Cooperative Banks need total revamping

 Cooperative Banks are another source of loot and they are in that sense better than PSBs because PSBs are watched by many and RBI's is solely responsible and accountable for their Regulation and supervision although Governments intervention is very much there to make the PSBs function the way the Government wants. In cooperative banks by and large the loot goes unnoticed and to some extent the depositors are taken care of by the Deposit Insurance Corporation and the Cooperative Banks are slightly different from PSBs and other Commercial Banks. In respect of cooperative banks their regulation supervision, management and administration are under the Control of the Reserve Bank and Registrar of Cooperative societies ie the State Governments. Ownership is practically monopolised by politicians and bigwigs of the area where the banks are set up and there are shareholders who know nothing as to how the banks are run. Deposits come from the shareholders and public but the bulk of deposits come from the shareholders and their friends who take administrative control of the banks. The loot of the bank is well organised and it takes the form of high interest rates on deposits and loans at the Cheapest rates possible and without much of securities to take care of the recoveries in the event of failure of the borrowers to repay the loans. Politicians ,major shareholders, bulk depositors and big borrowers join hands to mismanage the banks and the Registrar of societies and RBI have limited role of only observing  banks incurring regular losses and their going weak one after another.In no way they can stop the loot is the ground reality. NABARD also is involved in the Supervision of a segment of Cooperative banks with the same result. The only way to save the Cooperative banks which are an essential link to promote savings, distribution of loans on an equitable basis to ensure creation of productive assets in the rural and urban segments, is to keep them away from politicians and local bigwigs completely and hand over them to share holders with Cooperative spirit in letter and spirit and run them purely with Professional support on commercial lines.RBI should be completely taken out if necessary by amending the RBI Act, 1934 and the NABARD should be entrusted with the responsibility of Cooperative banks. The major Cooperative banks set up in metro centres can be converted into Commercial banks or can be merged with some PSBs.It is time to stop experimenting with the present arrangement of duel Control on Cooperative banks and losing money on a recurring basis without any value addition either to the society or to the depositors. From this angle, the article has been very thought provoking and needs to be seriously studied and appropriate action taken .

Dr T V Gopalakrishnan

Banks and accuracy of Data

Are banks figures accurate? is always a doubt in the minds of investors, banks auditors, regulators and policy makers. Wait for March figures. All figures will look impressive and their accuracy certified by  banks auditors and top Managements. There will be deposit growth, advances growth and decline in NPAs. All banks will be showing profit and risks will be bear minimum on business front. Bankers would become eligible to draw productivity bonus and the Auditors will prepare the Balance sheet as the Chairman and his Executives Desire. The data collection and dissemination is an art in India and the reliability of data was doubted by none other than Dr Subba Rao the former Governor of RBI The window dressing of banks' balance sheet is a feature well established for decades but how the same art is repeated in a computerised environment is a mystery. The ground realities and the data produced by various institutions do not match is a fact and the policies based on erroneous data cannot produce any better result. Garbage in garbage out is what we experience. 

(This comment appeared in Money Life dt 21/3/16).

Private Bankers, Public Servants and RBI

This article is well intended and carries lot of messages to correct the wrongs by the powers that be in abusing and misusing the powers taking advantage of the technical loopholes found in the interpretation of different acts. The Supreme Court has done a wonderful job in correcting the lapses observed in different acts and their applicability to private sector Undertakings. Mr Gelli  played havoc and took the GTB bank depositors and shareholders for a ride and the Supreme Court's  verdict finding him guilty in terms of the Provisions of PCA and BRA is a message for all to be careful in dealing with public money whether they are serving in Government or in private sector. However, the author is not fully right in saying that RBI as regulator covered up its regulatory failures and avoided losses to depositors by forcing the GTB's merger with the Reluctant Oriental bank of Commerce. In fact RBI has done its best to protect the banking system by eliminating the wrong doer and avoiding the systemic risk the GTB  could have done had it been allowed to continue with all its irregularities and staggering bad assets. RBI is one of the strong Institutions the Country has produced and this has been recognised all over the world. RBI is also functioning in a weak Governance system the Country has in general and RBI has autonomy only on paper and not in Practice. There are two Nominee Directors on RBI's Board from the Central Government and RBI can be easily dictated by the Government. Even the pension updation agreed to by the Government way back in 1990 has not been implemented as on today is the reality. All said, the financial system in general and banking system in particular continue to remain strong and the credit definitely goes only to RBI for its strong  professional approach to carry out its defined functions as per the RBI Act, 1934  with all limitations known to all those who matter in the area of Economy, Finance, Judicial system and administration.        

