Weekend Lighter: How to save Indian banks
WEEKEND LIGHTER*: How to Save Indian Banks
(April 22/23, 2017, No.16/2017)
Section III: Society
Warrier’s Blog updates:
Cumulative page-views: 93, 577(since inception)
Number of posts: 2,777 (since 2008)
Pageviews last month: 8,364
Topper: The Blog post “RBI Pension Revision: No Man, No Problem”
retained its top position in terms of page-views for 3 weeks from April 1, 2017
and moved out allowing “RBI’s missing links” to replace it.
M G Warrier
www.warriersblog.com
I
Cover Story
How to save Indian banks*
This
refers to your editorial “Rebooting PSBs” (Business Line, April 21) which could
form the basis for further discussion on financial sector reforms. Unfortunately
the Financial Sector Legislative Reforms Commission (FSLRC) for reasons of
motivated mandate and functional constraints due to wrong guidance from finance
ministry, instead of dealing with ‘financial sector reforms’, went on a tangent
and produced a report aimed at breaking the regulatory apparatus in the
financial sector and disturbing the public debt management arrangement which
was in working condition.
The
damage was minimized by the presence of Dr Raghuram Rajan during 2013-16.
The
institutional structure, management and the entire working of the four
subsectors in the Indian Financial System, namely Public Sector Banks, Private
Sector Banks, Non-Banking Financial Companies and Cooperatives are overdue for
a revamp and overhaul. After the nationalization of banks, we have been trying
measures in isolation whenever problems surfaced. Reasons for such a sporadic
approach varied from political to ‘fear’ of consequences.
Governance
issues like inadequacies in credit appraisal and risk management, dual
regulation, political and bureaucratic (read finance ministry) interference and
adequacy of compensation to recruit and retain talent and professionalization
of boards with sufficiently long tenure of membership flagged in the editorial
need immediate attention at the highest level. Quickly attending to these
issues may save the Indian Financial System from a breakdown which appears
imminent, otherwise.
M
G Warrier, Mumbai
*Submitted version of letter published in The Hindu Business Line,
April 22, 2017
II
Recent responses
MPC proceedings
This
refers to Abhijit Lele’s story “Patra
pushed for rate hike at RBI meet” (Business Standard, April 21). While
the text of the report is a balanced one the caption read with the note “But
minutes of the meeting show executive director voting for status quo” gives an
impression that Michael Patra
has done something unusual or ‘acted under duress’, which is not the case.
Patra
concludes his statement asunder:
“To
sum up, I believe that a pre-emptive 25 basis points increase in the policy
rate now will point us better at the target of 4 per cent to which the
Committee has committed explicitly. It will also obviate the need for
back-loaded policy action later when inflation is unacceptably high and
entrenched. On balance, however, I vote for holding the policy rate unchanged
in this bi-monthly meeting and await a few more readings of incoming data so
that remaining transitory factors have passed and a clearer assessment of
domestic and global macroeconomic conditions emerges.”
Since
the present Monetary Policy Committee became functional, it meets for two days
and RBI Governor announces the Bimonthly Monetary policy based on the
recommendation of the MPC on the second day. The deliberations of MPC are
transparent to the extent that views expressed by each member including
Governor are made public.
I
think, voting by a member and the views expressed by him at the meeting should
be seen separately, as voting could be influenced by the strength of argument put
forth by other members also. MPC should be given some more time to evolve its
own procedures and practices without affecting the free and fair expression of
views by each member during the meetings.
M G Warrier, Mumbai
Public sector autonomy
Apropos
“Shine Jacob’s story “Railways get serious about making money” (Business
Standard, April 19), first a word of gratitude to Business Standard for
publishing in great detail a public sector initiative to manage own resources
to optimum advantage. If Indian Railways succeed in generating non-tariff
revenue at the scales projected, Railways will become a role model in making
productive deployment of ‘hidden’ resources.
