Why FICCI should not come to banks' Rescue

This suggestion  by FICCI to set up AMCs  to take over banks' non performing loans  is nothing but transferring the disease of elephantiasis from one leg to another. Instead the FICCI should advise / direct all its members to conduct the loan portfolio with the discipline expected of them. No representative board has spoken a word about the bad debts of banks because of the borrowers' undisciplined approach to banks and availing of credit without bothering to utilise them properly for business expansion. The diversion of funds by the borrowers is the major cause of bad debts and this needs to be checked and controlled by the Federation if at all they care for public deposits and banks health. The borrowers know well that the money banks lend are nothing but deposits of public and the banks are only acting as trustees of these deposits and these funds have to be repaid on demand but the way they misuse the funds and dare not to repay come what may approach needs to be condemned and such borrowers have to be taken to task. The Chamber of commerce and Federation of Indian Chambers of Commerce and Industry have a moral responsibility to educate their members and cooperate with banks to recover the funds taken as loans to expand the business.

( Comment sent to BS dated 21/2/16)

More Credit , more NPAs?

It is a fact that some of the normal economic theories have no relevance to India. As rightly said, investment in India is rate insensitive and this is what we experience. Like wise NPA formation in banks is also insensitive to the theory of credit deployment. More you deploy the credit the expectation is that more it will produce, more employment it will generate,more demand it will create, more revenue will accrue to the economy,and there will be less of fiscal deficit and less of NPAs. Nothing happens in our economy. More the loan, less is the production, less is the employment, less is the revenue , more is the deficit, more is the NPAs and more wealth to the loan takers and more wealth to the politicians, bankers, brokers and middlemen.. Banks suffer, Depositors suffer, good borrowers suffer, and tax payers also suffer because of more NPAs. In India no economic theory works is the ground reality and politicians know more about this than the economists. Bureaucrats also know the theories well but they also know how not to practise the theories . Politicians are also totally insensitive to any economic theory or to any comment .

Dr T V Gopalakrishnan

( This comment is published in BS dated 20/2/16 against the Article by TCA Srinivasa Raghavan)

Diagonise the disease properly and then presribe the medicine

The reasons behind the huge accumulation of bad debts  in PSBs need to be correctly understood. There are no institutions to finance the infrastructure projects of the country and the banks are forced to lend on a long term basis for which they have no expertise or long term funds. Asset liability Mismatch , lack of adequate cash flows to recycle the funds are affecting the banks very badly. Besides these, the interference  from the Government through various ways also compels the banks to act unprofessionally knowingly well that such an approach will land the banks  in trouble but they have no choice. There is also no bond market to take care of the long term needs of large corporates engaged in the build up of infrastructure very badly needed by the country for its economic growth. The banks financing long term projects do not have an opportunity to avail of the take out Finance facility and their funds are locked up.

The other reason is  the appointment of Directors and top management executives  in banks based more on extraneous considerations other than merit and their commitments are not to safeguard the banks funds but to safeguard the interests of their masters. Further the typical public sector character of being indifferent and non involvement in the work by the human resources behind the institutions cause such a damage which can be quantified only in terms of Non performing loans. Lack of Corporate Governance and laxity of regulation and supervision account for the other reasons behiind the Non performing  loans. The only solution perhaps is to discipline both the banks and the borrowers and educate them to conduct the loan portfolio in a very professional manner by having a very close monitoring and self correcting mechanism by way of penalty both from banks and borrowers for all their wrong doings from the moment the loans are sanctioned till they are liquidated. Prevention is always better than cure. Both anesthetic  and deep surgery approach are painful and are the last resorts after the disease is well established. The other solution can be allowing the banks to raise long term resources with special regulatory features and tax incentives..  

Dr T V Gopalakrishnan

Cover up wont work

Apropos the editorial, "Tip of the iceberg", the banking system needs to implement reforms, structurally and functionally, to improve its finances and operations and provide support to the economy.

That camouflaged bad debts are equal to or more than the disclosed bad debts can't be hidden anymore because of the recurring damages they bring to the economy. It is time to recognise and identify the overall weaknesses of banks due to the absence of a bond market or institution to finance long-term projects, the interference of politicians and bureaucrats in banking operations and a legal system that is not up to speed. A cover-up will only damage the health of banks further; this is definitely not in the interest of the economy, its financial system and the people.

