(March 26/27, 2016, No. 13/2016)
Weekend Lighter is posted every Saturday @mgwarrier.blogspot.in
Feel free to mail your views on this edition of WL to mgwarrier@gmail.com
Opening remarks
Snakes and ladders
This refers to Ajay shah’s piece “In need of action” (Business Standard, Snakes & Ladders, March 21, 2016). The writer has cogently argued the case for reforms in the banking sector and a change in approach on the part of RBI to the current agonies of banks arising from ‘stressed assets’. It is tough for anyone to rescue public sector banks (PSBs) from the shameful situation they have been dragged into by government policies or to defend the high level of bad loans they have accumulated. Since nationalisation, political leadership has been meddling with the working of PSBs, using the ‘assumed’ ownership rights, with immunity. The miraculous survival of PSBs including SBI (State Bank of India) can be attributed to the net interest margins (NIMs) banks in India were privileged to enjoy continuously. During the current ‘Rajan era’, even at times of near ‘cartelisation’, RBI (Reserve Bank of India) has been merciful when it comes to passing on the benefits of lower resource cost by reducing lending rates.
 Judging the performance of banks with reference to the bad loans accumulated or the support they need from the owners, by itself, is not rational. Comparison is always with private sector banks. To get a clear picture, one has to remember that PSBs’ share in banking business is three times that of private sector banks. What prevents the private sector banks from increasing their share in business is a riddle that policy-makers and regulators should solve, at least at this stage, before succumbing to the pressure to again ‘privatise’ PSBs. Among institutionalised businesses in India, banks stand alone as one group which have been, by and large, able to meet regulatory norms and payment obligations thanks to the professionalism with which RBI has been carrying out the regulatory and supervisory responsibilities.
 It may be recalled that banks were nationalised because of the refusal of the private sector to plough back deposits mobilised from small savers to sectors that benefited inclusive economic development. The residual and new private sector banks continue to be selective in providing credit; the social responsibility of the banking system was largely met by PSBs. The corporates, which did not want to follow the banking discipline, used their influence to get credit from PSBs. All these, together, resulted in differential treatment for public and private sector banks. Given a level playing field and semblance of functional autonomy, the future of Indian banking is safe in the hands of PSBs.
This is not an argument against the need for reforms brought out in the article. This is a plea to analysts to have a look at the performance of corporates which owe large amounts to banks and the role of regulatory agencies in ensuring financial discipline and compliance of provisions of various laws in the conduct of their business.
 MG Warrier, Mumbai
Recent responses
March 20, 2016
Revamp cooperatives
This refers to the article “Why microfinance is fading out?” (Business Line, March 19). Between village money lenders and the mainstream institutional system represented by commercial banks and cooperative banks(which were brought under the purview of the Banking Regulation Act in 1966), we had small village cooperatives (primary agricultural credit societies and multi-purpose cooperatives) which catered to a variety of needs of the rural and farm sectors. Since early 1980’s, perhaps from the time when National Bank for Agriculture and Rural Development (NABARD) was established, the primary cooperatives became a neglected lot.
Non-Governmental Organisations which could get funding from various sources started organising Self-Help-Groups (SHGs) which were financed by commercial banks. This affected the  business potential of primary cooperatives and many of them became sick or extinct. In the Indian situation, where commercial banking system cannot reach, the best suited institutional system is cooperatives. In smaller countries like Bangladesh, where banking itself was yet to penetrate to rural areas, with limited scope for village-level activities, initially the SHG model might have succeeded. In India, economic development itself is at different stages in different geographical areas and the role of state governments in supporting rural development and farm sector is of a higher level. Developing cooperative financial intermediation at village level would be of advantage in such a situation.
M G Warrier, Mumbai


The Hindu, FAITH Column


Imperishable wealth

Saint Arunagirinatha, in his Kandar Alankaram, calls out to those who set great store by material possessions, said R. Narayanan in a discourse. Of what use are these possessions, he asks.
Fate determines what we enjoy in life and fate is not going to allow us to enjoy our wealth forever. And is there any guarantee that such wealth will never pass out of our hands? We may bury it to keep it safe from thieves. But will this wealth follow us when we depart from this world? Can we have access to it once we die? Why then do people hanker after wealth, the saint asks.
If one has wealth, one should share it, says Thiruvalluvar. There are those who are so much in love with their millions that they cannot bring themselves to spend it. Nor can they contemplate giving it to others. Such people are to be considered poor, says the Thirukkural.
The wealth of a man who does not share it with others is like a tree that grows in the heart of the village but bears poisonous fruits. If a man spends his life accumulating wealth, with disregard to the more important aspects of life like love for fellow human beings, it is certain that his wealth is going to be enjoyed by others, says the Thirukkural.
The man who hoards wealth without either putting it to good use or giving to those in need will have a miserable life in his next birth.
Arunagirinatha, by talking of the need to remain unattached to wealth, is reminding us that the only imperishable wealth is bhakti towards Lord Subrahmanya. Worshipping the One whose flag bears the emblem of a rooster is the only means to be liberated from worldly life.


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