WEEKEND LIGHTER: Viral on RBI's reserves

WEEKEND LIGHTER*: Viral on RBI’s reserves
(February 25/26, 2017, No.8/2017)
Feel free to mail your views on this edition of WL to mgwarrier@gmail.com
*Weekend Lighter is posted every Saturday @mgwarrier.blogspot.in
Section III:The woman who cut off her breasts

Cover Story
Viral on RBI’s reserves
RBI’s new Deputy Governor Dr Acharya has clarity of views on issues like dipping into Reserve Bank of India’s capital and reserves for funding GOI expenditure. Speaking on the sidelines of the IBA’s Technology Awards event last week, he suggested that using a part of the Reserve Bank reserves for recapitalising state-run banks may not be a good idea. Dr Acharya was responding to queries in the context of a suggestion mooted in the Economic Survey 2017 that the “Demonetization bonanza” that will result in an assumed surplus income in RBI balance sheet should be used for funding recapitalization of PSBs. He supported his observations against the proposal asunder:
“After an assessment of the money required for handling various stress scenarios in the banking system and the financial markets, the RBI transfers its surplus or the dividend, to the government. Once it transfers the money, it is for the government to use is the way it wants.
I generally don't like to tie the two (surplus payment and allocation of the money for a purpose) because then you are getting into a difficult situation where you want to dip into the RBI reserves because you want to do something else. Money is fungible and when you dip into RBI's balance sheet, you are dipping into it for fiscal expenditure. My sense is that we have to keep these things from an accounting perspective settled.”
It can be recalled that when the suggestion  mooted in the Economic Survey 2016, was brought to his notice, Raghuram Rajan had also opposed the idea.
M G Warrier
Recent responses
Management of stressed assets

RBI is lucky to get Dr Viral Acharya, who is comfortable with the identity "Poor man's Raghuram Rajan" as Deputy Governor at this point of time! Access his February 21, 2017 speech in Mumbai on management of stressed assets of Indian banks using the above link (@rbi.org.in)
 My response
This refers to RBI Deputy Governor’s speech on management of stressed assets of Indian banks (Report dated February 22) at the IBA event at Mumbai on February 21, 2017. It is comforting to find that the transparent approach of RBI in policy formulation evolved during the current decade is being further strengthened by Dr Acharya. The following observations carry a significant message for all stakeholders:
“Only a bank that  fears losing its deposit base or  incurring the wrath of its shareholders is likely to recognize losses in a timely manner. In many of our banks, such market  discipline is simply not present at the moment. In others, even if some such discipline is at work,  banker horizon is excessively short until end of  the CEO’s term.
Banks lobby for regulatory forbearance; perhaps some loan prospects have turned sour due to  bad luck, but beyond a point, concessions in recognizing losses just ends up being a strategy of  kicking the can down the road and leaving them as legacy assets for the next management team to deal with. The sectoral  concentration of losses substantially amplifies this  problem.”
The message: RBI is not comfortable with the ‘hit and run’ or ‘first aid’ approach to handling of problems faced by the financial system and a comprehensive overhaul touching the structure, resources and management is what would help it to come out of the current situation.
M G Warrier, Mumbai
Merge to grow
Apropos the report “SBI, 5 associates to merge from April 1” (HBL, February 24), the merger has not come a day too soon. Long back, when major private sector banks were nationalized or during the early 1990’s when globalization, liberalization and technological upgradation were accepted as part of growth strategy, rationalization of banking infrastructure should have been prioritized. Vested interests and narrow constituency considerations prevailed and things got delayed. Better late than never!
Now that a brave step has been taken to merge associate banks with State Bank of India, this initiative should be followed up with other measures which will improve the health of the financial system. These include:
(a)  Merger of weak public/private sector banks with strong banks either in the public or private sector which are interested in expanding business.
(b) Rationalise branch network by initiating enabling legislative measures for closure/merger of branches in areas where there are more than necessary number of branches for historical reasons.
(c)  Rationalise ATM network. Pooling of ATMs will save unnecessary maintenance expenditure including security costs.
M G Warrier, Mumbai
Nangeli: The woman who cut off her breasts!
Use the above link to read the story “The woman who cut off her breasts” by Manu S Pillai the author of award-winning book “The Ivory throne” published in the Hindu Magazine last week.
 Nangeli too was recast. When Nangeli offered her breasts on a plantain leaf to the Rajah’s men, she demanded not the right to cover her breasts, for she would not have cared about this ‘right’ that meant nothing in her day. Indeed, the mulakkaram had little to do with breasts other than the tenuous connection of nomenclature. It was a poll tax charged from low-caste communities, as well as other minorities. Capitation due from men was the talakkaram — head tax — and to distinguish female payees in a household, their tax was the mulakkaram — breast tax. The tax was not based on the size of the breast or its attractiveness, as Nangeli’s storytellers will claim, but was one standard rate charged from women as a certainly oppressive but very general tax.
When Nangeli stood up, squeezed to the extremes of poverty by a regressive tax system, it was a statement made in great anguish about the injustice of the social order itself. Her call was not to celebrate modesty and honour; it was a siren call against caste and the rotting feudalism that victimised those in its underbelly who could not challenge it. She was a heroine of all who were poor and weak, not the archetype of middle-class womanly honour she has today become. But they could not admit that Nangeli’s sacrifice was an ultimatum to the order, so they remodelled her as a virtuous goddess, one who sought to cover her breasts rather than one who issued a challenge to power. The spirit of her rebellion was buried in favour of its letter, and Nangeli reduced to the sum of her breasts.



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