 Dr T V Gopalakrishnan

Archaic System and procedures in RTO and Treasury

 I happened to visit the Regional Transport Office and the District Treasury Kakkanad, Kochi in connection with the Transfer of my car to Karnataka and to get the related documents and refund of excess tax paid towards vehicle tax. The work was done successfully but the taste of Government’s arrogance and the harrowing experience that I got is something I am not able to digest.The curse, the harassment, the displeasure and the insult meted out to me despite recognizing my old age and experience as a public servant in an Institution having national and international stature is something unbearable and beyond any stretch of imagination one can have about a government institution in a state where literacy is the highest, people are highly conscious of their rights and the State has several credits for many a welfare schemes and is far ahead of many other states of India. Devils in the form of systems and Procedures in God’s own Country need to be dealt with urgently to enhance the image of the Government and improve the ease of doing business.

The staff  attached to both RTO and the Treasury are found to be exceptionally good, courteous , helpful and definitely one cannot find fault with them for any deficiencies on their discharge of responsibilities but the fact that the  archaic systems and procedures in vogue come in their way of dealing with the public and satisfying with their requirements. One incognito visit by any official to the RTO and the Treasury and interaction with the crowded public in these offices  will get a very clear picture of the suffering, harassment the public undergo on a daily basis and the pressure of work, the frustration the displeasure, the curse the staff incur from public which are  definitely avoidable if the administration opens its eyes and views the issues involved with proper perspective and initiate action using technology and the human resources with improved systems and procedures securing the governments interests and serving the public with utmost care and satisfaction.

The areas where some changes can be comfortably thought of from my own experience relate to Communication system with the public through correspondence using e mail or other traditional methods, discussions, announcements and issue of proper notices and the disposal of cases using technology optimally, imparting of knowledge, systems and procedures to the officials through training and interactions in periodical meetings. The world is moving fast and we are all in the digital world and advanced Technology are at our disposal to meet the ever increasing services and responsibilities and the State like Kerala certainly cannot be lagging behind in updating their services in tune with the advancement of the technology..

It is high time the RTO office and the Treasury coordinate their work in such a way that they do not expose themselves their problems, differences and inefficiencies to public. I was advised to come and collect my refund personally although I am in Bangalore and the travel from one place to another these days is really difficult in view of physical inconveniences, making travel plans at short notices, stay arrangements and prohibitive expenses involved for conveyance etc. The refund sanctioned to me could have been easily remitted by means of a draft, cheque or through internet banking or handed over to an authorized person at my own risk and responsibility but the RTO office and the treasury in their wisdom preferred and Insisted on my personal appearance although I had enclosed a cancelled   blank cheque and requested for the remittance of refund of excess tax as and when sanctioned. Even the very senior officers have no discretionary power to overlook the procedure in exceptional cases and act, only smacks of arrogance of power to harass the public and perhaps to escape payments genuinely due to them. Having come to the office to collect the payment the suffering I had to undergo being a diabetic and senior citizen, shuttling between the RTO and the Treasury climbing five times the two floors of extra ordinary heights typical of Old Government offices made me mad and think for a moment donating the money to the Government but I resisted and decided to collect the refund at any cost so that I can donate the money to some really deserving which I am happily doing now. The staff involved both in RTO and the Treasury were really helpful, cooperative and courteous but the systems and procedures they have to adhere to were the stumbling blocks to disburse the money. 

The policemen on duty can definitely treat the public better with little more decency and politeness as the public coming to RTO office and the treasury are either to remit some taxes or collect some genuine dues to them from the Government. Serving public is an opportunity and there is lot of pleasure and satisfaction in that. The police officials can definitely behave in a civilized way particularly in places where only civilized and some what educated people caring for the laws of  the Country  visit to avail of some services to lead a dignified life.

Millions of people visiting RTOs on a day to day basis suffer,waste their money, energy , lose patience and carry a very bad image of the Government offices is a fact which cannot be  and need not be compromised by the tax payers.It is high time the Government offices update their technology , review their systems and procedures and provide hassle free services to public and better their own image. Times are changing, expectations are increasing and the service providers cannot be in their 19th century and say / claim the ease of doing busing is really easing. 

Allow the banks and the Reserve Bank to function professionally.