Dr T V Gopalakrishnan

(This comment is published in Money Life  against the article Private bankers are public servants dated 30/3/16)

People are eager to see the Ache din come fast.

 The PM has good  intentions and vision for the Country and its poor people in particular . But the fact of the matter is that some of the policies initated by the government have gone against the poor and they are worst affected. The service tax on almost all items affect almost all which can be intelligently avoided had it been aimed only at bigwigs. The intended service tax revenues can be easily made up by levying a cess on all luxury purchases, travels,  expensive games and sports etc.  Like wise the cutting of interest rate on small savings in the Post offices mostly affcted the lower middle class and poor who save in Post offices because of convenience and personal touch they get from the officials. This can also be avoided by having lower interest  on banks deposits  above a cut off limit and avoiding the incentives the banks give  on high value deposits and eliminating  interest cuts to those who avail of big loans  through contacts and influence. Some of the loans do not even cover the Cost of funds of banks is a reality which need to be arrested completely.   Banks do not care for the masses have been proved beyond doubt for the past sixty years and they are the source of loot by those who run them Viz Politicians Bureaucrats, industrialists and all their Chamchas. Professionalism is alien to banks and banks have the art of keeping poor people away by their actions, interactions with the poor, and lack of personal touch with people who matter and deal with them. The Jandhan Yojana is an excellent  scheme but this can work only if the bankers put their minds and hearts which cannot be ensured with the present system of their functioning and management.  The PM has all good intentions and people are with him but the implementing agencies and the Officials in them are not on the same page as the PM thinks is unfortunately the reality. Further Sixty years of wrong doings cannot be set right overnight is also a reality though Change is desirable and needs to be vigorously pursued keeping a constant monitoring of the implementation of the policies intended for change. People are very eager to see the achedin to come fast .

Dr T V Gopalakrishnan  

(This comment sent to Business Standard on 27/3/16)

A well written article carrying the responsibilities of a Central Banker. While Inflation target is required to be attained as on a future specified time, the Fiscal deficit of the Government which has a direct impact on the growth and inflation and  where the Central banker has limited Control needs to be closely monitored and expected to be maintained by the Central Government  at a level acceptable to the Central Bank, the financial  market and external economies. The Dosa economics needs to be convincingly established before the public both gullible and intelligent. The Financial Stability has to be ensured with acceptable level of volatility in exchange rates, market indices, through the tools CRR,SLR and Interest rates . SLR cannot be easily altered to suit the Government Finances and at the same time CRR needs to be managed to meet the Liquidity requirements in the declining scenario of savings, increasing trend in bad debts , stagnation in economic growth, and lot of political uncertainties ensuring at least working autonomy of the Central bank.The mind of the Government needs to be thoroughly understood and acted upon to change policy rates irrespective of the real need to change purely based on Economic Fundamentals. All the problems faced by the Central bank have to be adequately covered up and supported by the effective Communication that it often spells out orally or in black and white. All said, I am the Central Bank and I would do what I want to do is the message the Central Bank has to convey to public and to its master .        

