No More Loot - Yes Bank Resolution Mechanism.

I watch with very keen interest your programme and the much needed campaign "No More Loot". The loot of Depositors, HONEST  tax payers, good borrowers, and gullible public  has been going on for decades in the  Financial System in general and  in the Banking System in particular  and this has been acknowledged by the authorities without any serious remedial action to stop the menace as there has been no mass movement or serious threat for reasons known to all with the result  the masses  eternally suffer, dishonest borrowers thrive and the economy remain stagnant with all resources at its command without much of use.    As an honest citizen and Professional Central bank Official I came out with a self Corrective mechanism to contain the problem of this open  and easy loot of banks  based on my Research in the years between 1998-2002  and well approved by the Examiners the Thesis brought out in the year 2004 and the Suggestion therein which was brought to the notice of then  FM, Governor of RBI and the public through seminars and debates in various forums involving Chairmen of Banks, Academicians, and  Researchers in the field of banking without any worthwhile result.   The Book 'Management of Non Performing Advances' brought out by Indian Institute of banking & Finance in the year 2004 based on the Ph D thesis had a Foreword from none other than by Dr C Rangarajan then Chairman Twelfth Finance Commission and former Governor of the Reserve Bank of India. The book inter-alia contained a very simple and highly practicable solution to make banks Viable and Efficient through prevention of entry of bad borrowers and liquidation of bad loans without penalising the depositors and innocent tax payers was conveniently ignored by the powers that be and the loot of Banks has been made a routine and regular habit killing the economy and keeping the masses to remain in perpetual poverty.  I bring this to your notice not for any personal gain but to intensify your campaign against the open loot and eradicate this from our banking system if possible so that the Financial  system which includes NBFCs and Large Corporates would become strong and help the Economy to grow faster and reach the target of $ 5 trillion as envisaged by our Honourable PM and make his dream  Vasudevaka Kudumbam a reality in the near future.  Kindly excuse me  for bringing this to your notice as I as a Senior Citizen and interested in the welfare of people thought the Republic TV can bring justice and order in the economy with the support of masses and right conduct in the matter of public affairs in general and public Finance in particular.       Dr TVG Krishnan 19/03/20 ( This letter was addressed to Republic TV in response to its Campaign No More Loot held in the context of Resolution brought in to save the YES bank from Collapse)

Find the resources from within the Country through improved administration.

The $5trillion economy aimed at and to be achieved by the year 2025 is a huge task and the wherewithal to find the financial resources from within and outside the country to take the economy from its  unusually slow pace and put it on fast track poses a major challenge by any standards based on the unimpressive fiscal resources of the Government, dwindling national gross savings and the lendable resources of our entire financial system which is unfortunately saddled with bad loans and lack of avenues to plug the loopholes of loot in innovative ways. No right thinking person can deny that the country has no potential in terms of talent and all sorts of resources in terms of Land, power, labour, natural resources and capital both in monetary and non monetary form needed to support the growth but unfortunately the readiness to exploit the resources through reforms and meaningful and result oriented Governance standards has been found to be elusive. Rhetoric pronouncements are very encouraging but they have to be pursued vigorously and implemented in letter and spirit to bear the fruits and bring the intended benefits for all to enjoy the fruits.         

The Fiscal deficit which is kept with great difficulty under control at around 3.3 % of GDP can definitely be stretched a little more to justify productive investments with tight control on extravaganza by any chance and enhance the physical infrastructure. The recent announcement to develop the infrastructure by $ 102 trillion is a welcome step and definitely very bold and commendable provided the plans get implemented fast with the Cooperation of the State governments and active involvement and participation by the private investors. This is the ideal time to fix the problems in raising the resources through incentivised savings, monetising the resources like gold, waste lands, and plugging of all possible loopholes now available to evade all sorts of taxes including GST , Income Tax, stamp duties, through creative accounting practices of all kinds practised in all types of transactions in and around the country, widening and deepening the capital market particularly the debt market through retail marketing of bonds including the masala bonds issued abroad and strengthening the take out Financing which has not taken off for  valid reasons. The informal economy continues to grow strong in innovative ways with and without the support of the authorities paving ways for tax evasion and without accounting for the computation of GDP, employment and being amenable for any Governance.

Huge number of farm lands and clubs, shops and establishments with and without licences, religious trusts, temples, churches, mosques and all forms of charities and NGOs in and around the country are engaged in different economic activities and services but to what extent they contribute to the economy and account for their activities in terms of production of goods and services, tax payments, generation of employment etc, cannot be satisfactorily  assessed is a fact leaving a huge hole in the economy’s over all data compilation and leakage of income. Such a list is very long and unending but huge money is involved cannot be disputed. This needs a very serious attention and follow up action to raise resources of the Government at this crucial juncture.