The banking system is in a mess and struggling to find ways and means to get out of the festering problem of non performing loans generated on a continuous basis due to lack of professionalism and political interference in its management. The so called autonomy has been elusive and the public sector banks survive because of budgetary support and subsidy provided by the depositors and other stake holders particularly good borrowers. The economy which is dependent on the banks for its growth is the worst sufferer and the loss suffered by it on a recurring basis is something beyond any calculation. However, the problem faced by the banks gets glossed over and no serious attempt has been made to introduce a lasting solution to make them healthy and self dependent for their survival. The solution to the menace of bad debts of banks lies within the   banks and the borrowers themselves by introducing a self correcting mechanism to liquidate the bad debts with the fines levied from bad borrowers and banks for their acts of undisciplined way of conducting the credit portfolio right from the sanction of loans to their liquidation. The problem of bad debts is definitely not an insurmountable one as is made out to be and this requires willingness and guts on the part of authorities to adopt the solution to discipline both the borrowers and banks without fear or favour. This much autonomy is essential for both  the banks and the  competent Reserver Bank to carry out their functions professionally without any sort of interference from the Government and politicians. 

Dr T V Gopalakrishnan

( This appears in the Hindu dated 15/2/16).     

Bad debts in banks , a creation by the authorities.

The loot through banks has been going on since the days of nationalisation. The write offs, interest concssions, and compromise settlements are the easiest routes to take depositors money from banks and they are made good by reducing the rate of interests to depositors , avoiding or minimising dividend payments to share holders who include the government and by tapping the budgetary resources ie tax payers money. Appointments to banks are as per the whims and fancies of the Government and RBI though know the wrong doings in banks has no option but to please the Government as dictated by the Government nominees both in RBI and the Banks. RBI has no autonomy is a known fact and it has always been functioning as per the directives of the Government . It gets oral instructions and messages through press reports. It has to act knowing the mindset of the Government in power. Even the pension updation has been stopped by an oral instruction ignoring the written agreement entered into between the Government and RBI to provide pension on par with Central government pension. Fudging of balance sheets of banks has been an accepted practice for decades and window dressing of balance sheets to suit the management to hoodwink the regulator and the Government has been going on with the full knowledge of the management, RBI and the Government. It suits all well and the ultimate result of all wrong doings is that the menace of NPAs unfortunately has touched beyond any treatment and is at the explosion level. These are all disclosed NPAs and hidden NPAs will be almost equal to the diclosed ones. Now the entire attention is on banks and their NPAs and the solution is to write off using tax payers ' money as they cannot question the Government. The balance sheets need to strengthened and the only way is to induct more money to cover up the write offs.Rob Peter to pay paul who has already been robbed is a mild expression so to say as far as banking is concerened. The article should be an eye opener and should enable the authorities to introspect the damages they have done to the banking system, the economy and the tax payers because of their lapses, lack of professionalism  and indulging in business with ethical deficit. Discipline is the essence of banking business and the more it deviates from financial discipline in particular,  more the damage it inflicts on all stake holders. The disease of bad debts is worse than cancer and it cannot be endured  for long with all the supporting system. Prevention is always the best cure and any expenditure to prevent the disease is worth spending.

      

Dr T V Gopalakrishnan

Can the Bankruptcy law deliver?

The Bankruptcy law is good but the fear is it is one more law in the list without any hope of bringing in any tangible benefits to the banks or the economy. Most of the bad debts are  the creations by the interested parties and they all know as to how to hoodwink this law also as they have been doing with all the existing laws of the country  with the connivance of all concerned authorities  and they all know as to how to escape the enforcement of the law if it happens..As it is, the country does not suffer for want of laws and if all the existing  laws can be enforced without fear or favour, most of the problems faced by the economy would vanish automatically. The fear of law is simply absent and the enforcement of law can be easily manipulated as the system permits it. For the banks' bad debts, the better law would be to ensure that the banks and borrowers follow some professional approach in the conduct of loan portfolio and both follow some ethics and discipline in the use of public deposits. Doing business without any ethics can only ruin the country and some  unscrupulous fellows would accumulate the wealth at the cost of public. Any law would not be of any use as long as ethics and values get ignored in the conduct of business involving public money and enforcement of laws is not effective

Dr T V Gopalakrishnan

( This comment appeared in Business Standard dt 8/2/16) .

Is not IBA morally responsible to protect banks from bad borrowers?