Dr T V Gopalakrishnan

( This comment is in response to the Article by Dr A Vasudevn in Business Standard Dated 25/3/16)

Case Study of Mallya's debts by IIM A

Ethics and Business have no relationship is what Mallya's case shows. There are several Mallyas in the banking system who loot the public money with the aid of bureaucrats, politicians, professional bankers , eminent Lawyers , Accountants and Trade Union leaders. The loot is not a one day affair. This has been going on for years and in several other cases for decades. The Study of Mallya's debts by IIM A  is welcome but the outcome should be to prevent such loots for ever through some self correcting mechanism. In this regard Perhaps the book Management of Non Performing Advances brought out by the Indian Institute of Banking and Finance in the year 2004 would be of some help to prevent such loots on an ongoing basis.The cross subsidisation of such bank loots by the public should come to an end and  IIM can perhaps come out with some ideas on accountability. Corporate Governance is said to be in existence in almost all Institutions but the result is open loot and no commitment or loyalty what so ever to the Institutions or to the shareholders or to the tax payers or to the Stakeholders of the economy is visible from people who manage these Institutions. . Dr T V Gopalakrishnan'

(This comment appeared in Times of India dt 26/3/16)

Middle class and senior citizens are the worst hit

The authorities seem to be bankrupt of ideas on as to how to improve and strengthen the economy. It looks obsessed with augmenting revenues at any cost ignoring the need to nurture the savings which are very essential to provide the support system for the economy to grow. Unfortunately the Government has a tendency to sideline the middle class with whose support it came to power. The Government very badly treated them in the budget recently announced and no tax benefit has been given. The savings of the Community which basically come from retired middle class and lower middle class people have been on the decline since the new Government came to power despite a tall claim of a decline in inflation. The taxes have been on the increase and honest tax payers are taken for a ride by the Government. The service tax literally takes away the charm of living as the common man is hit very badly even for his cup of coffee or tea. The black money holders thrive and enjoy life and avenues are  very many  for tax evaders in the economy. Many money spinners do not seem to be knowing the existence of something called Income Tax. Fudging of accounts and false reporting are suspected without any check or accountability. Corporates collect various types of taxes but how correctly they report and pay the taxes to Government no one Knows.Salaried class in particular and honest tax payers are taken to task and their grouse against the government is growing day by day. Perhaps the next election will show the impact. The Government's dependence on the bureaucracy who still seem to be maintaining its loyalty to the previous Government also seems to be taking this Government for a ride. Senior Citizens are the worst hit by this Government's policies and definitely this approach of the Government can and will never be tolerated. 

Dr T V Gopalakrishnan

( Comment given in Money Life )

Why the banks suffer and bad borrowers thrive?

The bad  debts problem is because of the following.1) Banks boards are not professional. Mostly the Directors  are political appointees without any background knowledge of banking ,finance, economics.etc.2) RBI and Banks do not have the autonomy they deserve. They have to dance to the tunes of politicians and corrupt bureaucrats They are not able to perform their responsibilities without fear or favour and they have to oblige the bureaucrats, politicians and tolerate all types of interferences from the Government  3) The borrowers are not disciplined and encouraged to do all unethical business practices . They dictate terms to banks instead of banks dictating terms to them. Bad borrowers in particular expect cross subsidisation of their interest dues  and  bring in all possible pressures on banks . Banks simply oblige and get continuously harassed for lower interest rates, evergreening of loans by compelling for release of fresh loans etc to service their interest and instalment dues. 4) The Accountants and Auditors are not honest to their profession and do not report the correct position of accounts in the balance sheets . They help corporates  to  hide more information Though they have all the information about the statutory defaults they either do not report or report incorrectly. They seldom verify banks dues and how they conduct banks loans.. Less said the better about their role in hiding the correct information from all authorities who matter. The Reserve Bank attempts to extract some hidden information through their inspection  and negotiation skills with banks managements and their auditors , but they are hand in glove with each other to project a better balance sheet. Window dressing of banks balance sheets is an open and accepted practice in banking and regulation of banking. 5) The representative bodies of Corporates like Indian Merchants Chamber, Chamber of Commerce and Industry, Federation of Indian Chamber of Commerce  and Industry , Exporters Association, Small Industries association etc make a hue and cry to curry favour from the Government and all institutions  and enjoy all possible concessions and reliefs,but seldom raise their voice against the bad conduct of their members in conducting the loan portfolio and not servicing and repaying of the loans,6) The Indian Banks Association the representative body of banks unfortunately have not been seen fighting for banks grievances against the borrowers or the Government or regulators etc. This Association can definitely do a lot in helping banks which suffer from bad behaviour of some bad borrowers, some corporates demanding high rates of interests on their deposits and lower interest rates on the loans, corrupt practices often experienced in the appointment of Senior Executives in banks etc 7) The Regulators have to often swallow the insults because of certain behaviours and interventions in their functioning. 8) Lack of Coordination among the Regulators to achieve the common Objective of keeping the Financial System strong and healthy is a major cause for banks and corporates poor financial performance.. How to take care of these issues should be the approach of the Government to make the banks healthy and strong. Without a strong banking system the expected GDP growth of 8% and above will amount to chasing a mirage involving heavy expenditure and avoidable cross subsidisation of all wrong things..

