978 Musings on Basil Convention, International Rating Agencies, Indian Public Sector Banks

Since the last many years, one question which has continually been tormenting me, without disappearing from my memory, although there is no need for me to remember it continuously, is: Should India ceaselessly promise this or that, to somebody or other, in numerous meetings, both formal and informal? Latest trigger for my this outpouring of mine, is the string of promises made by Mr. Arun Jaitley, Finance Minister of India, as reflected in Economic Times New Report dated 9.5.2017, while addressing some meetings in Tokyo. Click here to go to http://economictimes.indiatimes.com/news/economy/policy/government-open-to-providing-more-funds-for-banks-recapitalisation-arun-jaitley/articleshow/58584283.cms . According to the FaceBook Page of Hon. Shri Arun Jaitley, he might have been addressing the Investors' Round Table in Tokyo. Click here to go to the Facebook page of Hon. Arun Jaitley.

Some quotes from Relevant Links

"...Where more funds are required from the government, we will be quite willing to look at that. But once the health of the banks improve, we have also announced that the government will be willing to bring down its equity in the banks to 52 per cent and that can be used for banks' recapitalisation ..."

ybrao-a-donkey's personal views, not intended to be imposed on others, in the following paragraphs marked 'yb'

Citizens of India deposit their moneys with Public Sector Banks in India, based on their INHERENT TRUST IN THEIR GOVERNMENT AND ITS ORGAN RESERVE BANK. They do not bother about the Balance Sheets of the Public Sector Banks, or their Capital. After demonetisation, this trust of the People on their currency notes and their Banks, has temporarily got bruised. Of course, 'Time is the best healer'. This Trust has not been irretrievably damaged. It was only a temporary phenomenon.

Whether to hold 100% Capital, or 52% of Capital in Public Sector Bank, is a Sovereign decision to be taken by the Government. It is an internal affair of India. In addition, it will not be prudent for Indian Public Sector Banks to issue Shares to Foreign Investors, whether 'individual' or 'institutional'. When Private Banks in India were nationalised in 1969, one of the principles adopted was 'Public Funds should not be controlled by Private Individuals and Institutions. Reason: Private Industrialists had a dirty habit of diverting Private Bank funds to their own Companies surreptitiously. If it is not safe to allow Indian Private individuals and institutions to control people's funds deposited with Banks, where is the question of allowing Foreign Individuals and Institutions to invest in Indian Public Sector Banks?

It is not clear why Hon. Jaitley is so devotedly, and dedicatedly promising the Government's bringing down its share to 52% in Indian Public Sector Banks, to Foreigners whether existing investors or prospective investors.

This is a 1000 page subject. More to write.

To continue adding / deleting / modifying. सशेष. ఇంకు ఉంది.

975 (Part 1/10) Reserve Bank of India alone cannot help Banks to recover their NPAs (Non Performing Assets)

According to news reports, on 5th May 2017, President Pranab Mukherjee approved an ordinance to amend the Banking Regulation Act, 1949 to give more powers to the Reserve Bank of India to take action against defaulters to speed up recovery of Non Performing Assets (Bad Loans) of Indian Banks. The Ordinance is reported to give powers to RBI to 1) issue directions to any bank to initiate insolvency resolution process in case of default. 2) Issue directions to the banking companies for resolution of stressed assets 3) Specify one or more authority or committee that will advise banks on how to resolve their stressed assets.

RELATED LINKS

Click here to go to https://scroll.in/article/836743/with-more-power-to-rbi-to-tackle-non-performing-assets-could-indias-big-bad-loan-problem-end-soon

Click here to go to https://www.ft.com/content/62cba48c-3195-11e7-9555-23ef563ecf9a (Financial Times)

yb-a-donkey's views which are not intended to be imposed on others

This is a 1000 page subject. Cannot be covered in one blog post.

1. Government of India and the Reserve Bank of India, have done too little, and too late. Government may want to show that they are doing something drastic, to ward off media, public and Parliamentary criticism that it is soft on Corporate Borrowers, and industrialists while small and medium industrial, personal and agricultural borrowers are harassed for recovery of palty amounts. There is much truth in this criticism.

If the Government really takes some radical, effective measures, Large Industrial and Commercial Borrowers are not going to remain silent. They will use their influence-s and pull the strings on their puppet MPs, to change / moderate the Government's behavior.

If one or two industrialists are picked up at a time, probably others will remain silent. But if the whip is flaunted on all the large Borrowers on a war footing, they may go even to the extent of toppling the Government by purchasing MPs, or they may try to split the Ruling Party, by creating hopes in latent aspirants for power.

