WEEKEND LIGHTER: RBI ANNUAL REPORT 2016-17
WEEKEND
LIGHTER: RBI Annual Report 2016-17
(September
2/3, 2017)
Flash editorial: Height of financial illiteracy!
This is Blog Post No: 3105 @www.warriersblog.com
This is Blog Post No: 3105 @www.warriersblog.com
I
Flash editorial: Height of financial illeteracy
As one who has been proud of being a reader of
The Hindu for the last 54 years, today I feel ashamed of the kind of journalism
The Hindu is promoting.
This report has been published in the Business
Page of the paper today. Clearly, the person/s who has/have put together the
story is/are not aware that RBI's accounts for 2016-17 have been finalized.
GOI can always borrow more money from RBI via
different windows, but that would not be against previous year's 'surplus
income' of RBI.
M G Warrier
Cover Story
RBI Annual Report 2016-17
RBI Annual Report 2016-17 is most likely to be sunk in
the Demonetization debris.
Going by the format and content, in recent years, RBI
Annual Report has evolved into a comprehensive document which reviews the
central bank's performance during the year making a realistic assessment in the
context of known role and responsibilities, gives details of department-wise
assignments on hand and future plans, making it a unique one among annual
reports brought out by other organizations in public and private sectors in
India.
Viewed in this context, Team RBI deserves to be
congratulated for bringing out a comprehensive, informative Annual Report
maintaining the tradition of RBI.
It is unfortunate that media and analysts prefer to
dump such documents in the preparation of which so much of efforts including
research work have gone into, in sensational debates on just one issue, namely,
demonetization.
It's unfortunate that people concerned do not open and
read the report, but participate liberally in criticizing RBI Governor and the
central bank's policies, part of which emanate from political jealousy or may
be, motivated by stakeholders who have suffered losses in the joint effort by
GOI and RBI to unearth black money or handle willful defaulters who have
diverted bank credit.
A word about ‘demonetization’. The November 8, 2016
announcement of withdrawal of ‘legal tender status’ of Special bank Notes
(Rupees one thousand and Rupees five hundred currency notes issued by RBI) did
not affect the ‘promise to pay’ with a sovereign guarantee signed by RBI
Governor printed on such notes. If someone responsible has made any
irresponsible statement about expecting a ‘windfall gain’ on account of a
sizeable portion of these notes not coming back to the banking system, it is
unethical to blame Prime Minister or RBI for that. If 99 percent of such notes
have been accounted for and ‘central bank’s liability’ has been met, we should
appreciate the efficiency of the Indian Banking System.
M G Warrier, Mumbai
Access RBI Annual Report 2016-17 @
http://www.thehindubusinessline.com/resources/rbi-annual-report-for-201617-full-text/article9837153.ece
Access RBI Annual Report 2016-17 @
http://www.thehindubusinessline.com/resources/rbi-annual-report-for-201617-full-text/article9837153.ece
II
SOME USEFUL LINKS
RBI’s Capital and Reserves: 2015 article
by
M G Warrier
We miss SS Tarapore. This link will take
you to his last article on RBI's Accounts. Since 2015, RBI's Capital and
Reserves as percentage to total assets have come further down. As on June 30,
2017, RBI's reserves were at a low of 7.6 percent of total assets. This is
against a self-set target of 12 percent which was almost achieved by 2009.
If interested, please read this article
and my online comments.
M G Warrier
III
RECENT RESPONSES
Demonetization
and RBI
Puja Mehra’s brief article
with focus on RBI governor Urjit Patel (The Hindu, “Diary of an unusual year”,
August 29) gives us an opportunity to discuss once again the mysteries
surrounding demonetization announced by Prime Minister Modi on November 8,
2016. That can wait release of RBI Annual Report 2016-17.
As the measures
taken by GOI and RBI post-demonetization have been widely debated in the media,
for now, let us restrict this discussion to certain misunderstandings that may
still remain after one goes through the article.
Economic Survey 2016-17
carried some misleading observations like the following:
“Last year’s
Economic Survey had raised the issue of the government’s excess
capital in the RBI. That issue could become even more salient
this year because of demonetization…If there is a demonetisation windfall
- not included here - the RBI will stand out even more as an outlier in terms
of government capital in the central bank…The estimate for India assumes,
conservatively, no windfall from demonetisation. There is no particular
reason why this extra capital should be kept with the RBI.
Even at current levels, the RBI is already exceptionally
highly capitalized.”