Dr T V Gopalakrishnan  .   . 

 

An open letter to Sri Arnab Goswami

Dear Sri Arnab Goswami,                                                                                         

                              
          Re Great Loot, Great Escape and equally Great Exposure

                     

It is a pleasure to watch you in Times Now fighting with the high and mighty who indulge in all sorts of corrupt and malpractices damaging the equilibrium of the society consisting mostly of poor people aspiring for a better tomorrow which is ever elusive due to wrong doings by the powers that be. The flamboyant Mr Vijaya Mallya’s art of looting, art of living in Luxury and art of leaving the country stripping many banks which have financed him liberally are well exposed by Times Now drawing the attention of the powers, the people and all shameless looters of banks,  the society and the economy. 

The banks which are supposed to be the supporting system of the economy and which are in the business of banking using the hard earned savings of the society fritter away the money with all impunities on the rich and without caring for those who really need it are in very bad shape expecting support from tax payers for their survival. The recurring loss suffered by the economy because of the non performance of banks and generation of non performing loans as if permitting organized loots is the divine duty of banks and the divine right of the borrowers who have free access to banks through back door, has never been figuring in the political, bureaucratic and any professional circles is really unfortunate and with the airing of the views through Times Now, the  avoidable NPA issue of banks has attracted national and international attention.

The NPA problem though inevitable in business like banking ,it is definitely  not insurmountable as it is made out to be and it can be prevented provided banks are allowed to function professionally without any intervention from the Government and political bosses and without any fear or favour. From this angle, a solution to arrest the cancerous growth of NPAs was suggested way back in 2004 based on a detailed Research on the Non performing loans with reference to public Sector banks and a book was published with a foreword from none other than Dr C Rangarajan, the then Chairman twelfth Finance Commission, Former Governor of the Reserve Bank and former Chairman of the PMEAC to the former Prime Minister. The Ph D thesis won appreciation for its lucid style of presentation and the suggestion consisting of a statistical model to prevent the formation of NPA rather than to cure it was recommended for a trial by the examiners who evaluated the thesis. Being a small fry in the whole scheme of things, the suggestion never came to light and never crossed the ridiculing stage so to say. The Indian Institute of Banking and Finance published the book in the year 2004.

Since then I have been writing articles and letters on various papers but the system does not accept or permit any worthwhile suggestion  to be considered for even a debate leave alone implementation. In this regard, I enclose for your information a copy of my letter recently addressed to our Honourable Prime Minister which is understood to have been forwarded to the Financial Services department (Banking Division). It gets perhaps buried there.