One
can expect that the pessimism of the ‘Industry Expert’ quoted at the end of the
story, which reads “It is not just about rolling out a brilliant policy – its
implementation in a proper manner should also be ensured” will be blown out of
proportion in the coming days with added spices about possibilities of
‘corruption’ in implementation. But, that is a virus which has to be destroyed
by transparency in execution of policies.
Beyond
their ownership and commitment to the roles assigned to them by statutes,
public sector organizations have to be out of the clutches of control by
government and political leadership. They should have functional autonomy in
managing their affairs within the mandated contours and should enjoy a level
playing field with their similarly placed organizations in private sector. Reversely, private sector
organizations which handle public resources (e g. deposits mobilized by banks)
should have the same responsibility to society as is expected from their public
sector counterparts.
Simultaneously
with improving revenue from tariff and non-tariff sources, Indian Railways need
to ensure that the services across sectors (Rajdhani to suburban local ) meet
the minimum expectations of passengers.
M
G Warrier, Mumbai
Online comments posted at moneylife.in
M G Warrier
Gradually, both Government owned and private sector should come
under uniform regulatory requirements and have a level playing field for
conducting banking business. After all, both raise resources from the same
source namely deposits from the public. Post nationalisation, somehow an
impression was created that private sector banks are "commercial"
banks and only the "nationalised" banks were responsible for ensuring
flow of credit for priority sectors and reaching out to rural and semi-urban
areas with banking services. Several concessions like depositing shortfall in
targeted lending in Rural Infrastructure Development Fund maintained by Nabard
strengthened this impression. The differentiation affected public sector banks
adversely in all areas including HR management.
III
Leisure
http://www.thehindu.com/opinion/op-ed/redefining-citizenship/article18081165.ece
Redefining citizenship: Chintan Chandrachud
Excerpts:
“First,
the court has increasingly used the regrettable, caste-based taxonomy of
‘purity’ and ‘pollution’ in its decisions. For example, in 2013, it endorsed
the decision of the Patna High Court observing that candidates with criminal
records pollute the electoral process, affect the sanctity of elections and
taint democracy. The court’s language is symptomatic of its conception of its
own role — as a sentinel of democracy seeking to ‘disinfect’ the electoral
process. This is more than a poor choice of words. The court has the power to
frame debate and influence the language of argument in ways that perhaps no
other institution does.
Second,
the court’s recent decisions have meant that whether the right to vote is a constitutional
right or merely a statutory privilege is still a matter of contestation.
Article 326 of the Constitution provides for universal adult suffrage, but does
not specifically mention the right to vote. Rights that are not explicitly set
out in the Constitution, such as the right to privacy, have routinely been
impliedly read into the text. But the court has refused to categorically
recognise the right to vote as an inalienable constitutional right, frequently
holding that it is a privilege that can be taken away as easily as it is
granted.
It
is disconcerting that the court still does not clearly acknowledge a
constitutional right to vote. Participation in the electoral process is often
seen as a gateway right, or a ‘right of rights’. Our only response to citizens
whose candidate of choice has not been elected is to point towards their right
to exercise that choice in the first place. The absence of a constitutional
right to vote has real consequences, for it makes it easier to impose wide
restrictions on who can exercise that right, and the circumstances in which
they may do so.
Closely
tied to this refusal to clearly recognise a constitutional right to vote is the
court’s endorsement of the embargo on the voting rights of prisoners. Blanket
prohibitions on voting are the surest way of alienating a political community.
The embargo is particularly draconian, for all prisoners, regardless of the
seriousness of their offences or the length of their sentences, are denied the
vote. Moreover, prisoners awaiting trial are also denied this ‘privilege’.
It
is one thing for the court to introduce transparency-promoting measures with a
view to allowing change to take place organically, but quite another to change
the rules of the game to match its conception of the ideal electoral system.
The right to vote and the right to contest elections are fundamental markers of
citizenship in a constitutional democracy. Incrementally yet decisively, the
court is changing what it means to be a citizen of this country. It may soon
take another step in that perilous direction.”
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