RBI's dilemma

Well articulated and presented. The demonetisation risk has not been properly assessed is a fact and therefore the risk management seen subsequent to the implementation of the scheme cannot also be said to be effective. This is what has been experienced by the economy and the people for the last few days.  There is absolutely no dispute on the faulty implementation . However, the task is huge and the RBI a well reputed organisation for its competence and professionalism in managing what ever tasks it undertakes has unfortunately let down this time for every one to criticize. The consequences of demonetisation  could have been assessed well and the risks could have been very well minimised if not eliminated altogether. The Introduction of Rs 2000 notes could have been very well  avoided or at best restricted to metropolitan centres and all other areas could have been flooded with small denomination notes. The outsourced works could have been well monitored and RBI could have relaxed some administrative measures for fast, smooth and equitable distribution of its available stocks of notes to reach as many people as possible without disturbing the banks normal functions of accepting deposits and lending. A little planning in the initial stages could have helped implementation of the demonetisation scheme a great success. A stitch in time saves nine is what is demonstrated. To what extent RBI's independence in handling such a huge exercise has been eroded is not made transparent as the Government's interference in RBI's functioning these days is too much and it has perhaps lost its strength and credibility to vent its views to the Government. The coordinated approach from the government and RBI without undermining RBI's own reputation and professionalism could have brought in better results. All said RBI will have its own reasoning for the lapses which need to be adequately captured and factored into while writing the History as and when attempted. It is an Institution which has faced criticism but has always been adjudged as one of the best Central bankers of the world.

Dr T V Gopalakrishnan

(This comment apperaed in Money Life against the article on Demon of demonetisation. on the 23rd of December)

Biased views from Dr Manmohan Singh and Dr Amartya Sen

Both Dr Amarya Sen and Dr Manmohan Singh seem to be biased on the issue of demonetisation  and their observations have not come out of their knowledge of economics.Being eminent professionals, having international experience and knowledge of evils of corruption, black and fake money faced by the emerging economies in particular,both should not have come out with such harsh statements on demonetisation. The economy needs lots of clean up and the PM with all resistance and opposition shows some conviction and guts to take some very bold steps risking his own party's prospects in the next election. The economy has been facing all sorts of problems because of corruption, heavy accumulation of illegal wealth in the form of cash, gold, real estate , assets abroad and  all types of attendant issues like terrorism, high inflation, erratic data on vital issues like GDP growth, employment, distribution of wealth , allocation of subsidies, exports, imports , lack of capital for the much needed physical and social infrastructure. Unless and until the economy is cleaned first and corruption, black money and fake money are removed and the  ill effects of the mismanagement of the economy for several decades have been eliminated completely, the chances of the economy registering growth and distribution of wealth in an equitable and fair manner to remove the poverty once for all are very remote and the PM has no way but to take drastic measures even at the cost of facing some disruptions . Demonetisation is the first step and many more such drastic steps are needed. This is the time for professionals to view things in the right perspective and appreciate some politicians without the knowledge of the economics have come forward to take some corrective measures to put the economy on the right track. It is unfortunate that Dr Manmohan Singh and Dr Amartya Sen have different views and have opposed the PM's move to demonetisation tooth and nail without any rhyme or reason. 

Dr T V Gopalakrishnan      

Ball in Government's Court

This refers to your editorial Playing too safe (Business Line Dated 8/12/16). The monetary policy announced by the Reserve bank in the background of the demonetization of RS 500 and Rs 1000 notes has been very prudent and contrary to the expectations of the market, the banks and the Government. The Reserve Bank stood its ground and decided to pursue a conservative approach by keeping the policy rates unchanged and withdrawing the 100% CRR introduced to mop up the sudden liquidity faced by the banks thanks to sharp increase in deposits consequent upon the withdrawal of high denomination notes. RBI is right on its approach as the full impact of demonetization cannot be factored into this policy as things are in a fluid state to assess as to how the informal economy may get merged with the formal economy and to what extent the setbacks caused by cash withdrawals of a very high magnitude can be minimized through replacement of new notes, digitization of transactions and making the economic activities back in action in full swing. There is a definite time lag between the demonetization and remonetisation and this can have some short term pains to be offset by long term gains which cannot be fully accounted for in the present policy. The macro economic factors continue to remain stable and the RBI need not be unduly concerned at this juncture to effect policy changes. The rupee is some what stable, inflation is under control, the current account and fiscal deficit are very much manageable and there are possibilities of interest rate cut by banks themselves in the changed composition of their assets and liabilities thanks to demonetization. No doubt, there is a paramount need to stimulate the economy through enhanced demand for consumption, production, investment and fast pick up of credit for which more than the monetary policy, the fiscal policy can work wonders. RBI perhaps wants the Government to take the initiative in that direction which will also facilitate easy implementation of demonetization.

T V Gopalakrishnan

Bengaluru 76  

( Shortened Version of this letter has appeared in Business Line dated 9/12/16)

Monetary Policy on Right track.

Monetary Policy on Right track.

RBI's monetary policy announced today in the background of the demonetisation  has surprsied many and it is  definitely not as per the expectatiomns of the market. On the contrary,  RBI has firmly stood its ground and  the policy is on sound lines to favour the economy. It has kept the policy rates unchanged  and withdrawn the incremental CRR of 100 % introduced to suck the excess liquidity caused in banks due to steep increase in deposits consequent on the withdrawal of old notes of Rs 500 and Rs 1000 which can be  well taken care of by the Market Stabilisation Fund.  RBI has also well clarified through its policy  that the withdrawal of old notes would not add to the dividend of the Government and the remonetisation can bring in  some potential benefits over a period of time in the transparency and enhanced digitisation of transactions. RBI expects to have a moderate fall in GDP growth by 0.5%  in the current fiscal year  and the inflation to be benign. It is clear from the polcy that the augment of GDP is dependent on the polcy initiatives of the Government to attract investment, credit pick up and esae of doing business.        

Dr T V Gopalakrishnan

(This letter appeared in ET dated 8/12/2016)

My Experience with ICICI Bank A feed back.