My idea of writing this letter is to appreciate you for your guts, courage, spirit and interests to fight the wrong doings in the society. This inspires many in the society and hope the change will happen over a period. Many silently fight, suffer, get depressed but seeing you and your channel the spirit of fighting is kept alive. May God bless you with all strengths and spirits Always and in All ways       

with regards,

yours sincerely,

Dr T V Gopalakrishnan

Loot has become order of the day

The article Wilful Defaulters are a result of Wilful Blindness is well titled and the details given in the body fully justify the title. The blindness starts from politicians and gets spread through the bureaucrats, regulators, banks own professionals, Auditors and ends with the tax payers who pay for all the losses incurred in the process blindly without knowing what has happened. Journalists write volumes exposing all the wrong doings, but the scams continue to get increased year after year and take different forms and shapes. The loss is borne by the tax payers and the cases are fought for decades without having any checks and balances to contain the frauds , omissions and commissions and the institutions get easily looted. The Governance standards have virtually disappeared from all Institutions and the accountability is no one's concern in the country.The credibility in the administrative system is disappearing fast and any amount of exposure ,naming and shaming have no impact. The looters feel proud for all the loots.

Dr T V Gopalakrishnan

(This comment is published in Money Life)

Welcome Coordination

Apropos "Sebi moves forward" (March 14), the Securities and Exchange Board's (Sebi) approach to bar wilful defaulters - whether promoters, companies or directors - from accessing the capital markets and from taking board positions in listed companies is most welcome. It will discipline wilful defaulters and also compel other corporate borrowers to be fair and transparent in the conduct of their loan accounts.
The exchange of information among all regulatory bodies including Insurance Regulatory and Development Authority, other statutory authorities like provident fund (PF) organisation and tax authorities would be of immense help to discipline borrowers so that they comply with regulatory requirements.

The Chartered Accountants Association of India has to take a cue from the approaches of both Reserve Bank of India and Sebi, and ensure their members qualify the final accounts and the corporates do not fudge the accounts in any manner to camouflage information on bad debts, tax dues, PF dues, et al.

Dr T V Gopalakrishnan
(This letter appeared in Business Standard dt 15/3/16)

Practical Solution to Contain Formation of Non- Performing Advances in Banks

Respected Honourable PM Sir,

Sub:  Practical Solution to Contain Formation of Non- Performing Advances in Banks 

At the outset I request you to kindly excuse me in addressing a letter direct to you, as I have been approaching the authorities out of love for the nation to introduce a built in mechanism to contain the formation / prevention of Non performing loans in banks and the response has been lukewarm despite the menace of bad loans destroying the banks and weakening the economy affecting all its stake holders including the Government, the tax payers and depositors of banks.

In this context, I enclose a book “Management of Non Performing Advances” authored by me based on the Ph d thesis that I did and  well appreciated by the examiners for its lucid style of writing and containing a practical solution to the festering menace of NPAs faced by the banks and suffered by the economy perennially. The Examiner has even commented that some of the suggestions of the Researcher will have policy implications and if implemented will give far reaching good results both to the public sector banks as well as to the economy. It is also added that the simple statistical model suggested by the researcher can be given a fair trial. The book carries a Foreword from Dr C Rangarajan former Governor of RBI and  former Chairman Prime Ministers Economic Advisory Council to the former PM..  

I have been very closely following you and your strenuous efforts to take the economy forward with a wonderful vision for the nation to excel in the world with peace, welfare, safety, security and solid economic progress. The strong growth of the economy is dependent on the strong financial system of which the banking system is the nerve centre and its inherent weakness cannot and should not be allowed to come in the way of your mission and great vision. That the banking system is strong but not healthy is a fact and it suffers from certain man made deficiencies which can and need to be set right in the interest of the economy and its people. In this regard, I am tempted to quote Mr Atal Bihari Vajpayee our former Prime Minister “We cannot allow peoples faith in economic liberalization to be shaken by those who do business with an ethical deficit.”           