Question: How the step of "Initiating Insolvency Resolution Process" is not going to solve the problem.

Ans: Even before the Ordinance, Bank Boards, Bank Senior Managers have powers to initiate Insolvency Resolution Process. In case of insolvency of Companies, the Companies Act requires Creditors to apply to State High Courts for Liquidating the Borrower Companies, and if High Courts are satisfied, they will appoint an Official Liquidator to execute the Liquidation Proceeds. The Official Liquidator has to sell all the assets of the Borrower Company, collect all dues receivable by the Companies, and after that pay off the Creditors in the Priority Order Stipulated by Law. The whole procedure and process takes several years.

The Ordinance does not appear to take away the powers of High Courts, or superimpose the new powers of Banks, on the powers of the High Courts. The Ordinance just empowers RBI to issue directions to Banks to initiate Insolvency Resolution Process. It may probably mean that, RBI can give directions to Banks to apply to High Courts for Liquidation of Borrower Companies. Even before the Ordinance, to issue directions to Banks, as may be necessary from time to time. There is no 'open' information that Banks were hitherto disregarding the instructions of the RBI.

In case of most Corporate Loans Banks have full/part security, which they can take possession and sell directly under SARFAESI Act 2002.(Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002)

Before SARFAESI Act 2002 came into force, Banks were dependent on Courts, for selling the assets mortgaged / hypothecated to them. Now, there is no such need.

Approaching courts for Insolvency / Liquidation Proceedings will be useful only when Banks are Unsecured Creditors, or where the mortgaged / hypothecated securities are extremely inadequate, and bulk of the loan will become unsecured.

To continue adding / deleting / modifying. सशेष. ఇంకా ఉంది.

967 Musings on Miscellany

Do Private Sector Banks in India have horns? It is understandable if Private Sector Companies embrace and encourage Private Sector Banks. But, the same thing cannot be said about Public Sector (Govt. owned) Companies embracing and encouraging Public Sector Banks. Public Sector Companies and Public Sector Banks are supposed to have affinities and synergies. Both the PUblic Sector Companies and the Public Sector Banks can survive only if they stand together and support one another. This Government Insurance Company "New India Assurance Company, Mumbai", largest among the five Govt. Insurance Companies in India, as on date, seems to be allergic to Public Sector Banks. Okay, some PUblic Sector Banks may be villains, lackadaisical and lethargic, and above all UNBUSINESS-LIKE. There are nearly 25 Public Sector Banks in India, with wide demographic and geographical spread. It should not have ordinarily been difficult for the New India Assurance to pick up five Public Sector Banks to handle its IPO (Initial PUblic Offer). Or at least, it could have had a mix of 3:2 i.e. 3 public sector banks and, two private sector banks, or vice versa. Strangely, it selected all the five fellows-- Private Sector Banks.

RELATED LINKS

Click here to go to http://timesofindia.indiatimes.com/business/india-business/new-india-appoints-five-bankers-for-ipo/articleshow/58466718.cms

ybrao-a-donkey's views not intended to be imposed on others

If Public Sector Banks are not offering New India Assurance, attractive and competitive terms/tariffs, New India Assurance, could have then reported the matter to its Holding Company, and the Government of India, seeking competitive and reasonable terms. Public Sector entities both Banks, and other Corporations, cannot be 100% business-like and socially irresponsible like their Private counter-parts. They have a dual burden of working profitably, and also responsibly. Acting in harmony and cohesion with one another should be an uncompromisable strategy of all Public Sector Units and Undertakings, in whichever industry/service/business they may be engaged. Supervising organisations like Government of India's different Ministries, Reserve Bank of India, Bureau of Public Enterprises, etc. have to continuously monitor this area,of mutual support among public sector units.

Quotes from the related links

"...Responding to speculation of merger of government-owned non-life companies, Srinivasan said that there was no concrete move and there has been only unconfirmed news reports. "As far as we are concerned there is no such thing and we are going ahead (with the public issue) in our present structure," said Srinivasan. ..."

yb-donkey: There seems to be some communication gap between the Govt. of India, and the New India Assurance. Govt. should be transparent to the Board of New India Assurance, about its future, i.e., about whether there are going to be some mergers, if so, likely with whom, on what terms etc. etc. Even if the Govt. of India is reticent, the New India Assurance's Chairman ought to have written an Official letter to the appropriate Govt. Ministry, seeking some information about the Company's future prospects/fate. Secretiveness can lead to the 'Controller' and the 'Controlled' working unintentionally in opposite directions. This will not be a good management practice.