I read with interest all that services your bank has provided and how ICICI Bank has updated itself with the state of art technology. However, I would like to narrate my exprience as a feed back and definitely not as a complaint. I know this is not the time to find fault but to cooperate in national interest as the implementation of demonetisation policy is on and there are lot of hurdles both man made and otherwise.  

Since the demonetisation was announced, I have not seen any ATMs operating in my area and I have visited two of ICICI Bank branches and the service I got was pathetic. I have all apprecitaion for all the  intended services but I strongly feel if some are translated into action , it would have been praiseworthy. The otherday I called on ICICI Bank branch at Bannerghatta Branch to encash my Travel Card having some dollar balances and after verifying my identity and account and having satisfied that I am the right person, prompt came the service that unless passport is presented, this cannot be encashed or credited to the account. I know banking is a risky business, but banking is also a business run on common sense, judgement and discretion assessing the risk and minimising the risk. I feel encashing and crediting the travel card to my account has no risk as envisaged and he could have asked me to send the copy of my passport  through  email. I have no grouse on this as he wanted to adhere to the rules prescribed.He is well within his right.

Then I wanted some cash for my personal expenditures and presented him a cheque and prompt came the reply that I could withdraw only Rs 2000 and that too in the same denomination, although the RBI has prescribed a withdrawal of Rs 24000 per week. He also advised me to stand in the queue having about 30 persons at that point of time. NO CONSIDERATION FOR SENIOR CITIZEN. I would also add here that since the announcement of demonetisation I do not think I have withdrawn even once through ICICI bank ATMs. I have always seen ICICI bank's  ATMS with OUT OF CASH or OUT OF SERVICE Boards.  I have withdrawn ontly from AXIS bank ATMs and they provided 2000 Re note, new 500 Re note and 100 Re notes.But withdrawal is limited to Rs 2000 at any point of time. Thrice I had taken  Rs 2000 each from Axis Bank ATM to take care of small payments to milk vendors and other retailers. Even Once I could get cash from  Lakshmi Vilas Bank ATM  which is no comparison to ICICI Bank . This is only a feed back as once in a while top brasses also should know what is the ground reality. I have been banking with ICICI bank for more than two decades ie since the inception of the bank.Technolgy is very good,but human involvement would definitely add to the service. There should be difference between Man and Machine. If both are mechanical, Customers have no choice but to turn digital at the earliest. But Senior Citizens have their own limitations. 

Dr T V Gopalakrishnan

(This is in response to the Personal Message that ICICI Bank sent to all Its Customers through email )

Bold Move.

Very bold but not a perfect move to prevent generation of black money and corruption 

Apropos your editorial more disruption than Economic Benefit (ET dated 9/11/2106), the arguments put forward therein saying that there are better ways to fight black money do not make sense and only add to the woes of the economy in the long run. The measure of demonetisation to fight black money and all its ill effects like corruption, inflation, growth of informal economy etc needs an element of surprise and what Mr Modi has done is very bold, timely, commendable and most appropriate to put the economy on the right track to derive the full benefits of growth and achieve a welfare state in all its sense. Though the Modi Government has given lots of hinds on its intentions to erase black money and corruption and several measures including the recently concluded declaration of black money have been introduced in that direction but the results have unfortunately not been encouraging and the performance of the economy in general and the ease of doing business in India continue to be lagging behind.

The withdrawal of Rs 1000 and Rs 500 denomination notes is the best available solution to eliminate the ills of the economy in the present circumstances although such a measure may have some disruptions and inconveniences which are inevitable in the larger interests of the economy and long term gains of sustainable nature. However, Reserve Bank and the Government seem to have well coordinated to make the withdrawal of these notes very smooth and measures have been in place to minimise the disruptions. All said, the introduction of Rs 2000 denomination notes and Rs 500 new notes cannot be said to be a perfect move in the over all schemes to prevent generation of black money. It may have definitely a nullifying and negative impact.

Dr T V Gopalakrishnan

( Letter sent to ET on 9/11/2016 but not published).     

Make Demonetisation scheme a success story.

                                              Victory is always for Dharma.

The economy in general and the financial system in particular got a shock but a game changing treatment when the PM announced on the 8^th of November at 8PM  the demonetization of high denomination notes of Rs 500 and Rs 1000 to prevent corruption and unearth black money to save the economy from the evils of dirty money. The objectives to combat financing of terrorism with black and fake money, to prevent corruption from the society, and to eliminate the disruptive  practices pursued in the economy mixing black money with the accounted money intelligently and finding  ways and means  to fight election, to distort the economic activities with wrong data on  macro economic factors,  are noble and laudable and needs to be achieved early to take the economy forward and restore the  lost values of this great nation to ensure a welfare state with utmost peace, safety and comfortable life for the people. The need to maintain ethics in business and commerce is paramount and when the people irrespective of their political, economic, social and technological background have wholeheartedly welcomed the PM’s initiative and bold decision to eradicate the black money and are prepared to put up with the inconveniences that such a measure can cause, then where is the opposition and what is the obstacle?.

Having decided to demonetize, and knowing the possible obstacle from opposition parties and people with vested interests to protect their black money hoardings in cash the preparedness of the Government and the RBI seems to have fallen short of and many a people particularly among the poorer segment have been made to suffer giving an avoidable opportunity to fight the policy tooth and nail and demanding a roll back even. The Government could have kept the positive sentiments of the public at large by ensuring smooth implementation which could and should have been made possible keeping the secrecy clause of the demonetization intact, had it acted fast as soon as the announcement was made and all the checks and balances are kept in place with appropriate logistics to serve the rural poor in particular on a priority basis. A bad execution should not kill the long term and perpetual benefits to be derived from this great and very bold move.     .