I send this book not for my personal recognition or some benefit .The efforts put on in bringing out a lasting solution to the problems arising out of Non performing advances should not go waste. I strongly feel that had the solution suggested in 2004 been implemented, the banking system now would have been strong and the credit discipline which is the essence of successful banking and expected of both the banks and the borrowers would have been well stabilized by now.

 Sir, I would like to end this letter with a quote from Swami Vivekananda that “Things do not grow better. They remain as they are; and we grow better by the changes we make in them”. It is high time that banks and borrowers change for the better with appropriate action from the powers that be.

With respects and regards,

Yours faithfully,

A well wisher

Dr T V Gopalakrishnan

Good Economics, Good Politics all Depend on Good Governance

The write up good economics is good politics ( The Hindu dt 10/3/16) no doubt reads well and highlights the plus and minus of the budget presented by the Finance Minister for the year 2016-17. The intentions to improve the agricultural and rural sector in particular, which  remained  neglected for decades,  with lots of incentives and inputs if acted upon seriously than  to remain a mere rhetoric  with  upcoming elections in mind  can prove to be a very good politics with good economics. The number of Institutions and agencies involved in these sectors are very many and the confusion prevailing at the grass root levels as to whom to approach and how to derive the benefits of various schemes will continue to play spoilsport and the intended beneficiaries will again be deprived of the facilities and incentives. The National Bank for Agriculture and Rural development needs to be strengthened to play an effective role to coordinate the activities of Financial Institutions and Agencies of various Governments to ensure that the efforts of the Central Government to enhance the agricultural and rural output optimally and without loss of time and money. The need to put in Technology in all the segments of production, storage, transportation and marketing is paramount to rescue the farmers from exploitation, wastage and help distribution of the intended incentives and inputs to all deserving cases. The Insurance of farmers and their products play a vital role and the Government’s supervision in this area can definitely give a morale boost .Recognition of farmer’s problems has been visible in this budget and the readiness of the Government to help them by all means sends a strong signal which should definitely help enhance the income of the farmers and rural people if not double their income in five years. 

Dr T V Gopalakrishnan       

Reform Banks, Give Autonomy

 Reform Banks, Give Autonomy 

Apropos the editorial, When the mighty fall, Reform should arise (ET dated 9/3/16), no doubt, the banking system needs to implement reforms, structurally and functionally, to improve its  Governance Standards, finances and operations and provide support to the economy and not to those who systematically loot and kill the economy in all respects.

That camouflaged bad debts equal to or more than the disclosed bad debts can't be hidden anymore because of the recurring damages they bring to the economy. The Vijay Mallya’s case is only the tip of the Iceberg. 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. Both RBI and banks do not have the autonomy and the Government’s reluctance to keep away from RBI and banks brings only destruction to the financial system and the mighty and their cronies get the money they want. Reforms in fact should start with administration, legal system and Governance standards with more of deeds than words and gradually taken to financial institutions and markets.

Dr T V Gopalakrishnan

( This appeared in Economic Times dt 10/3/16)

Strengthen the Banks

Apropos "Lessons from Gyan Sangam" (March 7), there cannot be two opinions on the need for strong banks in the backdrop of the growing size of India's economy and its international recognition in terms offoreign direct investment flows, non-resident Indians' contribution, its own investments, exports and imports.

This was strongly recommended by the Narasimham Committee in its reports in 1991 and 1998 that got shelved due to bad politics and bad economics. No doubt, forced mergers of banks have caused bad experiences as a result of mixing different cultures and involving huge capital expenditure from the taxpayers' kitty. But they should not come in the way of merging major public sector banks, which are comparatively healthy and strong, instead of combining the weak with strong ones. Besides consolidation of major banks, there is adequate scope for bringing in specialised banks to cater to the growing demands of various segments like agriculture, small and medium enterprises, housing and other retail sectors. The new set of banks licensed by the Reserve Bank of India - payment banks and small banks - can supplement the stronger and specialised banks with emphasis on savings, investments and speedy and safe payments, particularly with a heavy concentration of fast expanding retail segments under Make in India, Start-Up and Digital India. It is time for a new approach to banking. The bad debts crippling the economy must be transferred within a cut-off date to a new escrow account backed by government guarantee.

