised. This has not been implemented since 1997 as some bureaucrat has stopped it although RBI does not need any assistance from the Government for paying its retirees their dues.Unfortunately, retirees lead a pathetic life as their pensions have not been updated for almost two decades on flimsy grounds...

Dr T V Gopalakrishnan

(This comment is in response to an Article by Dr Tarapore that appeared on the Free Press journal)

Take care of the depositors who support the economy

The banks act smart and the borrowers act smarter and the authorities both the Government and the RBI squeeze the tax payers and the depositors respectively as they have no voice or representative body to fight for them. Only crying baby will get the milk is what is evidenced the way the authorities act. The Reserve Bank cut its policy rates three times by 0.75 basis points in all as per the demands of the Government, and the borrowers in particular but the banks hoodwinked both by cutting the rates by just 0.30 basis points whereas the deposit rate has been cut more than by 1.25 %. The NPAs have increased by manifold under the cover of economic slow down and the defaulting borrowers have their own ways and means to evade and avoid payments to banks and their representative bodies like FICCI, CCI, Exporters Association and other business cartels make a hue and cry for reduction of interest rates and do nothing to bring down the NPAs of banks. Unfortunately the tax payers and the depositors bear the brunt and are made to support the economy. While depositors have to pay Income tax on the reduced interest earned on their fixed deposits, the tax payers have to contribute to the capital of banks through budgetary resources. The depositors particularly retirees who depend on the meager interest payments from banks have noother avenues what so ever to make better returns without risking their hard earned savings. The insurance coverage in banks is also a pittance of Rs one lakh fixed in early 1990s without any change what so ever afterwards. Depositors particularly senior citizens are being taken for a ride by the authorities and their survival is becoming increasingly difficuly day after day. It is time the Government and the RBI in particular keep a very close watch on Banks functioning and see that they take care of depositors with whose money they are in business.

 Dr T V Gopalakrishnan             

PSBs need change of outlook and enhance efficiency

 The banking is in a mess and the recent   measures of the Government under Indra Dhranush   to reform the public Sector banks cannot be a remedy to make the PSBs perform professionally, viably and rescue the economy from its paralytic condition to say the least. The Governor’s  point   that the time for incrementalism is past and could well allow a potential crisis to morph into an actual one needs to be viewed seriously and actions initiated with right earnest to improve the health of banking which is critically ill and suffering from various weaknesses. right from absence of adequate human resources to financial capital. The reluctance to handle the government schemes like Jan Dhan Jojana emanates from lack of vision on the vast business potential in the offing in different ways and the indifference to such schemes citing non viability and demanding compensation. The problems of PSBs are human resources and the professionalism in handling the business in a competitive environment where payment banks, small business banks and private sector banks are becoming order of the day and are enhancing their presence. The only way for psbs to survive in business is to qualitatively improve its human resources potential and find ways and means to enhance capital, expand business opportunities and handle assets portfolio on  commercial lines and improve profitability by bringing in utmost efficiency in the management of balance sheets.

 Dr T V Gopalakrishnan      .