Greed . Inefficiency and Banks

Greed has overtaken the market and this reflects in the pricing of products and services. Charging for withdrawals through ATMs by banks adds one more component apart from greed ie pricing for their inefficiency in managing their portfolios particularly Advances and other assets like establishments. NPAs and expenditures to accommodate various obligations like the recent episode observed in the UCO bank to sponsor the Government projects at bank's cost are features commonly observed in almost all banks and they seldom get examined by any. Depositors are forced to bear the brunt and they have no means to fight the atrocities being committed by banks day in and day out. The depositors are paid a pittance of 4% on their SB balances and banks meet several expenditures unconnected with banks business to accommodate many. Auditors , regulators seldom examine the expenditures of banks and fix them for their irregularities. It is time depositors unite and fight for their genuine rights as banks are run with their funds and a run on banks is protected with the depositors' and tax payers' money. Charging for withdrawals through ATMs has no justification what so ever and it only shows banks' indifference and callousness to understand the depositors' plight and their own survival without depositors' support.  

Dr.T.V.Gopalakrishnan

Make PSUs contribute

The time is right for the Government to offer loss-making PSUs on lease to professionals from both domestic and international markets and make them contribute to the economy in a big way. Taxpayers’ money cannot be allowed to be drained through these white elephants and the investments made in the PSUs have to show returns in terms of employment, production, revenues and growth in GDP. The Government has the backing of the masses and it is committed to good governance and bringing in efficiency in the management of the economy.

TV Gopalakrishnan

(This letter appeared in BL dated 12/11/14).  

Food supply and Money supply are two different aspects

 Economic Growth also helps inflation to come down is simply ignored by the RBI. The rigidity with which the rate of interest is linked to inflation and that too CPI index is irrational (although highly desirable) and it is akin to chasing a mirage in the present economic scenario. Besides, RBI by sticking on its policy rates only to inflation fails to comply with its statutory requirements ( well spelt out in the preamble of the RBI Act, 1934) of ensuring growth with price stability. Why RBI does not want to  recognise that indian economy is way behind advanced economies to adhere to only inflation targeting through its monetary policy is a mystery .Indian economy has its own uniqueness wherein, the banks have social responsibilities , the government has a huge burden to lift the masses from poverty through various schemes injecting money, the economy itself has fundamental issues of fiscal deficit thanks to its heavy dependence on imports of certain essential items like oil, coal etc to run the industries, requiring heavy dose of bank finance . Besides, the presence of informal economy also upsets all the official moves to have a smooth run for the economy.  Unless RBI takes a holistic view of things which was all along the practice followed by it since its inception in 1935 and making the  banking system support the growth with provision of adequate credit at reasonable cost, the growth may not take place.  RBI's stance and support of the economy keeping   a sound and healthy banking system has been well acknowledged and well recognised all over the world.It has withstood all imaginable pressures with ease and dignity and supported the Government keeping its restricted autonomy in tact. The economy cannot be expected to do better  without money. As credit is the life blood of commerce and in India only the banking system can provide this vital element RBI has a key role in ensuring that the transmission of credit at reasonable cost is made available at appropriate time.This has to be made known to RBI by veteran journalists through their write ups is something unfortunate.The article carries lot of message and still RBI wants to be adamant on its undiplomatic and dear monetary policy, its supremacy may be at risk.RBI has never failed and it  should not fail in its responsibilities to the nation and its masses.Economic Growth with price Stability can take care of both.Shortage of food supplies in the market cannot be tackled with containment of Money supply is what RBI has to realise and proceed.

Dr.T.V.Gopalakrishnan

(Modified version of this is published as comment in Times of India in response to an article by Prem Shankar Jha on 20th Oct,2014). 

Find Solution

This refers to the editorial, “Taking cover” (October 15).The issue of unhedged exposure of corporates and others comes up every now and then without arriving at any tangible solution.

The RBI has been flagging this for years now, but corporates, particularly those having exports, gamble on this as they perhaps prefer to keep the forex exposure unhedged to take advantage of the rupee depreciation. Further, the accounting system in vogue does not insist on the need to make transparent the unhedged exposure and the attendant risks.

The major reason for many to avoid hedging may be due to lack of expert knowledge and guidance. As rightly suggested, the Government in consultation with SEBI and the RBI has to take concrete measures to take care of this and make it transparent in the published balance sheet. Banks also need to develop the required expertise to guide their customers in the matter.

TV Gopalakrishnan

(This letter appeared in Business Line dated 16/10/14),

RBI is becoming a non entity.

The way the Government wants to fix the inflation target by the Government, RBI will be a non entity after a few years. The proposed Monetary policy Committee will have some Government officials or some parliamentarians and Governor will only be a figurehead. With the implementation of other recommendations of the FSLRC, RBI's presence or absence in the economy will not make much of difference. Politicians will always have the Final word is what is being proved now.So far, the RBI Governors somehow withstood the pressures of the Govrnment and did not yield much. Even Dr Subbarao the former Governor had to fight a fierce battle to maintain RBI's autonomy and this stance has been getting a final go bye.

Dr.T.V.Gopalakrishnan

(This comment has been given in ET in response to a news report The Parliament will decide the Inflation Target for RBI that appeared on 8/10/2014).

Is RBI pragmatic in it's thinking?

 The measures announced by the RBI in its recent policy review are a clear indication that it is not convinced of the measures on the part of the government to contain food inflation and the inflation will continue to remain high till March 2016 without giving any scope for adjustment of policy rates. While the arguments put forward by the RBI sound academically reasonable and acceptable perhaps but how long it can ignore its other statutory responsibility of supporting the economic growth is an issue to be sorted out by the Government. Unfortunately the understanding between the Government and RBI which had historically,  had a mutually reinforcing influence in deciding the fiscal and monetary policies had been becoming the thing of the past does not augur well for the economy is what is to be understood both by the RBI and the Government. The other regulatory steps particularly the reduction of the HTM category of banks’ investments and bringing in Urban Cooperative banks under LAF are welcome to strengthen the market. However, the haste with which the RBI plans to issue licenses to have Payment and Small banks in the field is not very convincing taking into consideration the not so encouraging performance of Local Area banks, Regional Rural banks, some of the old generation small banks and cooperative banks unless RBI wants one more head ache to add on to its Financial Stability Issues. Whether more Non Performing Banks are also  desirable along with ever increasing Non Performing Assets of banks is what RBI has to seriously consider.

T.V.Gopalakrishna