Such vague and lose
observations in traditionally reliable documents and analysts and media not
taking cognizance of official positions taken by RBI on demonetization (RBI had
brought out a paper analyzing ‘impact of demonetization’ which was placed in
public domain) have done irreparable damage to the reputation of Indian
Financial System. It is convenient and easy to isolate RBI or its Governor and
quickly ‘fix’ responsibility, as Urjit Patel is not Raghuram Rajan who almost
kept giving online responses when allegations were made against him or his
policies.
M G Warrier, Mumbai
HAL takes off
This
refers to Ajay Shukla’s report “HAL’s production of light combat helicopter
takes off” (Business Standard, August 27). Recently, Hindustan Aeronautics
Limited (HAL) had signed a memorandum of understanding (MoU) for 2017-18 with
the Ministry of Defence. The annual MoU outlined targets on various performance
parameters of HAL during 2017-18, inter
alia targeting a revenue from operations at Rs 17,900 crore, the highest
ever annual revenue target for HAL.
The
HAL initiatives now reported align well with PM’s focus on ‘Make in India’ and
increasing indigenization of defence production gradually. In defence
production and several other areas which will not give quick commercial
profits, in India, public sector will have to play a major role for several
more years. This was well understood during Nehru’s days, but the BPL
(Businessmen-Politicians-Lawyers) combine which started dominating all
political parties without exception for obvious reasons took on themselves the
responsibility of selective killing of public sector organisations, one by one.
The present move to revive public sector need to be seen in this background.
M G Warrier, Mumbai
Beacons of hope
With reference to R C Mody’s letter*, “Guidelines of wise men” (August 29), it is comforting to
see that there are several veteran former bankers, who lived in an era during
which corruption was not an essential ingredient of politics and business;
institutions such as the Reserve Bank of India, the Supreme Court, Election Commission and
the government existed separately and with people at the helm, who were aware
of the contours of their responsibilities, even if some of them could not get
things done in the manner they would have wanted to. Mody is one among them and
reading his letter, I feel proud about his willingness to share his memories.
In the liberalised world of today,
everything has a market-based, indexed price. Still, people like Mody keep the
beacon of hope alive.
M G Warrier, Mumbai
*Copied below is R
C Mody’s letter:
With reference to “Monumental failures of RBI”** (August 23),
Gajendra Haldea has said that it was the Reserve Bank of India’s (RBI) job to
lay down effective (lending) norms and guidelines to banks.The RBI
had laid down comprehensive norms and guidelines to banks in
1975. These were evolved not internally by the RBI bureaucracy and
dictated by it to banks. They were based on recommendations of a
study group (later known as Tandon Committee) appointed by RBI under
Prakash Tandon, the much celebrated then chairman of Punjab National Bank and
comprising 14 other eminent men.
These wise men, after year-long deliberations, prescribed
industry-wise norms for inventories and receivables and laid down guide lines
for bank lending. The basic principle on which the guidelines were
based was that the function of a bank was only to supplement its own resources
(including long-term funds raised elsewhere) of a borrower in running
an enterprise. The bank’s lendings were not to exceed the Maximum Permissible
Bank Finance for each borrower, based on a formula laid down by the study
group.
The RBI accepted major recommendations of the study
group and required banks to restrict their lendings accordingly. It
required its supervisory machinery to oversee their implementation. As a
result, the quality of loan portfolios of banks showed perceptible
improvements and what we call non-performing assets today (a term not in vogue
then) did not contaminate them to any visible extent. Then came the era of
liberalisation in the wake of the economic reforms of 1991, which dispensed
with the undue restrictions and controls associated with the license-permit
raj. The RBI’s norms for bank lending, which were evolved with the consent of
and in co-ordination with those affected (viz. banks and their
borrowers) did not fall in the ambit of the said reforms, although their
revision from time to time, in the light of changing scenario, was always
called for. But at some stage, the norms and guidelines were dropped
lock, stock and barrel and a free-for-all was created; banks could
lend as they liked. And the result is there for all to see. The wholesale
abandonment of aforesaid discipline in the name of liberalisation tantamounts
to throwing the baby out with the bathwater.
R C Mody, New Delhi
**Can be accessed
@www.warriersblog.com also
IV
LEISURE
Radha Krishna By Keshav (August 31, 2017)
A
WhatsApp story teller with a difference!
Enjoy the rains
Start reading from anywhere... this article will make
sense...If it doesn't, open this mail again some other time...
M G Warrier
Chinese version of Valentines Day: August 28, 2017
The Hindu Open Page articles.August 27, 2017
*******************************
Comments