Banking system is the life blood of commerce and also the nerve centre to provide the life support system to the entire economy and the need to have an efficient system free of corruption, loot and to act as a harbinger of ups and downs in the economy through capturing vital information on the movement of funds, end use of funds, and generation of wealth in the economy among institutions and individuals in monetary terms is paramount at this crucial juncture when the Government is placed in a catch 22 Situation to put the economy in fast track and augment the resources from within the economy but scattered all around without any trace. As bankers’ bank and Regulator of the entire financial system along with SEBI, PFRDA and IRDA, the Reserve Bank of India as an Internationally Recognised Central Bank of the country for its professionalism has a major role to play with adequate autonomy but with full accountability to the parliament ensuring that the Financial system delivers with conviction and full transparency on the sound performance of the Industrial, agricultural and services Sector. Monetisation of non-monetary resources like Gold, Silver, idle assets scattered in different forms is the need of the hour and identifying nonperforming Assets in whatever form they may be and converting them into performing assets through conduct of surveys, guidance, support with a missionary zeal need focused attention and meaningful result oriented action from the Reserve Bank.

Real Estate and all related deals like purchase, sale, lease, rentals etc continue to generate black money in different parts of the Country and the only way to eliminate black deals is to tie them through bank accounts. Without the involvement of banks, no real estate transaction of any kind irrespective of the amount involved can take place should become a law and the necessary administrative mechanism should be in place to ensure that no transaction gets escaped from banks. There should be proper tie up of Registrars, banks and parties involved in transactions. Initially the tie up can be made obligatory in Metropolitan and Urban Centres insisting on Aadhar and Pan Numbers. Information Technology can be put into optimum use. Stamp Duties and other related expenditures, tax etc should reflect separately in the deals so that evasion of taxes and generation of black money can be to a great extent minimised though not totally eliminated at least to start with.

Lots of unauthorised shops and business establishments operate throughout the country with and without the aid of formal and informal financial system and they are the main sources of black money, corruption, evasion of GST, exploitation of labourers and practitioners of all imaginable and unimaginable unethical ways of doing business. Likewise, lots of commercial activities do take place in large metropolitan and urban Centres even without any name boards or formal appeals but taking advantage of social networks and laxity of any regulatory or supervisory mechanism or even the feel of presence of authorities. They largely deal in cash and do not seem to be figuring in any sort of data on employment, income or services etc.

It is time now to involve people from all walks of life in the development of the Society and the Economy through enhanced and effective administration and transparent accountability for all types of economic and commercial activities for creation of wealth and its equitable distribution ensuring welfare for all. The Resources are available but needed to be tapped and accounted for.

Dr T V Gopalakrishnan                                      

What is wrong with the Economy

Very well presented. The whole problem with the economy is lack of administration and accountability by any Institution either in the private sector or public sector. The Government's Politics have been by and large a success story but the Economics pursued so far continue to be a failure. The measures like Demonetisation , GST, Make In India  and all other welfare measures are all well intended but unfortunately have not yielded the desired results at ground level despite the public extending whole hearted support for all the policies of the Government. This  should make every one associated with the policy making seriously ponder. Either the bureaucracy has failed or the politicians have lost control on administration resulting in the failure of implementation of various reforms so far attempted. The maximum  Governance promised  is literally absent and unfortunately no governance is practically present is what the the people regret. Corporates , Banks, NBFCs, Regulators and other Institutions engaged in production of physical goods and extending  all services and administering have become Non performers turning the Assets of the Country into non performing resulting in the so called slow down of the economy in terms of data generated apparently although the poverty and misery otherwise seen in the country is not that visible. Something is seriously wrong somewhere and this needs to be identified and fixed. Perhaps, a better administration making all Institutions accountable with drastically improved data collection and restoring the fast eroding values , ethics and  above all TRUST  in the Governance Standards can make wonders and definitely the economy can deliver. The Informal Economy is emerging strong fast is the reality and there should be persistent and solid measures to merge the informal economy with the formal economy. Half of  the problem gets solved instantly if this is done.

( This comment is given in response to Dr Yerram Raju's Article on the Economy that appeared in Money Life Magazene).