The Reserve Bank has a key role in ensuring the successful implementation of the scheme and should have been made fully responsible for its fast and smooth implementation without any glitches. The ATMs, banks’ branches and Post offices spread in the nook and corner of the country should have been fully equipped with adequate infrastructure like man power, transport, security, insurance,  note counting and verifying machines and adequate supply of all small denomination notes (including soiled notes and coins if required) right from Rs 5 to Rs 100. Rural and semi urban centers should have been supplied first with these notes in adequate quantities and the normal banking operations with a special emphasis for exchange of old denomination notes with proper identity with restricted numbers of notes. Unfortunately the Touts and Commission agents crowded all the counters and honest and genuine people suffered in the process. This could have been anticipated and effectively prevented. The two way operations in banks Viz acceptance of deposits and lending got stopped and the panic situation to corner as much money as possible in all denominations of permissible legal tender currencies got a momentum with all shortages and chaos every where in the first two or three days of implementation of the scheme. Lack of planning and proper execution to minimize problems for the poor and hapless people was taken full advantage of by the politicians in waiting to attack the government. The cooperative banks and micro finance Institutions working in rural areas and banking correspondents could have been enabled to carry out their normal operations using small denomination notes to come out to the rescue of the poorer segments. The Government could have got mobilized peoples’ volunteers to make the scheme understandable and acceptable by the masses with all inputs. The enforcement agencies like Income tax, Sales tax and Police force could have played their respective roles in keeping a vigil on possible irregularities and mal practices and educating the masses and business establishments to switch over to digital forms of payments to avoid harassments and come clean on all transactions. The issue of Rs 2000 notes could have been restricted to major towns and cities for the initial days as the people are by and large literate and can appreciate the Government’s move and have the entire wherewithal to absorb the problems if any without much of hassles. The Reserve Bank could have issued more of Rs 500 new notes instead of Rs 2000 notes to avoid irritation to find change for this high value note for small value transactions. The Reserve Bank also could have sought the help of Temples, Mosques and Churches and all shops and establishments to stop acceptance of the demonetized notes and to surrender all small denomination notes to nearby banks on a day to day basis to ensure their recirculation. The sensitive areas like village markets, ration shops, small business firms and village industries should have been given priority treatment in the withdrawals and exchange of  old notes with due diligence to avoid irregularities and malpractices with the help of  banks, ATMs, Post offices, volunteers and enforcement agencies. The man power shortages in banks could have been addressed by resorting to appointment of retired hands and volunteers and there should been more counters for exchange and acceptance of deposits of all denomination both illegal and legal tender currencies.

The Government also could have come out with some fiscal incentives to calm the public and mobilize their total support. Reduction of service tax on items consumed by masses, increase in the procurement prices of agricultural commodities, reduction in the prices of fertilizers, small increases in kerosene subsidy,  income tax relief’s for lower income groups, reduction of excise duties and taxes on two wheelers, petrol, diesel and LPG prices would have worked wonders. The losses may not be substantial but the overall gains both monetary and otherwise would be handsome and those who oppose the demonetization would have been silenced.  What the Government needs at this critical juncture is time to make arrangements to replace the withdrawn notes with adequate liquidity and help the people to act with confidence in the scheme of things to overcome the   temporary difficulties caused by the sudden withdrawal of high denomination notes

All said the economic benefits of the Demonetisation scheme are enormous and there is a paramount need to make it a success at any cost. The disruptions are temporary and definitely manageable. Once the normalcy is established  with effective administration and the banking system is back to normal carrying out all its functions, the economic activities would resume in new avatars and all informal activities hitherto unaccounted for would turn formal and get properly accounted for, rectifying the incorrect data on  investment, production, distribution of  economic products, enhancing employment activities  formally helping in the reduction of undeserved subsidies,  bringing in transparency in the compilation of data, movement of  accounted funds paving way for correct assessment of taxes, framing accurate policies based on more reliable  data unlike in the past. With the proposed GST implementation and with the eradication of unaccounted money, the cleanliness of the financial system gets assured and the Government can very well concentrate on improved and enhanced infrastructure,  effective Governance,  housing for all and better  welfare of the people having control on corruption, inflation, safety from terrorism and fair and equitable distribution of wealth. Conversion of unaccounted wealth in the form of gold and real estate needs to be the next step followed by electoral reforms to make the economy more clean and transparent.  

A society with less cash for transactions and more cash for better living standards can be made a reality with enhanced and wide use of technology in the payment and settlement system. Strong administration is what is called for at this crucial time and as long as people are for the change, then what and where can be the opposition in bringing the change for a better living? 

Dr  T V Gopalakrishnan                            

Call for details of holdings of demonetised notes.

The form  prescribed for exchange of notes should incorporate a column asking for the total number of demonetised notes held by the applicant which would ease the supply of replacements. This would also enable the authorities to keep a watch on the commission agents / middleman who help the black money holders. A notification by the Government / RBI asking the public to disclose their holdings as and when they tender for exchange or deposit  the demonetised notes  so that the authorities can have some idea as to how much they can expect to surrender from public. This declaration can be made on or before a stipulated date. 

Dr T V Gopalakrishnan

Introduce additional measures to make demonetisation a success.

Demonetisation of Rs 500 and Rs 1000 is a great move to prevent corruption, black money and terrorism and all connected ills. To make it a success, the Government should simultaneously introduce steps to have some information on an ongoing basis or through Income Tax returns the quanitty of Gold held by people, lands held by them and other types of properties held. If feasible, it is very ideal  time to start a Gold Bank to mobilise Gold from people and convert these Gold into productive assets. Gold Bank can be a separate entity under the Reserve Bank.  This concept of Gold bank would work wonders for the nation and the economy and Perhaps India can be leader and a model to the world on having a gold bank  The hoardings of Gold in the form of black money and otherwise are huge and once the bank is established, and part of the hoardings of gold can be brought to gold bank ,the shortage of funds needed for the economy to develop Infrastructure, and give a boost to agriculture and the Financial system can be a history 

The  gold and funds held in temples should be made transparent on an ongoing basis and they can be made to supplement banks efforts in reaching the masses with small denomination notes. They should not divert their funds to rich and mighty to cover up the conversion of old Rs 500 and Rs 1000. They should be asked to report their holdings of gold, small Denomination and demonetised notes immedoately as otherwise the Rich who are controlling the trusts and temples would take advantage of these institutions to cover up their black money.