What is the Contribution of IBA to reduce the burden of bad debts of banks? Has it done anything worthwhile to educate the banks and borrowers to pursue professionalism in their businesses.? has it done anything to convince the Business lobbies to reduce the bad debts of banks? has it approached the government to prevent appointement of non professional directors in banks Boards? has it approached the represntative Bodies like Indian Merchants Chambers, FICCI, Exporters association, various other associations representing different categories of industries, SSI associations etc to discipline their members and advise them to condut the loan portfolio of banks professionally, ethically  and avoid becoming NPAs? What is the proactive role played by the IBA to justify its own existence. Does'nt it have moral responsibility to rescue the banks from bad borrowers and apprise the representative bodies as to how the borrowers cheat and dupe banks in different ways? Even the reprentative bodies make a hue and cry to cut interest rates and keep themselves silent when thheir members behave erratically with banks?.

Dr T V Gopalakrishnan

Time to act and deliver the result

The hype created by the government and the achievements on the economic front do not match. The credibility of delivery from the Government is gradually disappearing and there is frustration among the people.Why it is so has to be introspected by the Government and if it is convinced of below expectations of its performance, this is the time to show its determination and act without loss of time further. Action is what is needed and the course of action should be reflecting in the ensuing budget. People are losing patience is a fact and is the ground reality. All segments particularly agriculture, Industry can definitely do well irrespective of the external situation but the initiative from the Government has been missing except generating hopes every now and then.The article should serve as an eye opener and the Ministers and Bureaucrats in particular have to deliver in action

Dr T V Gopalakrishnan

(This comment appeared in Business Standard dt 8/2/16).

Inflation , Prices and the life of Retirees and common masses

No Doubt Dr Rajan is a renowned economist and a champion of Inflation but his dosa economics to illustrate that the retirees are far better off today in the background of lower CPI at 5.5% does not carry conviction in Indian situation is the ground reality. The inflation component to arrive at 5.5% and the prices the compiler collects sitting in some office in Delhi do not really reflect the retail prices the Retirees pay for their day to day living is What Dr Rajan has to experience if not experienced so far. One visit to a doctor for a fever costs not less than Rs 1000 these days is a fact and where it reflects in the 5.5% inflation the retirees do not know.  The fact that  the Tur dal , ulund dal are selling between 180 Rs and 220 Rs a Kg where as vegetable oils are selling at  between Rs 150 and 200 a liter  which the retirees pay ,out of their reduced income of interest rate after income tax  may not be known to Dr Rajan perhaps.. The dosa is priced at Rs 50 and 65 in hotels and it carries a service tax of 14.5 % and Dr Rajan's calculations do not hold good at least for metropolitan centers..The conveyance charges incurred by the Retirees to visit some places even by bus these days carry a cost and where  and how it reflects in the 5.5% inflation is  not known to retirees.Their  take home incomes by way of interest have drastically come down and the expenses incurred by way of rent / maintenance Charges for their accommodation,  living expenses involving water,  milk, vegetables, provisions, medical , transportation  electricity charges , news paper /TV Charges , servant maid's wages, etc  have gone up by leaps and bounds because of increases in the prices coupled with the  compounding effect of Service Charges. Dosa Economics cannot be a convincing answer to the retirees and this is not expected from an eminent economist. who have been moving through out the world. Such statements from politicians are understandable but definitely  not from professionals of such high caliber even in lighter vein..Masses are suffering from high prices but may not be suffering  from high inflation is the fact of life.Price levels and Inflation are totally two different things for Indian Masses.

Dr T V Gopalakrishnan

(This comment is a knee Jerk reaction to Dr Rajan's speech "Retirees are better off " that appeared in Business Standard dated 7/2/16).

SEBI and Retail Investots in Ltd Companies

SEBI should bring about once in a while with reports on Companies which have 1) Excellent Corporate Governance Standards 2) Good Dividend payment records 3) Good Bonus declarations 4) fudged accounts having subsidiaries  and  window dressing of balance sheets by showing losses in some subsidiaries  5) delayed conduct of AGMs and delayed payment of dividends etc 6)  raised funds through IPOs and failed to keep their promises. Some of the IPOs are greedily priced and after raising the funds nothing is known about the Companies..7) failed to conduct AGMs and have not been informing anything about what they are doing. 8) have defaulted to banks and have been rated by banks as Non Performing Assets..9) Auditors and Accountants not well reputed and rated by the Chartered accountants Association of India 10) failed to Comply with the Government's regulatory requirements like PF Remittances, Excise duties, tax payments etc  11) Excellent track records for contributing towards the Corporate social responsibility.
The retail share of investors need to be augmented to prevent volatility in the market.More the retail investors the better for the Companies, for the economy and the market.The SEBI needs to be more proactive to make the Companies perform well in all respects by openly reconising them for their contribution to the economy in terms of GDP growth, Corporate Governance Standards and satisfying the Customers and the shareholders as well. 
Dr T V  Gopalakrishnan   

Banking system is in a mess.

