WEEKEND LIGHTER: Save Public Sector Banks

(July 2&9, 2016, No. 27&28/2016)*
Weekend Lighter is posted every Saturday @mgwarrier.blogspot.in
Feel free to mail your views on this edition of WL to mgwarrier@gmail.com
*There was no issue of WL dated July 2, 2016 as M G Warrier was hospitalised from July 1 to 6, 2016.
Opening Remarks
Save PSBs*
Dr Charan Singh’s article “Banks should perform or be privatised” (The Hindu Business Line, July 8), hopefully, will open a debate over the future course India’s banking sector can take to meet the emerging challenges posed by recent developments within India and across the world. The conclusion that PSBs should serve as benchmarks for the banking sector, the emphasis that they should work at their efficient best and the need for PSBs to establish very high standards will not be disputed even by enemies of public sector. PSBs can perform and continue in business, fulfilling the expectations or perish. Transfer of inefficiency to private ownership is not an acceptable option.
But, the history and evolution of Indian banking sector during the last 4 decades do not take one to the solution suggested, namely privatisation. With the exception of State Bank of India, Indian banking sector was under private ownership for decades after independence. The need to nationalise was felt in the context of the refusal of private sector to cater to the development needs of the country including taking banking service to semi-urban and rural areas and meeting the credit needs of small borrowers. Such responsibilities are still met by PSBs is evident from the fact that post-nationalisation, the residual and new private sector banks together could, till date, manage a market share of less than 30 per cent in the country’s banking business.
Long term and enduring solution to the present problems of PSBs would lie in a slew of measures, many of which were tried sporadically as quick-fix or first aid ones from time to time. The high powered committee (HPC) suggested in the article should be a representative body of experts, stakeholders including GOI and RBI and employees’ interests. While private sector participation should not be discouraged, at present stage of development, the public sector identity may have to be preserved to ensure the continued performance of priority and social sectors responsibilities by banking sector. The HPC should, inter alia look at:
i)                   HR issues including recruitment, career progression and remuneration packages in PSBs vis a vis their successful counterparts.
ii)                Immediate need to ensure efficiency and autonomy in management at top level.
iii)              Possibility of lateral mobility of middle and top level executives across public sector and private sector banks and supervisory and regulatory bodies in the financial sector. Ideally, as early as possible, a Financial Sector Service comparable with other civil services should evolve.
iv)              Merger of loss-making or redundant bank branches with branches of other banks.
v)                Revisiting Lead Bank Scheme to ensure that social responsibilities are not neglected.
vi)              Enforcing discipline in lending to big borrowers.
vii)           Transfer of business to other PSBs or private sector banks in geographical areas where a particular bank is not successful.
M G Warrier, Mumbai
*An edited version of this letter published in HBL today (July 9, 2016)
Random thoughts on healthcare
I will be 72 on August 9, 2016. I was hospitalised for the first time for 6 days from July1, 2016. It turned out to be Kidney stone related complaints and was discharged after some medication. Diagnosis and procedures at Fortis, Mulund, Mumbai were excellent. Since early 1960’s, I have had fairly good number of hospital visits when relatives and friends were hospitalised. From the crowded Medical College Hospital, Calicut to Jaslok, Mumbai. The longest continuous time I spent with a bystander was when a friend’s wife’s brain operation lasted for 13 hours.
The absence of a ‘Family Doctor’, inadequate communication within the family and among friends about ailments, arrangements for quick support arrangements when one gets hospitalised, some cost-related issues when one gets hospitalised, better arrangements for receiving visitors and transparency in doctor-patient communication will be touched in my future postings here. I have already covered some healthcare and support issues in my earlier articles, some of which have been included in my 2014 book “Banking, Reforms & Corruption: Development Issues in 21st Century India”.
Recent responses
Real wages*
This refers to the article “Why we need to talk about a basic income” (The Hindu, June 30). This is a well researched, interesting article on the need for a debate on basic income keeping in view the livelihood needs of those who are not able to inherit assets or earn enough to meet current expenditure and save for periods of unemployment, by getting employed. It is comforting to see that several significant aspects of ‘living wages’ has been touched in this article by someone who can articulate the concerns before GOI and the political leadership responsible for evolving policy on such matters.