Dr T. V. Gopalakrishnan

The way forward .Make the Institutuions strong and accountable

 All Institutions are becoming weak and administrative efficiency has taken a very big hit. 

 RBI is getting weaker and weaker every day and losing its glamour in all respects. SEBI has no

control on capital markets and the corporates dictate terms without adhering to corporate

 Governance standards expected of them. IRDA has never shown its mettle and insurance area 

continues to be fraud frown area. There are mushroom growth of Insurance companies and

 whom they are accountable god alone knows. Public are taken for a ride and once an 

amount is remitted getting back is only a chance. Corporate Hospitals and Insurance

 Companies jointly loot the public their health and wealth. Those  who have got both

 money and power have some respect and are able to survive comfortably and   to some 

extent peacefully in the society but others have no choice but to carry on with all sorts of

 harassment, diservice and indifference meted out to them by any service providing Institution.

 There is no grievance mechanism is the ground reality and anybody can get away 

with all sorts of inefficiencies, frauds, or ill treatment. Things are worsening day by day and

 senior citizens are lucky in a way  that they do not have put up with the suffering for a long

 period compared to the next gneration and youngsters. Things are looking bleak is the feeling 

the  avearge common man gets. May God save the people.

Dr T V Gopalakrishnan

Demonetisation of Rs 500 and Rs 1000 notes.

A very great move from a very great Visionary Mr Modi. Hope he gets all support from the public and various institutions in achieving his Vision of freeing India from the evils of black money, corruption and terrorism.India has all the potential to turn into a welfare nation provided the leaders with vision can provide the direction and make the institutions and the people work with dedication, commitment and sincerity. This is the time for institutions to emerge strong and show their might to take the nation forward keeping the values in tact. 

Dr T V Gopalakrishnan

Well done Axis Bank .

Some banks have done an excellent job to come to the resue of public by making arrangements to exchange demoetised notes with legal tender currencies. Axis Bank in our neighbourhood arranged in our residential society having around 10000 people to open a special counter to exchange the notes and  the staff deputed  have taken very special care of senior citizens. They Excahnged the old notes as per the procedure laid down but ensured that people got both the new Rs2000 and small denomination notes. Very imaginative approach to manage the temporary crisis caused by the demonetisation which the people have wholeheratedly welcomed. People want such banks which can take care of the Nation's needs and PM's  vision  to have a welfare,inclusive  India without corruption and  ills of black money.

Wish more of such banks thrive and  are given all support and encouragement. Some of the public sector banks have let down the Government and Canara bank is an example from my experience. Ttwo days , I visited the  Canara Bank Arekere branch and the ATM Counter attached to the branch around 7PM and both the days the branch and the ATM were closed although the news reports indicated that banks would be functioning extended hours .The security had the courtesy to inform that the supply to the ATM is outsourced and there was no supply for the last few days. May God save the PSBs and the economy. High time the Government reviews the working of PSBs factoring therein interalia the  feedback from the Public and the Customers  and initiate steps to privatise the PSBs which are inefficient, incompetent and indiffrent to function indeference to the vision of the Governmet in letter and spirit.  

Dr T.V.Gopalakrishnan

Matured Government is the prerequisite for a strong Central Bank.

Well said Dr Rajan. RBI should have operational independence.The thinking , actions and biases of the Government depend on the political masters where as RBI is an institution taking care of the economy without any biases and it protects the interests of the Government and the people . A strong and independent Central Bank is the strength of the Government and the EGO of individual politicians in the Government cannot play havoc with the Powers and Functions of RBI.  Government is supreme and all Institutions come under the Government is well known to all and particularly to RBI and its top boss. But the politicians in the Government should show some maturity in understanding the important role RBI as a CENTRAL BANK of the Country plays to make the economy strong by ensuring stability of prices, economic growth, monetary stability understanding the dynamics of international economies and their linkages and impacts with the domestic economy. . While vote catching and being cheer leader is one of the objectives of the Government, RBI has only one Objective ie economic growth encompassing all round welfare of all. This is possible only if the Government and RBI work in perfect coordination understanding and total alignment. Matured government is the prerequisite for a strong Central Bank. 

Dr T V Gopalakrishnan

(This comment appeared in ET against the Dr Rajan's speech RBI should be able to say no to the Government.)

Make RBI Independent and accountable to Parliament.

RBI is a unique Institution and it has to play a totally different role in the country to give the economy a strong support to make it nationally and internationally known.The job requires both national and international experience, grip on the subject of economics and finance, market dynamics of the whole world and independent thinking without any political bias. Almost all the Governors with one or two notable exceptions perhaps have delivered what is expected of them and giving RBI an international recognition for its professionalism .The institution has since been losing its glory and independence and unfortunately it is being converted into a government of India undertaking like many a public sector undertakings with all characteristics of public sector where bureaucrats and politicians dictate and never allow them to work proficiently ,efficiently and professionally . RBI has earned a name and fame for its delivery of functions in a highly skilled and professional manner despite all the handicaps of political and bureaucratic interference thanks to the diplomacy and dynamism displayed by the Governors.The need for a knowledgeable,experienced and independently thinking governor is all the more needed now to make the dream and vision of the PM to make the economy the most vibrant and fastest growing and reach the top among all world economies a reality and make nation and people proud. This is possible only if the RBI is given the autonomy and freed from political and bureaucratic interference in its day to day functions and it is fully made accountable to parliament for all its functions and responsibilities.

Dr T V Gopalakrishna

Very glaring revelation to public

Why only Dr Subba Rao paid the price for asserting the RBI 's autonomy. Two Deputy Governors of high repute were not allowed to continue, PSBs were allowed to rotten,the economy was allowed to be slowed down, the NPAs were allowed to accumulate fast, the losses of PSBs  were increased due to heavy write offs, and the taxpayers money was used to make up for the losses of PSBs. Even the RBI retirees were not spared as their updated pension given on par with Central Government was withdrawn for no reason what so ever. Both these FMs had played  havoc with RBI''s autonomy and they  virtually killed the mighty Institution. Now it is the turn of the present Government to make the Institution  its own  department to frame  monetary policy and the work has already begun by making  Dr Rajan to have a forceful exit. The present Government is also after the Reserves painfully built up by the Reserve bank to protect the vulnerability of the rupee and ensure financial and monetary stability  of the country and perhaps these stories would be revealed by Dr Rajan as and when he brings out his book on his short stint at RBI. The Institution is losing its glamour very fast  is  the reality as the bureaucrats and the politicians in power would not like to give any credit for RBI for its  role in strengthening the economy with all its  professional strength. The fight between RBI and the Government is a continuous affair but it has never come to open so far  in such a glaring manner is a revelation to public and it needs to be introspected seriously by the intellectuals,statesman politicians and bureaucrats who love the country more than their ego. Never in the history of RBI such an interference in its functioning  by the Government as it happened during the last ten years. 