Pakistan's inhuman acts of mutilating bodies of Indian Soldiers

Battles, wars, squabbles and squirmishes take place between countries, and as a part of it, sometimes, unfortunately some soldiers may die on both sides. But mutilating the bodies of slain soldiers is an extremely reprehensible practice which all Nations have to condemn. Pakisthan seems to be ruled by ISIS and Taliban, rather than by a democratically elected Government. Besides, Pakistani Generals and Military Officials seem to exercise undue authority and dominance on their Civil counterparts. In addition, Pakistani Army seems to be infested with from ISIS and Taliban militants, who do not have any scruples about military traditions. Religious Fanatism is blind to everything sane. We should not expect any sort of civil behaviors in such situations.

India should go for more drones, robots, missiles and unmanned aircraft like Lakshya

India cannot continuously afford to sacrifice the noble lives of its brave soldiers. there will also be no use of Prime Minister and Defence Minister, repeatedly expressing dismay and taking lofty pledges and vows. It must find out ways of unmanned, less-manned, attacking and defensive methods using latest equipment, vehicles, and systems.

Posting of Mr. Anil Kumar Singhal as the Executive Officer of TTD (Tirumala Tirupati Devasthanam), the largest and the Richest Temple in India

TTD is an All India Temple. Pilgrims visit not only from all parts of India, but also from other parts of the World. It will, therefore, be natural to expect the E.O.of the Temple to know the International Link language English, India's National and Link Language Hindi. Mr. Anil Kumar Singhal fulfills these two needs.

The TTD Shri Venkateswara Temple, situated in South India, is surrounded by the cultures and traditions of the four South Indian languages Telugu, Kannada, Telugu, and Tamil. Among these four languages, Telugu and Kannada have some affinities of vocabulary, grammar, script, and many other practices. Tamil and Malayalam have a similar relationship. It will, therefore, be apt to expect that Mr.Singhal will try to learn at least two of the four languages, one each from Tamil/Malayalam, and Telugu/Kannada. TTD follows Vaikhanasa Agama (scripture of worship methods) method of worship. Mr. Singhal will have to study these AAgamas and try to establish a close working rapport with temple's priests, and their working modes and moods. Managing a Temple, will be totally different from managing other Government Departments and Offices, in administering which it will be sufficient to know law, Management science, and some behavioral methods.

Mr. Singhal to apply his mind to the problem of VIPs, contractors and business persons intruding into the Temple's Systems, claiming special treatment. This is leading to grave injustice to the ordinary pilgrims.

Enriching Contractors or depriving contractors from their due profits cannot be a duty or pastime of a Temple Management. Temple Managements cannot become slaves of contractors, particularly those having political patronage, for earning kickbacks, or promotions.

TTD also seems to have an insatiable urge to entertain donations of 'gold' and 'precious-stones' from its devotees. Accumulation of gold will only divert the attention of the Temple Managements, from their main object of maintaining a 'divine' and 'serine' environment in Temples. Security will become another problem. Employees and Priests themselves, however honest they by nature are, may be tempted to steal gold/precious stones. Cash/gold/precious-stone donations given by persons and Corporates who earn them through corrupt, dubious, illegal means and methods, as Commission /share of booty to God-- the Temple should refuse to accept such tainted donations.

Nations and Societies have to learn from history. We should not forget that Ghazni Mohd. from Turkey invaded India 17 times from 1000 CE to 1017 CE, almost every year, to rob the Somnath Temple at Gujarat. Mohd. Ghori to robbed hundreds of maunds (Maund=100 Troy Pounds) gold and precious stones after vanquishing Prithviraj Chauhan in 1171. Even today, temples and their deities are dug up by unscrupulous persons in search of treasures hidden beneath the idols and phallus-es.

It is a banal cliche / jargon in India to say that 'All are Equal before God'. Along with other Temples in India, TTD's Venkateswara Temple also proves that 'some people are more equal than others'. I believe that in India, even on cremation grounds/ grave yards, we cannot find equality though the Great Medieval Lyricist Annamacharya sang:--

తందనాన అహి, తందనాన పురె tandanAna ahi, tandanAna pure
తందనాన భళా, తందనాన || tandanAna bhaLA, tandanAna

బ్రహ్మ మొకటే, పర brahmamokaTE, para
బ్రహ్మ మొకటే, పర brahmamokaTE, para
బ్రహ్మ మొకటే || brahma mokaTE.

