What awaits UPA GOVT

Very rightly warned the UPA.Corruption and mis governance would never be tolerated is what the results of Karnataka election Indicated. UPA under any stretch of imagination can conclude that People have accepted the ideology of cash and carry and a scam a day of THE UPA GOVT. Dr Manmohan Singh failed to live up to his own standards of honesty and to the expectations of the masses is the ground reality and people are waiting for an opportunity to punish. The UPA is insensitive to the feelings and concerns of the people expressed in different ways and it is waiting for the next election to fool the masses and again coming back to power by cheap gimmicks and popular schemes like food security which has been denied to the people even after sixty five years of independence.

This comment is in response to an article BJPs defeat in Karnatka is an ominous portent of what awaits the UPA appeared in ET)

Old age miseries

Law cannot help to bring solace to the old couple. It can at best ensure that the couple are not beaten up and they are physically safe. But why the youngsters behave like this and how the old people can be saved from mental agony and physical harassment for want of proper food and dieting are to be looked into not only by authorities but also by the society and social reformers.Parents getting deserted by their own children have been very common these days and their social security is a major concern. The Children otherwise very intelligent and earn much more than what their parents have earned do not have the realisation, wisdom, knowledge and intelligence to understand that their own old age is not that far off.These sorts of events are happening in every nook and corner of the country and the basic cause is people seeking material pleasure giving up the Country's ancient heritage, culture, civilisation, spiritual knowledge and their own moral responsibilities to own families and society. This is what is called allowing degeneration of values, ethics and principles which prevents achieving a harmonious family and society life.The greed for money has become insatiable and the the Governance system in the Country has further accentuated it through corruption, lack of accountability to the society and the nation, non adherence to the laws of the nation, contempt for values in having a dignified life etc.Time some serious thought is given by academicians, administrators, social reformers, politicians who care for values in public life to see that society does not degenerate further., Such stories disturb the peace of mind and should never occur to any family.   Dr.T.V.Gopalakrishnan This is my response to Give us death over son's an article appeared in TOI dated 11/5/13.  

Corruption and Independent Police Commission

This article is well balanced and offers  a suggestion worth implementing at the earliest to save the economy and its people from ruining because of very  high magnitude of corruption at very high levels involving politicians and the bureaucrats.An independent police Commission if set up on par with Election commission can definitely minimise if not eliminate corruption. The selection of officials to man such Independent police Commission also should be spelt out and the Supreme Court should have some say in the matter.In todays atmosphere the only hope of the people and the country is Supreme Court and more of such institutions if developed and made functioning independently,  the economy will reach its pinnacle with in a very short span to the surprise of the whole world. Will it happen? Do the politicians have the mindset to go in for such good things? 

Dr.T.V.Gopalakrishnan

(This is in response to the Article India needs a statutory, independent Police Commission that appeared in ET  and Times of India dated 5/5/13)

Human Resources, the Greatest Risk the Banking system faces

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The banking has undergone a sea change over a period in terms of form, complexion, technology size, volume of business and products expansion. The expectation from banking has  been on the increase as is always the case in a developing economy where integration with the  global economy is a reality and the function of intermediation is becoming more complex and challenging. The banking systems' balance sheet size is increasing and off balance sheet volume is becoming mind boggling compared to the past  trend. Inclusive growth being the accepted policy of the Government and financial inclusion is the only way out to ensure that, the responsibility of banking system is becoming  something  of a very high order in the sense that on one side, it has to grow to meet the challenges of  attaining standards of international excellence and on the other, it has to cater to the needs of the growing masses consisting of illiterate, half literate and poverty stricken, unemployed, underemployed, mobile population  who can be easily influenced by cheap politics often resorted to by our politicians who strongly propagate for periodical write off of loans etc.. Implementation of KYC norms which is becoming an inevitable necessity to eliminate many undesirable, antisocial and illegal activities in the larger interests of the society and adoption of fast changing technology as per the times, the  banking system's task is really daunting. While the economy grows the banking system enjoys good deposits, quality advances, investment and profit and the moment economy slows down, its first impact is first  felt  with growing non performing loans, restructuring of loans, poor deposits, advances, investments and low profit.