Dr T V Gopalakrishnan

Fix black money generation and augment tax revenues.

The Chartered Accountants are the brain behind money laundering and safeguarding black money holders. The source of generation of black money is known to all educated fellows in the country but they have no avenues to bring to the notice of the IT although IT officials are themselves aware of the modus operandi of generating black money in India, Banks are also a party in aiding the people to transfer black money in different ways, The export and imports need to be thoroughly investigated. All educational institutions insist on cash and they are the major sources of black money generation. Professionals ,traders, brokers of all kinds operating in different cities and towns are other sources. Small chit fund operators in all metropolitan area deal only in cash and their clients are whole sale and retail traders engaged in all sorts of commodities.Happy to see that the the IT department has been active to fix the evaders. Instead of their being after salaried class and pensioners earning less than Rs 10 lakhs with some silly queries , their time can be well spent in tracing the cash transactions every where and fix the tax evasion.Once they succeed , the tax collection would get drastically augmented and the people particularly honest category of tax payers would give full cooperation to the Government in fixing the problem of tax evasion and generation of black money.''The readiness is all that matters.'' Dr T V Gopalakrishnan ( This comment appeared in Times of India dated 8/7/2106).

Get People and their Economic activities connected to banking.

The Indian banking is weak because of dominance of informal economy, inequality of incomes and wealth, laxity of Governance at various levels of administration and presence of middlemen, indigenous bankers, money lenders and NBFCs of all kinds. The banking scenario is changing fast and middle class who save in banks have no money to save because of all sorts of taxes which do not seem to be getting accounted anywhere other than to those who levy them. The banks also lose heavily because of their dependence on Technology , Non human approach, and not understanding the customers. The taxation policies of the government and the ease of doing business are not favouring or encouraging any one to attract to any economic activity. The data collection in the country is erroneous and do not seem to be reflecting the correct position of employment, generation of economic activities and productive assets. Banks can thrive only if people and their economic activities get  fully connected to banking. 

Dr T V Gopalakrishnan

India needs politicians to develop strong Institutions

Very forthright views well brought out by Iyer. Politicians cannot appreciate and they do not want to appreciate to have strong institutions as they come in their way of free and easy funds as and when needed. PSBs are a source of funds to meet social obligations and to have continued support by allowing crony capitalism. Dr Rajan intelligently attempted to stop these which was not taken in right spirit by the politicians in power who have their own axe to grind. politicians are always shrewd and professionals' intelligence and expertise cannot be tolerated by them. Dr Rajan lacked diplomacy to handle the politicians and bureaucrats because of his lack of professional experience in indian context as some of his predecessors and this cost him heavily though professionally he is not a loser .The loss is for india and its financial system. 

Dr T V Gopalakrishnan

(This comment appeared in ET against the article this government has shot itself in the foot).

Even high ranked professionals should know the political minds

A very balanced view reflecting the in and out of the PMs office.Compared to Dr Y V Reddy, Dr Rajan perhaps lacked the diplomacy to understand the politicians' mind and act. That is because of his long absence in India and lack of experience being in Indian Administrative Set up. Any way Dr Rajan should have been allowed to continue based on his, brilliance and expertise as an Economist and professional performance and achievements brought to the Financial System in his very short stint as Governor of RBI irrespective of his personal liasoning with the political and administrative set up. Definitely the country lost an Expert's skill in handling the murky and complicated financial system. His frank and open opinions have not been taken in the right spirit by certain political masters, is a fact and it is a lesson for all professionals to seriously ponder before they accept a senior Government assignment. Their life becomes miserable if they fail to dance to the tunes of the politicians in power.

Dr T V Gopalakrishnan
(This comment is in response to an article the numbers RBI Governor did not get : 282 in 2014 that appeared in First Post dated 22/6/16)

Even high ranked professionals should know the political minds

A very balanced view reflecting the in and out of the PMs office.Compared to Dr Y V Reddy, Dr Rajan perhaps lacked the diplomacy to understand the politicians mind and act. That is because of his long absence in India and lack of experience being in Indian administrative set up. Any way Dr Rajan should have been allowed to continue based on his, brilliance and expertise as an Economist and professional performance and achievements brought to the Financial System in his very short stint as Governor of RBI irrespective of his personal liasoning with the political set up. Definitely the country lost an Expert's skill in handling the murky and complicated financial system.

Dr T V Gopalakrishnan
(This comment is in response to an article the numbers RBI Governor did not get : 282 in 2014 that appeared in First Post dated 22/6/16)

A very balanced views reflecting the in and out of the PMs office.Compared to Dr Y V Reddy, Dr Rajan perhaps lacked the diplomacy to understand the politicians mind and act. That is because of his long absence in India and lack of experience being in Indian administrative set up. Any way Dr Rajan should have been allowed to continue based on his, brilliance and expertise as an Economist and professional performance and achievements brought to the Financial System in his very short stint as Governor of RBI irrespective of his personal liasoning with the political set up. Definitely the country lost an Expert's skill in handling the murky and complicated financial system.