At this stage of development, there is a felt need to bring some correlation between the pay, perks and incentives available in the private sector and the comparable public sector organizations and workers in the unorganised sector.
The cause for several unethical practices including corruption in India can be traced to the anomalous costs, prices, wages and income structure. When the first Indian President’s first month’s salary was fixed at a consolidated amount of Rs10,000/- the underlying thought was a ratio of 1:10 between the lowest and highest remuneration across sectors in the country. At that time, there were not many executives in the private sector also, who were drawing a higher salary than the President.
The argument is not that such a ratio should remain static. But, someone should look at the ethical inconsistency in a small Indian company paying two of its ‘employees’ every year a remuneration of Rs50 crore or above, when hundreds of executives in public and private sector who do much more work get paid much less than two percent of Rs50 crore.
Similarly, income of workers who are taken on contract or hired by ‘service providers’ (another name for contractors!) has to be made commensurate with the work they do and their social security needs should be factored in in their wages. The concept of minimum wage should be revisited in this context.
A realistic prices, wages and income policy will unburden the government budgets to a very great extent.
M G Warrier, Mumbai
*Letter published in The Hindu. July 1, 2016  
Hidden wealth
Apropos “FM: Black money info will not be shared with other agencies” (Business Standard, June 29), one is tempted to suggest that a reverse assurance that there will not be punitive measures from other enforcement agencies based on the information furnished under Income Declaration Scheme(IDS) 2016 would have given more comfort. This is because there could be legal hurdles in preventing sharing of information, in certain situations.
IDS is about black money. There has to be a conscious effort to plough back into the mainstream the concealed assets hoarded in various pockets. They lie idle in the form of land, buildings, hard cash, gold and jewellery and other various forms of moveable and immoveable assets with individuals and organisations. Unless these assets are also mapped and their appreciation/depreciation watched on an annual basis, assessment of income based on potential taxpayers’ declarations will be an incomplete exercise. An audit of such assets under supervision of organisations of repute and professional integrity like CAG and RBI may help in bringing transparency in arriving at the net-worth of country’s domestic resources.
M G Warrier, Mumbai
IDS and assets base^
This refers to the report “Ministry to come up with more clarifications on black money window, says Jaitley” (The Hindu Business Line, June 29). It is intriguing that clarity is yet to emerge on the Income Declaration Scheme (IDS) which has a pre-decided life of 3 months from June 1, 2016 and meetings with assesses and stakeholders on the scheme’s features are still on. When ‘this is the last opportunity to declare unassessed income’, the launch of the scheme should have succeeded such negotiations and ensuring clarity of features.
IDS is about black money. There has to be a conscious effort to plough back into the mainstream the concealed assets hoarded in various pockets. They lie idle in the form of land, buildings, hard cash, gold and jewellery and other various forms of moveable and immoveable assets with individuals and organisations. Unless these assets are also mapped and their appreciation/depreciation watched on an annual basis, assessment of income based on potential taxpayers’ declarations will be an incomplete exercise. An audit of such assets under supervision of organisations of repute and professional integrity like CAG and RBI may help in bringing transparency in arriving at the net-worth of country’s domestic resources.
M G Warrier, Mumbai
^Submitted version
Online comment @moneylife.in
The fallacy in the Economic Survey 2016 observation about RBI holding 32 per cent capital has been pointed out earlier. Any reader who can reconcile the position taken in the Economic Survey 2016 (RBI is having 32 per cent capital) and the real position reported in the RBI Annual Report 2014-15 (Percentage of RBI’s capital and reserves to assets base has come down from 11.9 in 2009 to 8.4 in 2015) may kindly come out with facts and figures.
Long back, RBI had taken a conscious decision to augment its reserves (Contingency Reserves + Assets Development Reserves) to a level of 12 per cent of the Bank’s balance sheet total. The Bank almost managed to almost touch this level in 2009. The following table indicates the progressive deterioration in the reserves position, since then:
Balances in Contingency Fund (CF) and Asset Development Fund (ADF)(Crore)
June 30
As%to total assets