In this background the risks that banking system faces are manifold and more than anything, the biggest risk is from the angle of human resources. Business Risks will  emanate from human resources and as on today, it does not seem to have been adequately factored into and leave alone understood. Man power planning does not seem to have been given the importance it deserves in any of these bank groups. Recruitment, training, up gradation of skills and knowledge development, placement etc to meet the demands of present day banking illustrated in the above paragraph have not been figuring in the scheme of things and the risks arising from the management of human resources are not manageable  with ease and the  repercussions will be very serious. As it is, the absence of the Bankers Training College of the Reserve Bank of India  is very much visible in the working of banks these days and general ignorance of banking at operational and customer service delivery level has been very much felt. Monetary policy transmission mechanism through banking has been not as effective as the Reserve Bank desires and this has been perhaps due to the disconnect observed in understanding of the Reserve Bank's policy expectations at all levels of banking  as was the case earlier when the Banker's training College was functioning. A few top level executives of banks understand RBI's requirements which, however, do not get percolated down. The top management has its own commercial considerations and business targets, compelling it to keep RBI's policy requirements within the broad framework of its regulatory requirements and at the same time carry on with decisions best suited to its competence to expand business in a most competitive environment. The ability and knowledge of the bank's  human resources will only  command respect in the market and decide its reputation and growth prospects in future.

 The knowledge gap between the top management and down the line staff  will expose the banks to both business risk and regulatory risk. One example is interest rate fixation by the banks.  Banks announce a base rate and have their own Bench Mark Prime Lending Rate, Prime Lending Rate and  final rates charged to borrowers. The  implications of all these rates are not known at operational level staff and the borrowers are also not being made known or educated about the rates charged to them. Borrowers expectations from banks are high, banks expectations from the Reserve banks are high and Reserve banks expectations from banks borrowers  and markets are also high when it frames its policy rates. Ultimately,  when the human resources at banks' level work without having any knowledge of Government's economic and fiscal policies, Reserve Bank's monetary policies and its regulatory and supervisory requirements, and their own top management's philosophy it may lead to a major business risk particularly in the area of credit and asset management. This knowledge gap risk is very vital and needs to be filled up. Knowledge development particularly at least at middle level and top level management including all Board Members is very essential to understand the rationale behind management decisions on deposit, advances and investment, their mix and dynamics.

Up gradation of skills:

The skill development has to be based on banks portfolio mix in assets, liabilities and off balance sheet items. Though assets and liabilities consist of only very few items, the dynamics involved in the composition of assets and liabilities are getting complicated day by day. The human resources who manage these need both an overall knowledge of banks balance sheet items and specialised knowledge about the liabilities, assets and their composition and dynamics.  Placement of staff based on their aptitude, attitude, skill and knowledge  is very crucial in the coming days .

 The major liability of any bank is deposits and deposits are not easy to come these days because of tough competition, limited products, persistence of inflation and availability of alternate products in the products. Here the human resources have to be really talented not only in marketing of the products but also in attracting and retaining the customers. Knowledge of staff in understanding KYC requirements, monitoring of KYC through operations, providing of hassle free services to deposit customers, educating the customers about some basics of banking, handling of literate and illiterate customers etc require special attention of the management in selecting human resources and placing them. Since this is the first point of contact of customers, staff handling them have to be courteous, knowledgeable, helpful and well behaved. Banks' image is built up from here and this assumes lot of importance to minimise reputation risk. Banks will have to cater to different classes of customers for deposit mobilisation and here the risks that banks carry are unpredictable. All staff cannot handle all classes of customers is a ground reality and placement of staff to deal with different classes of customers is very sensitive and crucial.    

Similarly, advances which is also the bread and butter of banks business like deposits, need an expert staff who are good at understanding credit risks and the borrowers' competence, requirements, problems etc. The menace of NPAs can be minimised to a great extent, provided the bank staff and the borrowers interact well , understand each other's problems and conduct the operations in the borrowers' accounts to the satisfaction of borrowers and banks as well. Such a situation seldom happens in many a banks and this is due to the reluctance of bank staff to educate the borrowers, understand the borrowers and their genuine problems and upgrade their own knowledge and skills. Like this each area of bank's business particularly, foreign exchange, rural credit, derivatives etc require special skills and expertise. The human resources and technology used in these areas of business have to have perfect alignment on a progressive basis. Most of the banks have problems in these areas as technology and human resources do not move together. This happens as technology moves faster and human resources are left behind. The HR planning  on recruitment, training and placement to suit the technology and business changes is very critical.