Dr T V Gopalakrishnan
(This comment is in response to an article the numbers RBI Governor did not get : 282 in 2014 that appeared in First Post dated 22/6/16)

No one is indispensable but,

No one is  indispensable including the NDA Government and its veteran MPS. But a performer and a non performer needs to be identified and discriminated. Just because Dr Rajan was appointed by the UPA Government and he was brought in by Mr Chidambaram then Finance Minister who happens to be the enemy of the present Government , Rajan should leave his post does not stand reason and sound decent and it only smacks of intolerance of a person who is a friend of the enemy. Dr Rajan is a professional and  an expertise having excelled in his field of economics and Finance with international recognition and his continuance as Chief of the Central bank of the Country carries image and  only adds  weight for the economy in the international markets . The Government in power  cannot  afford to be so narrow minded and  encourage  personal vendetta and  prejudices against a person who has an outstanding record par excellence and has been doing a commendable job with wonderful results to be very proud of as a growing economy with all sorts of complexities. The loss is substantial and it may take some time to make up provided an equally competent person comes and takes on the challenges.  All said, a highly talented professional cannot take political side when he performs his responsibilities occupying a sensitive post.  

Dr T V Gopalakrishnan

An Honourable and glorious exit Well Done Dr Rajan

Dr Rajan has taken the right decision to quit. Better to be away from politicians as otherwise one will lose ones' personal integrity, individuality and dignity. This is what happened to Dr M M SINGH a great academician well known Economist and a professional of very high calibre.If he had retired after his first term as PM, history would have treated him kindly and honourably. Being part of politics, he lost all his  glory of academic and other professional achievements in public perception at least. Now Dr Rajan will be remembered for his short stint as the Governor of the Reserve Bank of India and the excellent contribution he made to the economy and the financial system as well.  His decision to quit without waiting for an extension to keep himself away from politics and  be back in academia leaving all the glories of being attached to an institution which has no autonomy or independence from political powers is really marvellous and a great lesson to those  who care for values in life more than anything else . Good that he right royally decided to quit making many to ponder particularly  by a few bright minds  among the political class. No glory or fame at the cost of personal dignity and self respect  is worth having is what Dr Rajan has demonstrated with his present decision. Dr Rajan came,conquered and left after leaving a permanent impression on his professional achievements and personal values worth recalling for ever. He created his own history to be recorded in Golden Letters  in the history of RBI as and when written in the future.

Wish him the very best for all his future ventures with his bright and unique ideas.

Dr T V Gopalakrishnan 

This refers to goof up in Bank Of Baroda  in respect Of Vijay Mallya's loan guarantee appeared in Money Life dated 10/6/2105.

It is unbelievable that  bank officials do not apply their mind when letters are issued , do not think on the subject matter and do not have any sense of the sensitivity of the subject. Vijay Mallya and his banks' dealings have been in the news for quite some time and officials involved in dealing with such sensational cases are completely ignorant of all these when follow up actions are initiated is something strange.  From my experience, the banks' officials at several levels have no knowledge of both inside and outside developments in banking and they have no reading habit. They some how manage to do their daily routine work mechanically without any understanding of what they do . The technology has also become handy .This is perhaps one of the major reasons why the banks fail to transmit the monetary policy as except perhaps the top management and some senior level officials many do not understand the objectives of monetary policy , the role of credit in an economy, the implications of interest rates, etc. With the invasion of technology, the banking has undergone a sea change but the absence of human intervention essential to run banks efficiently and effectively has been creating catastrophe and needs to be fixed. Things were better when the banks officials used to have exposure to Central Bank training in Bankers Training College, Mumbai. Now the ground reality is that except the top management and some officials who take some personal interest to keep themselves up to date about the developments of economy , banking and finance , others have no knowledge even of the Presence of Reserve Bank of India,(RBI), leave alone the entire banking scenario, the advantages of having an effective credit management for the banks and the economy etc. Unfortunately ,RBI has also ignored the need to enhance knowledge, skill and expertise among bank officials. The stress was on the Risk management without understanding and recognising the major risk on banks through human resources. The greatest risk bank face these days is not on account of stressed assets but on account of human resources . Knowledge of banking is virtually absent among many a bank officials and unless and until this is adequately addressed, more such goofs can be seen in banks . But making the tax payers and depositors to foot the bill and make up for all the losses banks incur is too much and this cannot go on for ever. Many such goofs are hidden and the balance sheets are fudged and covered up.

Dr T V Gopalakrishnan

Protect the banks from bad borrowers

Any move to protect the banks from bad borrowers at the cost of tax payers and depositors can only weaken the banks , the economy and the financial system. The approach should be to professionalise the banks, discipline the borrowers, discourage bad borrowers from smartly looting the banks, encourage good borrowers, strengthen the bond market enabling project financing with long term capital funds,and improve the ease of doing business without any sort of corrupt practices generally found everywhere. Enhance general standards of ethics and corporate Governance in the system to better the results everywhere.

Dr T V Gopalakrishnan

Is there any service from Banks to Customers?

The shoddy treatment meted out to customers  by banks is with the approval of top management of banks is what the experience tells. In good old days, one can write to higher ups and seek some redressal of the complaints. One can visit branches and speak to some one who knows the customer ,understands the Customer , knows the importance of the customer and has some concern for the customer. But with the invasion of technology, the personal touch is given a go bye and neither the customer nor the bank officials know how to deal with the complaints . KYC is literally reduced to killing your customers and avoiding him by all means by insisting on certain documents which he may or may not be able to produce. Even insistence of Gazetted officers signature is not given up although the new Government under Mr Modi on his taking over as PM announced the need for such attestations. I recently approached ICICI Direct with a request to transfer one of the investments of my late father to my account producing all required documents as per the checklist made available to me which include affidavit from a notary stating that i am son of so and so who is dead . I also attested the death certificate of my father as a retired bank official with my designation but the official insisted for a gazetted officer's signature on the death certificate. Luckily good sense prevailed on him as he did not insist on my late father's own self attestation in his presence. This is the level of understanding and knowledge on the part of officials. Common sense and logic have no role to play and only documents as per the checklist are the guiding principles to render some service. An NRI made a request in writing to close her D mat account and submitted to ICICI bank but even after a lapse of almost two years the account is not closed as the bank wants her personal presence in the branch to close the account though the NRI is based in US and has requested over phone to close the account as per the letter submitted. The bank wants the NRI to be personally present in Bannerghatta Road ICICI Bank branch to close her D mat account , though she is residing in Dallas, Texas. 