Budget 2020-21 Some random thoughts and suggestions

                                                         Budget 2020-21

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The budget 2020-21 assumes unusual importance both politically and economically to live up to the expectations of the people domestically and expert economists internationally ensuring fastest economic growth in the backdrop of slowdown of the economy witnessed all around the world. The challenge the Finance Minister faces is though thrilling and defiant but definitely manageable with the resources potential the economy has and the support the Government enjoys from the right thinking of vast majority of the masses aspiring for all round welfare. The only hurdle perhaps is the laxity in Governance, planning and execution of various reforms reflecting in the poor achievement of results from all well intended grand reforms and very bold policies of the Government Viz, Demonetisation, GST and well meaning welfare measures for the downtrodden who had been ignored for decades and now made part of the inclusive economic development obviously pursued since 2014.   

The so called economic Growth engine and the Compartments the engine supposed to pull need to be well aligned and placed on very strong laid parallel lines viz Fiscal Policy and Monetary Policy. While the broad economic policies should encompass the major reforms so far found to be elusive in the areas of land labour and legal with strong administrative and political will to get them implemented expeditiously, the fiscal policies and monetary policies need to be closely coordinated to strengthen the Financial System consisting of all broad Markets, Institutions and Instruments under meaningful and transparent regulatory and supervisory arrangement accountable to Parliament. The need for drastic, considerable and visible change in the major macro economic factors Viz GDP, Employment and Inflation is paramount to make the ambitious target of $ 5 Trillion for the Indian economy a reality not only to meet the political and economic aspirations of the Government but also to make the Country powerful and noticeable among the economic super powers of the world.

The ensuing budget is an opportunity to turn the tables and reset the Economy the way the Government desires, people aspire and the world wonder.  Some of the measures which can perhaps do the trick inter alia include the following.

The very fact that the slowdown of the economy though has not materially altered the living conditions of the people and the standards of living of large segments of the population by and large in reality particularly those coming under upper middle class , the data captured, presented officially and publicised widely do not reflect the ground reality and present an all round gloomy picture is a proof that the informal economy is more strong than the formal economy and the policies announced and pursued do not bring in the desired results officially. The economic Liberalisation of the1990s seem to have let lose the administration, regulation and supervision paving way for non accountability, freedom to indulge in activities unethical and erosion of values all around, leading to amassing of wealth at any cost by a few and getting away with all sorts of frauds, scams and unheard of atrocities in the society.

The Leakage of data on production, services and employment and the consequent leakage of income accruing to the Government kitty despite the best of technology in vogue needs to be officially and administratively recognised and this needs to be plugged by all possible means involving, Panchayats, Municipalities, Corporations, all administrative set ups, Financial Institutions, service providers and Social groups.  The failure of collection of data in the overall governance is beyond justification causing embarrassment to the Government and missing all the intended results under various major policy initiatives. No doubt, the task is easier said than done but it is time to think out of the box and fix the problem. Earlier it is done the better for the economic and social development. The National Registrar of Citizens as and when introduced, The Aadhar Cards, PAN Numbers, Bank accounts, real estate deals, employment Numbers, various pension, insurance provident funds, subsidy  claims from various segments, etc can provide some links and leads to generate the required data on employment, services and leakage of revenue to the Government. The very fact that Cities and Villages do not get both skilled and unskilled workers is an indication that there is no unemployment and poverty as such and the economic slowdown needs to be captured elsewhere perhaps by innovative statistical designs covering informal economy spread throughout the length and breadth of the Country and even having international connections. Contract labour concept, underemployment, low income, uncertainty of a steady income and low demand may perhaps have caused a bit to slow down the economy but is definitely not insurmountable and can be tackled through the budget.      

The Fiscal Policy to augment tax revenues through GST, Direct Taxes and other avenues like Railways, auctions of essential resources like coal, power and other energies needs to be thoroughly and constantly reviewed to ensure that whatever is envisaged is collected and it reaches the  Government Kitty without much of time gap and preferably instantly without pilferage. The leakage of revenues seems to be untraceable and this needs to be tracked. This again requires data integrity, expeditious flow and Checks and balances to ensure against pilferage and evasion through ingenious means. Unfortunately even Technology is largely understood to be abused and misused over and above the dishonesty and unethical practices already in vogue. This calls for the effective Governance Standards and transparent accountability. Knowingly or unknowingly, the erosion of values in the pursuit of making money by reducing costs and maximising profitability at the cost of investment, employment, production and distribution of national wealth seem to have set in, in  the society throwing to the winds the good objectives and long standing value additions to the economy through prudential means. Time has come to arrest this tendency and restore the values through the budgetary measures.