కందువగు హీనాధికము లిందు లేవు kanduvagu hInAdhikamu lindu lEvu
అందరికి శ్రీహరే అంతరాత్మ | andariki SrIharE antarAtma
ఇందులో జంతుకుల మంతా ఒకటే indulO jantu kula mantA OkaTE
అందరికీ శ్రీహరే అంతరాత్మ || andarikI SRIharE antarAtma

నిండార రాజు నిద్రించు నిద్రయునొకటే ninDAra rAju nidrincu nidrayu okaTE
అండనే బంటు నిద్ర - అదియు నొకటే | anDanE banTu nidra - adiyu okaTE
మెండైన బ్రాహ్మణుడు మెట్టు భూమియొకటే menDaina brAhmaNuDu meTTu bhUmi okaTE
చండాలుడుండేటి సరిభూమి యొకటే || canDAluDu unDETi sari bhUmi okaTE

అనుగు దేవతలకును అల కామ సుఖ మొకటే anugu dEvatalaku kAma sukhamu okaTE
ఘన కీట పశువులకు కామ సుఖ మొకటే | ghana kITa paSuvulaku kAma sukhamu okaTE
దిన మహోరాత్రములు - తెగి ధనాఢ్యున కొకటే dinam ahOrAtramulu - tegi dhnADhyunak okaTE
వొనర నిరుపేదకును ఒక్కటే అవియు || onara nirupEdakunu okaTE aviyu.

కొరలి శిష్టాన్నములు తిను నాక లొకటే korali SishTAnnamulu tinu Akali okaTE
తిరుగు దుష్టాన్నములు తిను నాక లొకటే | tirugu dushTAnnamulu tinu Akali okaTE
పరగ దుర్గంధములపై వాయు వొకటే paraga durgamdhamulapai vAyu okaTE
వరస పరిమళముపై వాయు వొకటే || varasa parimaLamu pai vAyu okaTE

కడగి ఏనుగు మీద కాయు ఎండొకటే kaDagi yEnugu mida kAyu EnDa okaTE
పుడమి శునకము మీద బొలయు నెండొకటే | puDami Sunakamu mIda polayu enDa okaTe
కడు పుణ్యులను - పాప కర్ములను సరి గావ kaDu puNyulanu - pApa karmulanu sari kAva
జడియు శ్రీ వేంకటేశ్వరు నామ మొకటే || jaDiyu Sri Venkateswaru nAma mokaTE

Approx. Engl. gist for the benefit of Readers who do not know Telugu language

తందనాన అహి, తందనాన పురె tandanAna ahi, tandanAna pure. This is chorus, in group singing.
తందనాన భళా, తందనాన || tandanAna bhaLA, tandanAna. This is chorus, in group singing. Approx. Engl: you are right. It is correct.

బ్రహ్మ మొకటే, పర brahmamokaTE, para. Supreme Spirit is one. (Telugu, Sanskrit word para= Supreme. brahmam= Spirit which is infinite. It is formless=nirguNam).
బ్రహ్మ మొకటే, పర brahmamokaTE, para. Supreme Spirit is one.
బ్రహ్మ మొకటే || brahma mokaTE. Supreme Spirit is one.

కందువగు హీనాధికము లిందు లేవు kanduvagu hInAdhikamu lindu lEvu. There are no distinctions of 'abominable' and 'venerable'.
అందరికి శ్రీహరే అంతరాత్మ | andariki SrIharE antarAtma. For all Lord is the Inner-Soul.
ఇందులో జంతుకుల మంతా ఒకటే indulO jantu kula mantA OkaTE. In this all the fauna is one.
అందరికీ శ్రీహరే అంతరాత్మ || andarikI SRIharE antarAtma. For all, Lord is the Supreme Soul.

నిండార రాజు నిద్రించు నిద్రయునొకటే ninDAra rAju nidrincu nidrayu okaTE. Sleep of a King is same.
అండనే బంటు నిద్ర - అదియు నొకటే | anDanE banTu nidra - adiyu okaTE. Sleep of a servant is same.
మెండైన బ్రాహ్మణుడు మెట్టు భూమియొకటే menDaina brAhmaNuDu meTTu bhUmi okaTE. Land on which a Priest (Brahmin) resides is same.
చండాలుడుండేటి సరిభూమి యొకటే || canDAluDu unDETi sari bhUmi okaTE. Land on which an outcast lives is same.