Less said the better about the deterioration of Customer service in banks. The ground reality is that Customers succumb to the fait accompli and silently suffer as there is no meaningful and reliable grievance mechanism. Rights of Customers are all there on paper but customers should have the capacity to endure with all insults, inefficient and shoddy treatment . Be ready to mentally, physically and financially suffer is the motto the Customers should learn and endure with to have dealings with the banks whether they are in the private sector or in the public sector. Contacts and influence helps to some extent but again it depends on banks. Many ICICI bank fellows even do not know that there is a regulator called Reserve Bank of India. May be the same with many a new generation private sector banks. Knowledge of banking is gradually disappearing among the bank officials is the sad part and the importance of customers for banks survival is practically unknown to many a staff.

The shoddy treatment meted out to customers  by banks is with the approval of top management of banks is what the experience tells. In good old days, one can write to higher ups and seek some redressal of the complaints. One can visit branches and speak to some one who knows the customer ,understands the Customer , knows the importance of the customer and has some concern for the customer. But with the invasion of technology, the personal touch is given a go bye and neither the customer nor the bank officials know how to deal with the complaints . KYC is literally reduced to killing your customers and avoiding him by all means by insisting on certain documents which he may or may not be able to produce. Even insistence of Gazetted officers signature is not given up although the new Government under Mr Modi on his taking over as PM announced the need for such attestations. I recently approached ICICI Direct with a request to transfer one of the investments of my late father to my account producing all required documents as per the checklist made available to me which include affidavit from a notary stating that i am son of so and so who is dead . I also attested the death certificate of my father as a retired bank official with my designation but the official insisted for a gazetted officer's signature on the death certificate. Luckily good sense prevailed on him as he did not insist on my late father's own self attestation in his presence. This is the level of understanding and knowledge on the part of officials. Common sense and logic have no role to play and only documents as per the checklist are the guiding principles to render some service. An NRI made a request in writing to close her D mat account and submitted to ICICI bank but even after a lapse of almost two years the account is not closed as the bank wants her personal presence in the branch to close the account though the NRI is based in US and has requested over phone to close the account as per the letter submitted. The bank wants the NRI to be personally present in Bannerghatta Road ICICI Bank branch to close her D mat account , though she is residing in Dallas, Texas. 

Less said the better about the deterioration of Customer service in banks. The ground reality is that Customers succumb to the fait accompli and silently suffer as there is no meaningful and reliable grievance mechanism. Rights of Customers are all there on paper but customers should have the capacity to endure with all insults, inefficient and shoddy treatment . Be ready to mentally, physically and financially suffer is the motto the Customers should learn and endure with to have dealings with the banks whether they are in the private sector or in the public sector. Contacts and influence helps to some extent but again it depends on banks. Many ICICI bank fellows even do not know that there is a regulator called Reserve Bank of India. May be the same with many a new generation private sector banks. Knowledge of banking is gradually disappearing among the bank officials is the sad part and the importance of customers for banks survival is practically unknown to many a staff.

BBB and Bad Debts

Apropos the news report Interim Mechanism to resolve bad loans in banks (BS Dated 21/05/2016), the need to strengthen the balance sheet of banks with strong credit portfolio devoid of losses on account of bad debts is paramount and the Banks Boards Bureau BBB) is busy in the process of Introducing some measures by the middle of June 2016. According to the BBB Chief “The mechanism in the works would be in the domain of banks and outside the BBB and It would give a lot of comfort to bank decision-makers and would be credible.  Unfortunately, the banks particularly the PSBs are working with lots of social and political compulsions and the commercial considerations are the least giving rise to no professionality in their business approach and this situation has been exploited by one and all to loot banks. Thanks to RBI Governor, the banks real health has been exposed and he wants to fix the problem once for all for bringing in the much needed Financial Stability and deeper credit and bond market in the financial system. The setting up of BBB has added strength and professionalism in the running of banks and with its present approach to find a solution to the burning issue of bad debts, it has added credibility and raised the hopes that the banking system can provide the badly needed financial support at a reasonable cost to industrial, agricultural and all other credit needs to support the economy for its fast and upward journey. The passage of Bankruptcy Code, no doubt would add strength to sort out the recovery of bad loans. The formation of bad debts has got cascading effects on the economy and its stake holders particularly the Government and tax payers and from this angle, any steps to prevent bad debts in banks would be welcome and BBB would make the greatest contribution to the economy and the financial world if banks’ balance sheets are made really strong.   

Dr. T.V.Gopalakrishnan

Uncalled for and unjustifiable demand.

This refers to the editorial Load of Rubbish (et dt 18/5/16).It  is unbecoming of an MP to openly write to PM for the removal of the Reserve Bank Governor ignoring the merits of Dr Rajan, his contribution as Governor in salvaging the wrecked economy and undermining the role of Reserve Bank as a central Bank of the country having perpetual  legal status, thorough  and intimate knowledge of the economy better than the Government and politicians in power. Dr Rajan's contribution in taming the inflation and bringing it under single digit, widening and deepening the capital market, by appropriate policies in strengthening the institutional set ups, improving the payments and settlement system and ensuring financial stability through containing volatility of the rupee, strengthening the balance sheets of banks by bringing in professionalism in the management of credit portfolio despite defiant intervention from the Government,is unparalleled and commendable..Dr Subramanan Swamy being an eminent economist himself and having been in the Ministry in the past should appreciate the fact  the poor performance of the economy is definitely not due to the policies of the Reserve Bank but it is due to the political interference and lack of government initiative in removing several bottlenecks faced by the investors in the ease of doing business and other legal and political hurdles. Interest policy alone cannot wreck the economy is a well acknowledged truth in Indian Conditions though Dr Rajan has done his best to change interest rates within the permissible economic conditions. Dr Swamy's demand for removal of Dr Rajan only smacks of his political arrogance and personal prejudices against Dr Rajan who maintains an unblemished record of achievements both nationally and internationally to his credit. Questioning his Indianness is simply absurd and no Indian can subscribe to such views on Dr Rajan.      