 The fear of tax should be literally absent among the people and tax compliance should be a pleasure. This is possible only through intelligent and proper mix of taxation policy with Technology and human resources capable of handling abnormal situations and circumstances gently and amicably. Make GST a very Good and Simple Tax attracting everyone to voluntarily comply. Let the taxpaying public satisfy themselves about the merits of GST, the way they are collected and spent for socio economic development of the Country.GST should gradually emerge as the Only Tax replacing all other levies over a period lessening the gap between the Rich and the Poor. Evasion of GST by any one should be a national Crime and it should be accordingly dealt with.  

The Income tax presently levied has to be totally revamped in such a way that it gets completely eliminated over a period with appropriate GST replacing it.  The fact that only about eight crores of the total population of about 135 crores come under Income Tax net simply cannot be true by any reckoning going by the number of cars, the number of flats, the number of people well employed and well placed both in the organised sector and unorganised sector as well, number of real estate deals in the country, number of people travelling abroad and domestically by flights in particular, number of people operating in the share markets, etc. This number alone should reflect on the inefficiency with which our tax collection machinery functions despite the best of Technology the Country has and is proud of being known internationally.  Further, the Security Transaction Tax needs to be made more dynamic and attractive to strengthen the entire Financial Market which should include among other things foreign exchange, derivative and commodity markets.STT being non inflationary in Character and its collection is instant and hassle free from administrative point of view, it should emerge as a an important tool to regulate and supervise the entire Financial market and make the market free from undue volatility, speculation, insider trading etc. Even the capital gains tax which creates some sort of anathema now can be well managed and collected through STT without incurring the wrath of the affected and without loss of revenue to the Government.   

Monetary Policy:

The Financial system which is the foundation to build up the economy strong and vibrant needs  better understanding and support through convincing and pragmatic policies by bringing in more of professionalism and expertise with added  vigilance, supervision , transparency and accountability in managing the system. The Infrastructure development, the industrial growth, the agricultural growth, storage, transportation and  marketing of products , their pricing and distribution to ensure their reach and supply in the length and vast breadth of the country containing inflation and all sorts of mal distribution through corrupt practices to manipulate prices through shortage and surpluses of seasonal agricultural products etc require strong administration, linkages with technology to capture essential data , flow of information to support with appropriate policy initiatives. The bureaucrats and professionals manning various institutions have to play a key role in ensuring that the monetary policies bring in the desired results minimising the time lag and benefiting all stake holders of the economy.

The Trust in Banking needs to be re-established at the earliest. The banks cannot and should not be the source of loot of tax payers’ and depositors’ money and this awareness among professionals, bureaucrats and politicians needs to be well incorporated in the budgetary provisions .The banks’ borrowers in particular and other stake holders of banks in general have a moral responsibility to safeguard the banks from collapse. The menace of Non-performing assets which is unfortunately man made is crippling both the banks and the economy as well, needs to be tackled with strong in built mechanism  to identify the problem at its incipient stage and liquidate it without passing on the loss to others under any circumstances. Definitely the ensuing budget can do that. The Whole Economy cannot be made to suffer perennially to satisfy the greed of some borrowers who collude with some powers that be to loot the banks and take away the credibility and the TRUST in the whole financial system. The triple balance sheets problem of Banks, NBFCs and Corporates caused because of bad borrowers’ behaviour needs to be arrested by all means and the Confidence in our Banking Systems’ ability to give a boost to the economy at this hour of crisis needs to be restored at the earliest.    

The Contribution of National Bank for Agriculture and Rural Development since its inception in 1982 needs to be evaluated in the context of continuous decline seen in Agricultural and rural segment in terms of agricultural  growth, income, employment, economic and social developments in the rural areas. Similarly the role of Urban Cooperative Banks in metropolitan and urban areas in the background of mushroom growth of commercial banks both in the public and private sector, spread of branches, ATMs, mobile banking etc needs to be studied in detail and suitable changes can be thought of to strengthen the Cooperative Banks in rural areas significantly. These banks can definitely be spared from Urban and metropolitan centres as they have a better role and responsibility elsewhere.  

Gold Bank.

The need of the hour is to find the financial resources to take the economy forward without any strain on the fiscal deficit anymore and without adding any tax burden on the people. The best and the most sensible way is to monetise the vast Gold reserves of the Country estimated to be around 20000 and odd tonnes  by setting up a Gold Bank under the auspices of the Reserve Bank. The Gold Bank would eventually turn out to be a goldmine of resources to meet all the economic developments envisaged and also would help to strengthen the foreign exchange market in particular among other broad objectives the Country has. The Country can turn out to be a Pioneer in the field in the process.      