Staff compensation is another area where the problem is going to be very complicated. Expectations are very high because of market conditions, where as the capacity to pay  in terms of profit  is limited. Retention of talented staff will be a problem and sudden and mass exit of staff will put the bank in a great business risk. This needs to be factored into in the HR policies of the bank. The attrition risk will be very high in future and finding replacement with high level of efficiency, expertise and knowledge will be at great risk. Loyalty of staff and institutions' response to staff's requirements have been on the decline have to be admitted and need a workable solution to ensure  continuity of relationship and mutual respect. Career progression is important and merit cannot be ignored and at the same time, white elephants have to be managed without affecting the organisations' efficiency and image. These are all sensitive issues and they need a continuous attention to keep the morale high.

Human capital which  deserves equal if not more importance than capital adequacy ratio in banks has  of late been getting ignored and banks will have to pay a huge price if they continue to ignore this vital aspect any more. The base of any dynamic business like banking is the strength of its human resources and they need to be very well  blended with the fast moving technology to ensure against all business risks both known and unknown in these days of competing environment domestically and internationally.

Dr.T.V.Gopalakrishnan,

(A  slightly modified version of this article has appeared in the book on Risk Management, The New Accelerator, authored by Yerram Raju and Narsimharao Venuturpalle,and published by Konark publishers  Pvt Ltd New Delhi).

      

          

     

Bharati Airtel and Ground level service.

Bharati Airtel has to improve and strengthen its ground level services to customers to project a better image. The staff at ground level and call centers waste. time, money energy and customers have to run from pillar to post to get something done. The efficiency and economic management and over all Governance are found missing affecting the image, revenue earning capacity of the Company. It may sound a bit absurd but base level service is the foundation and the stepping stone to move forward to by any company. Improvement in service will also help Customers to save their time money,energy and irritation.

Dr.T.V.Gopalakrishnan
( This comment appeared in TOI )

Laws and Financial fraud

Financial Fraud cannot be avoided by having stringent laws and punishment. But, they can be minimised or eliminated gradually,if the existing laws are implemented, Regulation and supervision are made effective and Financial Inclusion and Financial Literacy are made a reality and people have access to some well regulated system which can take care of the Financial needs of the people.Chits are in fact an accepted way of investment by people and chits as such are not bad provided they are carried out not by cheats. Ponzi Schemes are unethical and worst form of derivative business without having a grip either on the circulation of money or the number of persons forming part of the scheme. Since Chit funds are very popular and have all safety principles if conducted as per the rules and regulations and with proper supervision by authorities having accountability and are susceptible to the laws of the land and by institutions established in terms of some acts and are traceable by all means. The financial inclusion can be made a reality by allowing some of the banks like RRBs, small private Sector banks to have chit fund schemes.Most of the Private sector banks in the south particularly in Kerala were basically Chit Fund operators and they were all doing well.Even the Govt run Chit Fund in Kerala has been performing well.Laws cannot improve the system,but proper approach to the problem and aspirations of the people can tackle the issue.Of course unethical persons and unethical business models like Ponzi Schemes have to be eliminated or rooted out completely from the society.

Dr.T.V.Gopalakrishnan
This comment in response to the article"It is naive to believe there is any law to end financial fraud appeared in ET )

Is the observation from RBI Dy governor OK?

This statement of Dy Governor from RBI is uncalled for as it is tantamount to admitting failure of RBI in the eyes of public and State Govt Authorities.Chit funds come under the purview of State Govts in terms of Chit Funds Act 1982 and RBI has absolutely no role in sponsoring, running, regulating or supervising Chit funds. The greed of politicians and some unscrupulous businessmen exploit the sentiments, illiteracy and poverty of the masses and drag people to chit funds.Financial Inclusion has not taken off the way it has been planned and desired is a fact and for that the banks and the attitude of human resources manning the banks have to be blamed. Even when well off and educated customers are badly treated by bank officials is an accepted reality, the question of entertaining poor and illiterate masses by such bank officials cannot arise. The failure of Governance system in the country in general and by the state govt in particular has caused the Saradha Scam and accusing the entire formal system otherwise well regulated and supervised by the regular has not come out of conviction but to curry favour from somewhere. This sort of irresponsible statements need to be nipped in the bud itself. It can even erode the confidence in the formal financial system which is not in good taste.

Dr.T.V.Gopalakrishnan

( Comment appeared in Business standard dated2/5/13