Dr T V Gopalakrsihnan

(This appeared in Business Standard dated 8/3/07).

Taxi aggregators

The taxi aggregators appear to be organised cheats and do not seem to care the administration and violate the safety needs. Some of them relate to 1) valuables are not safe in the vehicles. By Chance, an item is left out , this is gone for ever. There is no alert system and drivers play honey traps to snatch the valuables. The loss of Phones in the cabs is very common and even if it is immediately brought to drivers' or the Service providers' notice, both refuse to recover and hand over the same to the rightful owners. Even contacting them is often rendered difficult. The way they respond gives an impression that they have a negative credibility on the policing system. They say give a complaint to police just like that. 2) Sharing a taxi with unknown fellows and totally strangers pose a safety threat to passengers particularly old people and ladies. 3) Some of the cab drivers collect toll Charges both ways when they are engaged to go to air port in bangalore where one needs to pay toll charges when coming to City from airport.. There is no way of reporting grievances to any one and even if it is reported nothing happens. 4) They have no standard rates. They fix their own peak hours and charge three to four times of the normal rates. Early morning and evening hours they cannot be relied upon. They have drivers who seem to be goons and their details are not displayed in cabs. Their antecedents do not appear to have been verified by the taxi aggregators. When something is lost both drivers and the taxi aggregators wash off their hands. 

Dr T V Gopalakrishnan

Last straw on Camel's Back

 Last straw on the Camel's back

The approach of the Government to  optimise revenue collection in varied forms including the cess and surcharge as a regular feature and  as a permanent fixture apart from service tax very widely spread (ET Dt 4/3/2016).affects badly the common masses more  than the high net worth individuals and this trend if not curbed early the chances are that the BJP will lose its grip among the middle class in particular. The savings of the community in banks have been on the decline as per the RBI's reports and with the Income tax rates unchanged for the middle class other than the tax relief announced at Rs 5000 instead of Rs 2000 earlier, the middle class gets squeezed perhaps beyond the imagination of the bureaucratic and political minds who frame the policies. Over and above all these, the proposed tax on EPF withdrawals is the last straw on the camel's back  disturbing the equilibrium of the middle class people's finances and mental peace.

T V Gopalakrishnan     

Find own Resources to recapitalise the State owned banks

Find own resources to recapitalize the  state owned banks banks.

Apropos your editorial How to recapitalize State Owned banks ( Et dated 2/3/16) which are steep in the red because of heavy accumulation of bad debts due to banks’ own lack of professionalism and economic slow down, it would be better and ideal to find own resources to recapitalize and prevent formation of bad debts in future. What the banks have to do is to freeze the bad debts and separate them from the balance sheets as on a date fixed and keep them under a Special designated escrow accounts and resort to recovery measures with all available legal remedies as of today and the proposed bankruptcy laws as and when passed. Government should provide only the guarantee equivalent to the bad assets which can be adjusted against the recoveries. To prevent future formation of bad debts and their liquidation, the banks should not depend on any of its stakeholders and manage to contain the bad debts formation with stringent credit discipline in the conduct of its advances portfolio and ensuring equally enforceable discipline among the borrowers by educating them on the need to manage the borrowed funds with utmost caution and generate adequate cash flows to service the debts and its repayments regularly. In the event of deviation from the envisaged discipline on the part of the banks and the borrowers, the RBI as a regulator should impose penalty on both and maintain a fund separately to liquidate the NPAs  at periodical intervals. The stakeholders of PSBs particularly the Government, the tax payers, the depositors and others should be permanently spared in rescuing the banks from bad debts because of their own non performance and that of the borrowers. The NPA menace calls for a lasting self correcting mechanism without depending on others.  

Dr T V Gopalakrishnan
( This letter appeared in ET dated 3/3/2016)