A well written peace coming out of experience as a former banker and as a customer now. Banking has changed a lot and unfortunately for the worst.It has come to streets in different forms without having any knowledge of its own customers despite having supposedly stringent Know Your Customer norms verification.Competition among banks has taken away the principles of good banking and the greed to make money at any cost has taken away the banker customer relationship losing in the process the good money and the soundness of banking. The data is so to say misused and not put into strengthen the business of banking through improved Customer relationship. Machines alone cannot achieve the results and the Techonlogy not supported with human touch can only ruin the business in the long run. This is what is being wiitnessed these days in banking and other areas.. The deposits are falling, NPAs are increasing, profit margins are getting eroded day by day and the presnce of regulation and supervision is vanishing fast under some external pressures, have been unfortunately the result of too much of data , too much of technology and too less of human touch every where.Hope this article will turn out to be an eye opener of the powers that be.

Dr T V Gopalakrishnan

(This comment appeared in Money Life dt 5/2/16 in response to an articel on Big Data). 

Ball in Governments Court

This refers to the editorial macro Economic Stability the key (ET dated 3/2/16).The latest policy statement of RBI keeping its policy rates unchanged   carries  a  clear message to the Government as to how the ensuing budget of the Government  should be shaped to keep the growth trajectory of the economy strong and achieve the ever elusive macroeconomic stability.RBI has highlighted the urgency for structural reforms needed in the economy to attract more of private investments to accelerate the stagnant growth and on  the need to have prudent public investment and expenditure to contain fiscal deficit at comfortable level without disturbing the price stability achieved    in the economy. Ensuring its continued accommodative credit policy, RBI wants the Government  to come out with a strong economic policy through its budget encouraging private investments, employment and growth oriented public expenditures without ignoring the social aspects. While Fiscal Consolidation is the key to keep the macroeconomic stability, the growth of the economy is the master key   to achieve the much needed fiscal consolidation. .    

- 

 Dr T.V.Gopalakrishnan

(This apperaed in ET dated 4/2/16)

Introduce self correcting Mechanism to Liquidate NPAs in banks

Unless and until a  built-in  self correcting mechanism is put in place, the NPA menace will continue  to haunt the banks and the stake holders other than the defaulters will bear the brunt.  The credit discipline is the medicine for bringing down NPAs of banks.This needs to be recognised by the regulator and the Government as well and both the banks and the borrowers should be made to pursue the credit discipline expected of them with stringent penal measures. NPas of banks is not an insurmountable problem as is made out and widely discussed. 

Dr T V Gopalakrishnan.  

Tarapore the Veteran Central Bankeris No more.

Dr S S Tarapore the  veteran Central Banker and an authority on Monetary policy is no more.. He has dedicated his life to the cause of Central Banking , its role in achieving economic growth with price stability through the adjustment of the monetary policy in the background of not so strong fiscal policies and weak governance Standards in administration. He has fought for the Central Bank's autonomy and a strong banking system devoid of Government's dominance.through his writings with conviction and authority He has also written extensively on the need to improve the Customer Service in banks and also to ease the Know your Customer pursued in banks. .An economist having the feelings for the common man, argued and worked  for them through out his career unlike many of the policy makers who have only lip sympathy for the masses. His death has caused a vacuum and is an irreparable loss for banking fraternity and the common man as well..May His Soul Rest in peace.

Dr T V Gopalakrishnan

( This comment appeared in Business Standard in response to the Column Obit A diminutive Colossus)

Banks Boards

Board appointments are based on political contactacts and influence. Merit is the last and  the least consideration to get into banks' Boards. This can be easily verified from the  details of Banks' boards Members;  their qualifications , experience etc if one were to peruse the records of Banks.  All public sector banks have Board members  appointed by the Political Bosses and without having any qualifications  for  being in banks Boards. This has been the feature since Nationalisation of banks in 1969 and even now it is  continuing unabated.

Dr T V Gopalakrishnan