Source: RBI Annual Reports

RBI’s capital since inception has remained at Rs 5 crore. There is no clarity about the components reckoned for computing the RBI’s capital and capital-like reserves at 32 per cent of balance sheet total. The Survey obviously has depended on the computation of figures by some external agency(the graph given in the Survey is attributed to BIS) instead of quoting from RBI’s Annual Reports.

To meet the internal capital expenditure and make investments in its subsidiaries and associate institutions, the Reserve Bank had created a separate ADR in 1997-98 with the aim of reaching one per cent of the Reserve Bank’s total assets within the overall indicative target of 12 per cent of the total assets set for CF and ADF taken together, accepted by the Bank earlier.
Obviously, the practice of transferring the entire ‘surplus income’ to government when the reserves position of the central bank shows a continuous declining trend(as a percentage of total assets) in the context of the present growth rate of Bank’s asset size, needs a review. Considering the size of RBI’s balance sheet, and remembering that the Bank’s share capital (5 crore) has not been augmented since inception, the reserves position needs to be raised to healthier levels. It is in this context and in view of the internal and external pressures on its income generating capabilities in recent times, as also the nature of shocks RBI has to absorb from time to time, GOI should support the central bank to augment its reserves at least to the level of 12 per cent of total assets which was accepted by the Bank decades ago.
The accounts presented in the RBI Annual Report 2014-15 (Chapter XI-Introductory) shows that the balance sheet size of the Reserve Bank increased by 10.09 per cent for the year ended June 30, 2015 primarily due to increase in foreign currency assets on the asset side which rose by 21.50 per cent and increase in notes in circulation and deposits which rose by 9.57 per cent and 37.60 per cent respectively on the liability side. While gross income for the year 2014-15 increased sharply by 22.66 per cent, the total expenditure increased by 11.92 per cent. The year ended with an overall surplus of `65,896 crore as against `52,679 crore in the previous year, representing an increase of 25.09 per cent. The entire surplus has been passed on to central government. This is based on a review of reserves position made by an internal panel headed by one of the Bank’s directors Mr Y H Malegam which concluded in 2014 that the level of reserves then available was adequate to meet the needs for the subsequent three years.
June 28, 2016
Talking tough
Going by his year of birth (1939), Subramanian (do not know whether he was Swamy then) would have had his post-SSLC education circa 1953-58. Those days in South India, ‘intelligent’ students got admitted to science stream aspiring to become engineers or doctors, ‘less intelligent’ tried streams like Mathematics or Fine Arts and the residual ones went for subjects like Economics, Philosophy and so on. After passing out, those who were brilliant among Economics/Philosophy B As, tried their luck at Civil Service Examinations. Some got employed in government or companies like Tatas. Those who failed to make their marks anywhere, went for further studies and after post-graduation tried for teaching jobs. Rich among them went out of India for ‘further’ studies or research. Later in life, those with oral communication skills became lawyers after procuring necessary qualification or joined politics where educational background was not looked into.
M G Warrier, Mumbai

(May God give us sense of ability to follow these guidelines...)
Put away your phone in their presence
Pay attention to what they are saying
Accept their opinions
Engage in their conversations
Look at them with respect
Always praise them
Share good news with them
Avoid sharing bad news with them
Speak well of their friends and loved ones to them
Keep in remembrance the good things they did
If they repeat a story, listen like it's the first time they tell it
Don't bring up painful memories from the past
Avoid side conversations in their presence
Sit respectfully around them
Don't belittle/criticize their opinions and thoughts
Avoid cutting them off when they speak
Respect their age
Avoid hitting/disciplining their grandchildren around them
Accept their advice and direction
Give them the power of leadership when they are present
Avoid raising your voice at them
Avoid walking in front or ahead of them
Avoid eating before them, when they are not eating
Avoid glaring at them
Fill them with pride even when they don't think they deserve it
Avoid putting your feet up in front of them or sitting with your back to them
Don't speak ill of them to the point where others speak ill of them too
Keep them in your prayers whenever possible
Avoid seeming bored or tired of them in their presence
Avoid laughing at their faults/mistakes
Do a task before they ask you to
Continuously visit them
Choose your words carefully when speaking with them
Call them by names they like
Make  them your priority above anything
 Parents are treasure in this world

You are lucky if you have your parents still living
You will realize their real value more after their demise
 Please do not forget that you too will become old
 Think how you want to be treated by your children, then
*Source: Email from Raju-anthony Devendran


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