The need to ensure fast and equitable growth of the economy is paramount and with all the needed resources the Country has, Why not we work for that and be the Super Economic Power of the world.  Time has come to recognise the Nations’ ability to achieve what has been missing us so far. I would like to conclude here with a quote by Robert Half “There is something that is much more than scarce, something rarer than ability. It is the ability to recognise ability.” Let this Budget exhibit to the whole world the ability of the Country to perform and excel.

Dr T V Gopalakrishnan
17/12/2019.

Poor Depositors taken for a ride

Very well said. Indian Financial System particularly the banking system is strong and stable because of the savings habit of the people and unfortunately the same people are being taken for a ride every now and then by fraudsters, bad borrowers, politicians, bureaucrats, lawyers , Chartered accountants, Management experts, regulators and supervisors and bankers. They do not get any sort of protection and on the contrary they are encouraged  rather forced directly or indirectly to keep their savings in banks, Chit fund Companies ,  Non Banking Financial Companies, Capital market etc through small   tax incentives, interest etc  and finally their savings are being misused and liberally abused by the authorities.without giving them any protection to pass on their savings . The trust and confidence the people have in banks get eroded very fast the way the banks fritter away their hard earned savings by allowing borrowers to misuse /divert and writing off of the loans without even the knowledge of the depositors. leave alone with their consent. The banks take the depositors for a ride and when they get liquidated or closed down because of erosion of deposits with bad debts,tax payers have to come their rescue again without their knowledge and save the banks.  The legal system helps the looters instead of the depositors and the DICGC provides an Insurance cover of Rs one lakh for the depositors and how and on what basis this pittance compensation has been fixed,is never questioned or analysed by any authority. The Premiums collected by the DICGC from banks and how they get accounted and what happens to the premium collections etc are never questioned or made transparent. The accountability and Governance standards are the worst one can think of in the economy and unless and until this is fixed,the 5 trillion economic growth will only remain in dream. The depositors and capital formation depend on the trust and Confidence of various institutions and the way the credibility of the Institutions efficacy and delivery of functions gets deteriorated every passing day,, this gets completely eroded and one can expect only  dooms day affecting all. 

(Comment in response to Mr Parikh's observation on the Depositors fate appeared in BS dated 10/10/2019). 

Econo-Reflexions: Dr Jalan Panel and Transfer of Reserves of RBI to ...

Econo-Reflexions: Dr Jalan Panel and Transfer of Reserves of RBI to ...: It appears from the press reports that prima facie  the recommendation of the Dr Jalan Committee on the transfer of RBI reserves to the Go...

Dr Jalan Panel and Transfer of Reserves of RBI to Government .

It appears from the press reports that prima facie  the recommendation of the Dr Jalan Committee on the transfer of RBI reserves to the Government is on expected lines in the sense that while the Government  is entitled to have its share of RBI surplus but the committee does not appear well convinced  of the way the Government intended and  demanded to get the entire Reserves transferred in one lot perhaps to cover up its failures on the economic front .No doubt the Government  as Owner of RBI and having its dominance on RBI by virtue of having all members of RBI Board appointed by the Government,  is entitled to have the surplus technically and politically, but  RBI being set up as an independent Organisation under a special statute, has certain unique role and responsibilities to deliver taking care of  predominantly the Government's interest, the economy and protect the nation from the national and international calamities arising out of political economic social and technological changes and dynamics. The Committees' recommendation though not fully disclosed with regard to the quantum of reserves to be transferred (as per the press reports version) is something very vital and its approach to transfer the reserves over a period of time needs to be underlined for its Reservations and perhaps Hesitations to transfer entire reserves in one lot. No Central bank worth its name and reputation can do this in the Sovereign Interest and in the interest of having a strong Financial system to support the growth of the economy based on the sound  economic policies  expected from a popular Government without much of damage to the entire fiscal position. The Committees' Recommendations should work as a major signal to the Government to leave alone RBI as an independent Organisation and to enjoy the surplus of income it makes prudentially in a manner without detrimental to the Financial  System Stability of the nation and without ignoring the need to have a  financially sound Central Bank to take the economy forward and strong and project inter alia  an image of the nation among other powerful nations and Independent Central Banks. 

Dr T V Gopalakrishnan

( Personal views and Comments given to Business Standard dated 18th July 2019)