అనుగు దేవతలకును అల కామ సుఖ మొకటే anugu dEvatalaku kAma sukhamu okaTE. The sexual happiness of Gods(Goddesses) is same.
ఘన కీట పశువులకు కామ సుఖ మొకటే | ghana kITa paSuvulaku kAma sukhamu okaTE. The sexual happiness o the insects and cattle is same.
దిన మహోరాత్రములు - తెగి ధనాఢ్యున కొకటే dinam ahOrAtramulu - tegi dhnADhyunak okaTE. Days and nights of a Rich person is same.
వొనర నిరుపేదకును ఒక్కటే అవియు || onara nirupEdakunu okaTE aviyu. They are same even to a very-poor person.

కొరలి శిష్టాన్నములు తిను నాక లొకటే korali SishTAnnamulu tinu Akali okaTE. The hunger which nourishes on succulent foods is same.
తిరుగు దుష్టాన్నములు తిను నాక లొకటే | tirugu dushTAnnamulu tinu Akali okaTE. The hunger which eats remnants and stale foods, is same.
పరగ దుర్గంధములపై వాయు వొకటే paraga durgamdhamulapai vAyu okaTE. The wind which blows on obnoxious-odious smells is same.
వరస పరిమళముపై వాయు వొకటే || varasa parimaLamu pai vAyu okaTE. The wind which blows on sweet perfumes and scents is same.

కడగి ఏనుగు మీద కాయు ఎండొకటే kaDagi yEnugu mida kAyu EnDa okaTE. The sunlight which falls on an elephant is same.
పుడమి శునకము మీద బొలయు నెండొకటే | puDami Sunakamu mIda polayu enDa okaTe. The sunlight which falls on a stray-dog is same.
కడు పుణ్యులను - పాప కర్ములను సరి గావ kaDu puNyulanu - pApa karmulanu sari kAva. To save the great virtuous, and the sinners
జడియు శ్రీ వేంకటేశ్వరు నామ మొకటే || jaDiyu Sri Venkateswaru nAma mokaTE, the name of the Supreme God is same.

Though the poet has used the name 'SrI Hari' as the name of the Supreme Godhead/ Supreme Soul (para brahmam), any name, including Christian, Islamic, ... ... names could be substituted here. We can give a benefit of doubt to the Great Poet Annamacharya that he did not intend only one ABC God, as the one who treats the Virtuous and Sinners equally. A person of such deep intellectual thinking, cannot NORMALLY / ORDINARILY view from the narrow walls of a particular religion, caste, region, language, inheritance, wealth and thousand other creators of inequalities in this world. This type of literature of Great Equanimity and Balance of Mind, we do not ordinarily find in European languages.

To continue adding / deleting / modifying. सशेष. ఇంకా ఉంది.

867 Pressurising Indian Public Sector Banks to reduce their lending rates does not appear to be proper

News: From 1-2-2017, State Bank of India, India's largest Bk., cut its marginal cost of funds-based lending rate (MCLR) across all tenors by 90 basis points (bps)., the steepest cut in several years. The six-month MCLR is now 7.95% and the three-year rate stands at 8.15%. PNB has cut its one-year MCLR rate by 0.7% to 8.45% from 9.15%. Union Bank of India has reduced its MCLR by 0.65-0.9% to 8.65%. The revised one-year MCLR stands at 8.65%. Link: Click here to go to Livemint.com, to study this Report. Indian Public Sector Banks seem to be under substantial pressure from Reserve Bank of India, Government of India-Ministry of Finance, to reduce their lending rates. Chair persons of Indian Public Sector Banks, though are supposed to be experts in Banking and Finance, though are supposed to act autonomously in consultation with their Boards, cannot really say anything, because their positions are precarious and at the mercy of our Rulers of India 2014-2019. Besides the Chairpersons have their own shortcomings and weaknesses, which place them in 'glass-houses' and the adage 'people in glass-houses cannot throw stones' comes to their mind. Persons can act with steadfastness and uprightness only when they are strong ethically and emotionally. Besides, most chairpersons of Public Sector Banks will be approaching their retirement age, and they may develop a thinking 'Anyway, we are going away. Why should we become unpopular with our bosses and the industrialists?'. Apart from that, their minds may be engaged on 'how to search for greener pastures. 'Which industrialist is going to appoint me in some sinecure job?' thus reverberates their inner-self.

SOME RELEVANT TELUGU PROVERBS/MAXIMS

1. tummitE UDe mukku. (A nose which gets severed and drops down, when a person sneezes. It will not last long anyway, because someday or other a person has to sneeze).

2.evariki puTTina biDDa, vekki vekki EDva. (When their own child dies, people sob and wail ceaselessly. When an orphan child dies nobody will weep. Purport: Nobody will show much concern, when the problem is not their personal.)

tinu, tina nivvu. (Eat and let others to eat. Purport: Live, and let live. This is a worldly wise advice. 21st Century additional meaning: Be corrupt, and allow others to become corrupt.

