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. .    

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 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

Financial Discipline and ethical deficit cannot go together.

Lasting Solution to NPAs

The only solution to Bad loans in banks is to Prevent Formation of bad loans than to find ways and means to recover the bad loans by spending more than the loans themselves involving tax payers’ money. Now what is identified as bad loans needs to be frozen and recovered by enforcing the existing laws of the land without any fear or favor and bringing in the Bankruptcy Code at the earliest. Loans turn bad because of several reasons and the major reason is the non professional approach of banks to favor the unqualified borrowers and encourage them ignoring the basic principles of lending and disciplining them from the day the loans are sanctioned. Instead of the suggested proposal to have a Stressed   Fund by the Ministry of Finance and the RBI,  is it not  ideal to have a Stressed Assets Prevention Fund by levying a penalty both from the erring banks and borrowers minimise generation of bad debts and liquidate the bad debts in case formed by the banks and the borrwers themselves without disturbing the other stakeholderrs?  This fund over a period would be more than the generation of bad loans and would be helpful to liquidate the bad loans without affecting the budgetary resources and depositors’ interests. The solution in the long run should be to discipline the borrowers, educate them to run the business on professional lines with ethics and make the banks also accountable and sensitive to the trusts and responsibilities vested in them. In this regard the practical solution suggested in one of the books Viz Management of Non Performing Loans in Public Sector banks  published by the Indian Institution of Banking and Finance way back in 2004 can bring in discipline among the borrowers and banks as well and find the required funds to liquidate the bad bebts without taxing the tax payers and depositors. The very acceptance of the solution eludes even the debatable stage despite having it been widely circulated among the top bankers , RBI and the Finance Ministry is a mystery.The bad debts accummulate due to ethical deficit among other things  is a fact which cannot be ignored any more  and the solution lies only in effective Governace.    

 Dr T V Gopalakrishnan        

What to expect from the Budget.

Tinkering approach to budget should go. The budget should contain policies to enhance the revenue collection without any leakage, raise funds from market through disinvestment without pricing greedily and incurring the displeasure of investors, ensure to reach the subsidies only to intended beneficiaries, contain fiscal deficit from taxes earned out of growth of the economy taking advantage of reduction in oil and gold prices, removing the flab observed in various segments, enhancing the production and supply without any deficiencies and leakages, improving the data collection on employment, poverty,, inflation, services, etc. The Over all governance standards have not improved is a fact and it needs to be fixed through social audit and public participation. The gap between what we are capable of achieving and what we really achieve needs to be identified and fixed appropriately through budget provisions.The budget should ensure to fix tax evaders by fradulent accounting practices pursued, insisting cash payments without issue of recipts mostly by professionals, brokers traders, business establishments .etc, People should have facility to report suspected tax evasion freely.There are mushroom growth of different types of clubs in and around major cities and they are nothing but illegal establishments to nurtuire black money generation and spread of wealth in a manner not acceptable to the society.  

Dr T V Gopalakrishnan

Have a humane approach to all.

It is really unfortunate that the Bureaucrats have stopped the updation of pension in RBI without any rationale The action on the part of bureaucrats  ignoring the agreement entered into between  the bank and employees association way back in 1990  with the full consent of the Government and also the spirit behind the decisions given by the Supreme Court in the matter of pension in respect of various cases,cannot stand justice and any ethics.  The right to live in dignity after serving an organisation for three or four decades and that too without depending on anybody for financial support by the organisation to provide pension  to its retired officials  is being denied by the Government without any rhyme or reason when the Government preaches welfare for all and equity and justice for all human beings. Taking away the benefits already enjoyed  without caring for the  ever increasing  cost of  living and the old age problems of  hapless senior citizens  has no justification what so ever.  Hope wiser counsel will prevail and pension updation is effected at the earliest. 

Dr T V Gopalakrishnan