Loot of banks -the best way is through NPAS

.This loot and the loot through write off of farm loans at the instance of the Government has have been going on for decades without being questioned by any. Of late this topic has been drawing the attention as banks are not able to write off as they did in the past due to erosion of profit from Investments in speculative markets. The real estate boom witnessed in the early 2000s has also helped the banks to recover some of the loans from middle class and small borrowers.The Corporate borrowers know the art of hoodwinking and they get the support of the powers that matter. The solution for this is to forcefully recover the dues by sale of real estate and other assets. The asset reconstruction companies are the comfortable outlet  for bankers to loot and camouflage the loot. Even if they recover or write offs the future loot cannot be prevented unless and until a self liquidating mechanism is introduced to prevent formation of NPAS and write of of NPAS involving the banks and borrowers through a statistical model with approved researched results and that too without any scope for manipulation through human intervention and influence. SEBI has also to ensure that Corporates  do not manipulate the accounts and what ever they report about their bank deals should be reflecting in banks books and the rating of borrowers by banks need to reflect in Corporate Balance sheets. There are ways to contain and prevent NPAS but the will is absent as the lot is easy. Unfortunately the stakeholders of banks particulars the depositors.The other stake holders of the economy viz the Government, the tax payers do not also care as they have not seriously evaluated the accrual of loss to the economy occuring on a recurring basis.

T.V.Gopalakrishnan

Where is regulation?

Regulation  in and of  banks has failed is clear from the fact that banks recklessly grant loans, spend liberally on establishment and legal matters to maintain the bad loans in the books, effect write offs without exploring all possibilities to recover the loans from sureties, guarantors and sale of properties. Besides, the ease of doing transactions at banks has been vanishing as the costs are increasing day by day without being questioned or resisted even. The charges levied on ATM transactions and convenience charges a latest entry for booking air tickets using plastic cards are nothing but the reflection of inefficiency in reducing the cost of operations and cost of funds thanks to high levels of NPLs and heavy expenditures under various heads without any control. The regulation is a failure and in the name of regulation resorting to levying exorbitant charges on normal services despite the reduction expected in the costs thanks to invasion of technology is nothing but a paradoxical situation.

Dr.T.V.Gopalakrishnan

(This comment appeared in BL dated2/1/15 against the article When the regulatory apparatus falls flat)

Time to act!

A well summarized write up on the economy with a solid conclusion and suggestion to the Government to act. Fortunately for the Government, some of the macro economic factors are in favor and it cannot miss the opportunity to encash them and take the economy forward by putting into practice minimum Government and maximum Governance. Imports of gold if banned will improve the trade deficit and fiscal deficit can be easily managed if the gold available in the system is brought to banks books and made productive. The sources of black money VIZ real estate deals. transactions in commodities like gold, silver and other high value commodities, imports, exports, remittances both inward and outward can be easily tracked through appropriate policy and improved Governance standards with accountability, incentives and punishment. Inflation needs close monitoring and supply side and cost push factors need to be addressed to keep it at an acceptable level. Time to take action and go forward.

Dr.T.V.Gopalakrishnan

(This comment appeared in Business Line dated 1/1/2015 in response to the editorial on Happy New Year)

Account for the lapses in PSBs

The problem of NPAs continues to be underestimated without any serious thinking on disciplining the banks and the borrowers is what is highlighted in the editorial.The banks balance sheets are window dressed to such an extent that no one can really figure out what is the real strength of our banking system. Ever greening of NPAs is an established practice and restructuring of  bad loans is nothing but an official version of ever greening with the blessings of even RBI.The write off of loans resorted to and the addition of NPAs on a recurring basis has been unfortunately absorbed by the accretion of deposits and addition to capital subscription by the Government using tax payers money.Though the death knell of banks is already sounded with ever increasing of bad loans,the tendency to ignore the problem both by the Government and RBI as the depositors and other stake holders bear the brunt cannot go on for ever as public awareness is on the increase and they will start questioning openly and the authorities will be constrained to account for the lapses.

Dr.T.V.Gopalakrishnan

(This  appeared in  Business line dated 26/12/2014)

How long can we ignore the agricultural sector?

Agriculture continues to be a neglected sector is what the editorial highlights quoting the survey report of the National sample Survey Organization.Why it is so is what the Central Government, State Governments, RBI and NABARD should introspect and come out with a detailed report what went wrong and how the policies went wrong ? NABARD's role need to be reviewed as it does not appear to have played its role effectively as envisaged in the development of agriculture and rural sector.Given an opportunity agriculturists run away from this profession as the income generated from agriculture after undergoing all hassles and suffering is not adequate enough to sustain themselves in these days of high inflation, high input costs, nonavailability of laborers, high interest costs, inadequate and timely credit, inadequate insurance coverage and dependability on the monsoon,etc. All these issues have been under discussion for decades  and resources spent on conducting surveys , meetings seminars, conferences , setting up of institutions like RRBs, strengthening of Cooperatives, nationalization of banks, reorganization of Boards of banks,setting up of NABARD exclusively to develop agriculture have not yielded any worthwhile results only smacks of poor implementation of actions envisaged and lack of commitment and sincerity in solving the problems of farming Community who provide the food and comforts for all to survive and make merry.It is  a sad state of affairs and lot of expectations are there from the new Government under Mr Modi and a lot needs to be done perhaps from the scratch to provide relief to farmers and make agriculture one of the attractive professions and a dependable main pillar of this economy.    

Dr.T.V.Gopalakrishnan

(This comment is given in Business Standard dated 23rd December against the Editorial )

Non affordability and high prices affect the realty sector demand

The demand cannot be expected to pick up as there are no first time buyers because of non affordability and a big chunk of black money involved which the masses do not have and they have no avenues to make also. The demand is normally from those who have various means of incomes and are from well employed segments having access to liberal loans and sources of black money. Since of late the fear of tracking black money is in circulation, many avoid investing in houses. Besides, the return on investments is also unattractive and the prospects of getting out of the investments through sales are bleak. The taxation policies and the hassles involved in acquiring properties also discourage people from investment. The old theory of renting a house is more wise and finding more acceptance and practical these days. Fools invest in houses and wise people stay is becoming a reality once again.

Dr.T.V.Gopalakrishnan

(this comment appeared in Business line dated 23rd December against the article demand pick-up evades realty) 

Why hesitate to discipline the bad borrowers and the erring banks

Disciplining the borrowers and erring bankers who encourage and support knowingly defaulting borrowers is what has been emphasized with a practical suggestion to contain the formation of NPAS in banks and save the depositors , taxpayers and employees from the rotting banking system in the book Management of Non Performing advances published by the Indian Institute of Banking and Fiance way back in 2004. Had the suggestion been accepted and implemented, the economy and all its stakeholders particularly the Government would have benefited a lot and the issue of NPAs would not have been a threat. Vested interests somehow kept aside the suggestion and now through Dr Rajan some of the solutions indicated in the book find acceptance. Even now it is not too late as the suggestion given in the book in the form of statistical model if implemented with the aid of IT can be a permanent and reliable remedy to contain NPAs in banks. Dr.T.V.Gopalakrishnan (This comment has appeared in Business Line dated 23rd December against the article Reserve Bank comes down hard on evasive borrowers )