WEEKEND LIGHTER: IMPERISHABLE WEALTH
WEEKEND LIGHTER: IMPERISHABLE WEALTH
(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
I
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
II
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
III
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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