.T.V.Gopalakrishnan

The demand for removal of RBI Governor is unfortunate.

It is unfortunate that Subramaniam swamy has written to the PM to remove RBI Governor ignoring the Status of the Governor, his contribution to the economy, his personal merits as an economist recognised all over the world and above all the supposed autonomy the RBI as a central bank enjoys for its independent views and policies . It is unbecoming of an MP to openly demand sacking of RBI Governor  who has been an Indian and who has been specifically brought to the Country to find ways and means to take the economy out of its bad shape for reasons known to Politicians and  unknown to even veteran economists. As Governor Dr Raghuram Rajan proved his mettle and displayed  his determination, courage, knowledge of economics and love for the country to take it forward and bring it on par with some advanced economies. His out of box thinking and his unique style of functioning keeping the Government under tenterhooks to make the central banks policies work effectively has perhaps irked some political masters and his speeches to drive home the need to have Government policies in tune with his thinking have irritated some Ministers without appreciating his intentions and desire to take the economy forward. All said, his contribution to save the economy from distress is commendable and unparallelled. Definitely, RBI and the Government will have to recognise and record in golden letters as and when RBI History is written for the period Dr Rajan was governor. Hope wiser counsel will prevail and the Government will keep him for another term both in the interests of the Government and the economy.  

Dr T V Gopalakrishnan

Write off of banks Loans.

There are three kinds of write off of loans in Banks.1) Technical write offs: The loans are  not written off in the books of Branches but written off  in the Banks Balance sheets. This is to claim Income Tax benefits and to manipulate recoveries to suit the management.2) The write offs due to total failure of the business and the loans are not backed by any tangible assets.3) The write offs often done with the full knowledge of the Management in collision with borrowers , Auditors and with the support of Boards of Directors. Here the intervention of politicians, bureaucrats and all sorts of pressures are brought in to write offs. Availability of securities is often ignored. Some times one time settlements are also offered meaning write off s ignoring the availability of securities, high networth of the borrowers etc. Several One time settlements have taken past in the last several years. RBI in its limited scope of Inspection due to shortage of staff, more delegation of powers to banks under liberalised approach, switch over to risk based supervision etc does not give much of importance to the write offs and banks  and borrowers are aware of RBI's approach to take full advantage. The fact of the matter remains that Borrowers Outsmart banks in fooling them by not repaying the loans, banks outsmart Reserve Bank in covering up all their lapses in conducting the loan portfolio effectively and the Reserve Bank Outsmarts all in keeping the banks' health under suspense.  This game has been going on and there is no intention to have a professional approach to run the banks commercially with all the discipline  and loan principles. Favouritism plays havoc and the loot goes on unquestioned. Unfortunately when the banks are better of the NPAs become non issues but it becomes noticed when the economy itself fails.  

Dr T V Gopalakrishnan

Surge Pricing and Economic Theory

The article ( The Mint Dated 8/5/2016) reads well but the applicability  of its contents in Indian context is limited. The surge pricing pursued in Indian Cities by cab aggregators is a reflection of their  greed and has nothing to do with demand and supply. Suge pricing by cab aggregators in Bengaluru and other places using the Computer algorithms in the garb of taking care of excess demand over the supply is atrocious and does not speak of the reality. The cab drivers with whom I had interactions informed that they keep their mobiles busy or engaged and create an artificial mismatch between demand and supply. Once the shortage is created in a matter of few seconds , the surge pricing operates and supply position improves.The surge pricing is three or four times or even five times and it cannot be said to be fair by any ethical standards . No economic theory can justify the surge pricing when the intention behind is to loot using technology and ignoring ethics and values. Unfortunately in India the Governance standards have reached their  nadir and markets have been made imperfect.The inequality of income levels has made the surge pricing technically acceptable as many are in the high income brackets with black money and without black money and improved affordability. The surge pricing is nothing but exploitation, day light robbery and outright cheating with the blessings of the authorities. 

What ever is pursued in advanced economies and their economic theories need not be true and applicable to countries like India and emerging economies. The Income levels, the efficiency of  transport system, governance standards,differ from country to country and understanding and application of technologies also varies to think of uniform application of all economic theories.Surge pricing in India cannot be justified based on demand and supply and the pricing mechanism adopted by the tax aggregators and air services are totally unjustifiable especially when the supply is more and demand is less. This can be easily verified if one were to conduct a survey on supply and demand for cab services in cities where these cab aggregators operate. The same is the position in airlines where one can observe lots of empty seats and surge pricing for the occupied. seats. Surge pricing coming out of greed cannot be justified applying the economic theories intelligently exploiting the weaknesses of Governance standards,inequality of income levels,ignorance and helplessness of some people .

Dr T V Gopalakrishnan. 

Improve the number of tax assessees

This refers to the  news report in Economic Times dated 30/4/16 that only ten lakh people are declaring income  above Rs ten lakhs. Obviously something is seriously wrong with the Income tax assessment and the number of people filing the IT returns.  This is nothing but absurd. Even a lay man with even below average common sense cannot take this figure as correct as he knows that in his own surroundings wherever he is in any metropolitan City  in India that there are lakhs of people earning more than Rs ten lakhs.  In IT Companies alone there will be lakhs of  employees earning more than Rs 10 lakhs per annum. Then what about the Central Government employees, Bank officials, professionals like Accountants, lawyers, Doctors, Consultants  and specialists attached to various multinational companies, Real estate Dealers, Brokers, Traders, Commodity dealers, Persons engaged in scrap dealings,  Interior decorators, Hoteliers , Merchants, Medical shops, Car service Providers, Second hand car dealers,  and all sorts of middlemen operating in different areas and commodities.  Herein lies the influence of black money, corruption and inefficiency in tracking the transactions and capturing them for improving the data collection and augmenting the resources of the Government. Definitely there is ample scope to augment the revenues of the Government through Direct Tax and reduce  the rate of tax for lower income groups. It is time for  the Income Tax Department  to realise the realities of the economy and capture the information relating to the informal economy which is more or less equivalent to the formal economy.

Dr T V Gopalakrishnan