Additional inputs from ybrao-a-donkey, which are not intended to be imposed on Readers

1. Indian Public Sector Banks operate on a very slender spread (Difference between lending rate, and deposit interest rate = spread, that is their profit margin). This spread must remain consistent and stable, if Banks are to stay in existence, without becoming bankrupt.

2. Considering the very very low spread which the PSBs in India operate on, they will be constrained to reduce their deposit interest rates paid to public on Savings and Term Deposits, in proportion to the cuts they make in their lending rates. In India, public sector bank depositors are an unorganised lot. They do not and cannot form pressure groups, to press the Govt. and Banks to keep the deposit interest rates stable.

3. Deposit interest rates should not only compensate the Bank Depositors who lose the real value of their money owing to inflation, but also provide a reasonable return on their deposits. Aged persons live on income earned from their deposits with Public Sector Banks. Besides, they are forced to pay Income Tax on this meagre interest income on deposits, if the interest exceeds Rs. 10,000 p.a. That Rs. 10,000 was fixed at a time, when Rice was some Rs. 15 per kilo, but now the rice is Rs. 50 per kilogram.

4. The steep increase in deposits of Public Sector Banks after July 2016, is not owing to attractiveness or competitiveness of Public Sector Banks in the Market. It is by legal coercion. People had no alternative. Not only that. Post demonetization, people have lost their trust in the PROMISSORY NOTE GIVEN BY RBI, with RBI Governor's signature, "I promise to pay the bearer a sum of Rs. ...". Earlier, as far as currency note was concerned, Government was their Supreme God, and sometimes more than the Supreme God. Now, that confidence is shaken.

LIQUIDITY PREFERENCE THEORY OF INTEREST

5. Liquidity Preference Theory of Interest of the Economics Text Books, is operating now in full vigor. In spite of loss of confidence on the currency note, people are still queueing before bank counters and ATMs because, people want to take back their money from the Banks, and keep it at their homes, to meet transactions both foreseen and unforeseen. Apart from that, during the period 8th Nov. 2016 to 31st Dec. 2016, they have postponed some of their expenses, repayment obligations, which required liquid cash. Now, they have to meet all such commitments.

The liquidity preference of depositors was low earlier, when they had confidence in Banks and ATMs, the confidence of the type "Why should I draw cash and keep in home, exposing myself to thieves and robbers? Even at the last moment or one day prior to the event (e.g. marriage, funeral, house repair etc.) we can draw the amount." Now, that confidence has been replaced by an eagerness and wisdom to keep money at hand.

Small and Tiny businesses will keep all their currency notes at the homes of proprietors' and partners', and everyday they will carry cash to their shops. Reason: Once bitten twice shy.

Ques: There is some ambiguity in what you write. You are contradicting yourself. You say people have lost their confidence in currency notes. You also say that people will hold all their currency in homes.

Ans: No conflict or contradiction. You can visualise two situations:

TRANSACTIONAL DEMAND

Till substitutes develop as PAYMENT TOOLS (not necessarily digital, as per Rulers of India 2016's wishes), e.g. minuscule sized gold coins and silver coins (without Government emblems), without Rupees denomination printed on their face, their value determined on the basis of their weight mentioned on them, currency notes will have to be used for daily transactional demands.

GOVERNMENT CANNOT SEARCH EVERY HOME EVERY DAY

Once people decide what part of their money should be kept in 'cash-currency' to meet daily and short term transactional demand, they will keep that separately.

For the remaining surplus, they will not hold currency. Depending on the type of business/occupation/family conditions, the ratio between Cash & non-cash may be in the ratio of 20:80. People may part with the currency, in exchange for something which is slightly liquid, but which is more inflation-proof, and Government-proof. People may prefer to buy more gold and silver coin equivalent metal pieces as STORAGE OF VALUE, which Govts. cannot take away, by making speeches on TVs. In spite of numerous controls which Government may impose on Gold Dealers, parallel unorganized markets will develop. Richer people may purchase more Fire & Barglary Resistent safes (FBR Safes) and install small lockers at their own homes.

GAME OF DONGA - POLICE

External appearances of houses may become 'poor' and 'simple' so as not to attract to draw the attention of Income Tax Search Teams, roaming with metal detectors and scanners. There will be a technological race between the Government and the People, a game of 'donga-police' (Thief and Police in English). Who will play the thief? Who will play the police? Who will be onlookers? This will be the subject of our forthcoming blog posts.

To continue. सशेष. ఇంకా ఉంది.

762 (Part 7/100 of Indian Economic Enigmas)- How can the bourgeoisie parties act against their own benefactors?

This is in continuation of our blog post No. 760 (Part 6/100 of Indian Economic Enigmas). . Merger of 27 Indian Public Sector Banks into 6 large Banks will only create chaos. Their efficiency will not improve. Here is a Deccan Chronicle.Com News Report which indicates that Centre is likely to ahead with merger of 27 Indian Public Sector Banks in 6 large Banks, as recommended by Shri Vinod Roy, a Former CAG (Comptroller and Auditor General of India). Click here to go to DC & Read the Report.. It appears that State Bank of India, India's and the World's largest Bank in terms of number of Branches, has already started the process of merging into itself its six Associate Banks-- State Bank of Hyderabad, State Bank of Mysore, State Bank of Travancore, State Bank of Patiala, and State Bank of Bikaneer and Jaipur.

In Telugu language, there is a proverb: "picci kudirindi, rOkali talaku cuTTanDi". Approx. English equivalent: "my idiocy (or lunacy, insanity) has been cured. Pl. roll this pezzle around my head". Here, the cured patient is asking his listener to bend the wooden pezzle used for pounding flour and grains in Indian Homes, and roll it around his head like a "head gear". Here, one question arises: picci kudirindA? picci mudirindA? Has the madness been cured? Or has the madness aggravated? This comment, which I am making, may appear to be rude.

Yet, with due respect to the Learned Former CAG who is said to have made some drastic recommendations for cleansing Indian Public Sector Banks, I am tempted to quote another Telugu proverb: "Dabbulu oka cOTa pArEsukoni inkO cOTa vetukkunnaTlu". Approx. English gist: Like a person who has lost money at one place, and who was searching for the lost money at another place. When an onlooker asked the money-loser, why he was searching at that particular place for the lost money, he replied: "Here, there are electric street lights. Where there are lights, we have to search".

Public Sector Banks lost their money, owing to their corruption, inefficiency and recklessness. In spite of that, they may be successful in recouping a part of the lost-monies, if the Legal System, Administrative System (both Central and respective State Governments) help them with earnestness and sincerity. The major drawback, both of the Judicial Systems and Administrative Systems involved in handling Huge Banks dues is: Both of them treat the Public Sector Banks and the Private Sector Banks equally.

The Judicial System treats Public Sector Banks just as ordinary litigants, and on par with private money lenders. Our Government Administrators both in Centre and States, view Public Sector Banks as "miltch cows" when it comes to new loans, and as "intruders and trespasers" when it comes to help the PSBs in Recoveries. Consequently, Public Sector Banks, with regard to the problem of recovery of their bad debts, have become orphans and endless sufferers like "raped women".

This particular blog post will not be spatially sufficient to discuss all the problems involved. First we shall see some of the problems which are said to be, at present, receiving the attention of the Central Government.

"...Stronger banks should decide which of their bad loans to shift off their balance sheets, while weaker banks need fresh capital before a round of consolidation that would cut the number of state banks to no more than six from 27 now. In the current budget, the government has put in about Rs 25,000 crores, but it has not said that this is the end. "

"...Consolidation has already begun with State Bank of India’s move to absorb five subsidiaries and Bharatiya Mahila Bank, a bank for women set up in 2013. ..."

"...More mergers are expected. But no timeframes. Well-performing larger banks could tie up with one another ..."

"... Troubled lenders could be taken over once recapitalised — if they offered good value to suitors. Specifically, Bank of India — the country’s third-largest state bank by assets — would not be considered a merger candidate until it was recapitalised. "

"...State banks trading at just 0.5 times book value, valuations were attractive for minority shareholders to subscribe to planned rights issues, alongside the government. ..."

"... India’s state banks have been reluctant to write down loans, especially to high-profile borrowers like liquor tycoon Vijay Mallya. ... Talks were well advanced on creating a separate mechanism to review such cases and expedite balance sheet cleanups. ..."

"... This mechanism could be a committee, involve an existing joint lenders’ forum, or new guidelines from the RBI ...".

"...No plans to create a “bad bank” to relieve lenders of dud loans. ..."

"...India has more than a dozen asset reconstruction companies, or ARCs, with state banks owning stakes in four. The government has let promoters take full control of ARCs and scrapped caps on foreign direct investment. ..."

"... There is sufficient financial interest to invest in the ARCs. But all are waiting to see whether the PSBs are willing to transfer their stressed assets. "

ybrao-a-donkey's humble comments. वैबीराव एक गधे के विनम्र राय . వైబీరావ్ గాడిద వినమ్ర వాణి. You have every right to differ with me. I respect your right. आपको मेरे मत से भिन्न राय रखने के संपूर्ण हक है। मै उस अधिकार को परिपूर्ण रूप से गौरव देता हुँ. మీకు, మీ భిన్నమైన అభిప్రాయాన్ని కలిగిఉండే సంపూర్ణ హక్కు ఉంది. దానిని ఎంతో నేను గౌరవిస్తాను. However, pl. examine this donkey's views also. परन्तु एस गधे के दृष्टिकोण को भी अनुशीलन कीजिये. కానీ ఈ గాడిద దృష్టికోణాన్ని కూడ ఓర చూపుతో కంటజూడుమీ, క్రీగంట జూడమీ.

Nothing significant can be achieved with the above measures. Merging Banks will only create numerous problems, including resistance from Employee Trade Unions.

SUGGESTIONS

Depending upon Public Sector Bank Overdues workload in each State, at least one new High Court Judge should be appointed to exclusively deal with Public Sector Bank Suits for Recoveries, and Criminal cases for prosecution of cheating borrowers and Bank Executives.

At Supreme Court, there should be at least 10 Judges, to exclusively handle Public Sector Bank Suits for Recoveries, and Criminal cases for prosecution of cheating borrowers and Bank Executives.

Govt. of India should first make necessary Statutes (laws) / ordinances / Constitutional amendments to increase the number of Supreme Court and High Court Judges to exclusively handle PSB cases and suits. If necessary, Special Sessions of Lok Sabha and Rajya Sabha should be held for the purpose. Then, GOI should issue necessary Notifications for executing the Legislations.

Government of India should then pray the Supreme Court Collegium to take up appointments of all the required Judges. When Supreme Court Collegium suggests names, GOI should unconditionally accept the appointments and speed up the whole process.

For each Public Sector Bank, Govt. of India should get a list of DEFAULTERS ACCOUNTING FOR TOP 50% IN TERMS OF AMOUNTS. Govt. of India should then establish a SIT (Special Investigation Team) for each Bank, consisting of Top Lawyers, full-time Special Top Police Officials, full-time Special- Central Govt. Officers, full-time Special- State Govt. Officers, for monitoring the dues. The SITs should have special office in the concerned Public Sector Bank. Case by case reviews should be done everyday.

Wherever, assets are available and can be sold without intervention of courts, they should be sold through Public Auctions without delay. Minimum bid prices should be kept low. Under no circumstances, auctions should not be cancelled repeatedly. Unless there are reasons to suspect foul play, irrespective of whether full market value is realised or not, bids should be accepted, and the amounts realised should be credited to loan accounts with no further delay.

Normally, Public Sector Banks take personal guarantees and personal assets of principal promoters and Directors, in addition to the assets of the Company. Wherever such personal assets and guarantees are available, they are to be enforced immediately. Wherever such personal assets / guarantees have not been obtained as security, the Bank's directors and Top Bank Officials should be held accountable. Where there is gross negligence, or connivance of the Bank Directors and Officials with the Borrowing Company promoters, all of them should be arrested immediately, after booking necessary cases.

Passports of all the defaulting business persons, industrialists, their collaborating bank directors and top officials , should be impounded PROVISIONALLY. Red Alerts are to be sent to Airports, principal Railway Stations, Sea Ports, as an additional precaution.

In case of Court cases, "attachments before judgement" should be obtained not only against the defaulting Company's assets, but also against the personal assets of the Promoters, depending on whether personal guarantee is available or not.

Doing all these things on a war-footing, will send shiverings into the bodies of willful defaulters, and their collaborating Bank Directors and Officials. These campaigns will also work as deterrents against new business and industrial loans becoming bad.

Asset Reconstruction Companies will be useless paper-tigers. They can be closed.

The problem with bourgeoisie parties at Centre is, they want to please the defaulting business persons and industrialists at all costs and by all means. How can the bourgeoisie political parties and leaders act tough against their own benefactors, patrons and fund-givers?

Incomplete. Subject to thorough future revision depending upon availability of evidence.

567 Indian Public Sector Bks should not be asked to cut lending rates. भारतीय प्रभुत्व बैंकों को ब्याज रेट्स कम करने के लिये दबाना नहीं चाहिए। భారతీయ ప్రభుత్వ రంగ బ్యాంకులను వడ్డీ రేట్లను తగ్గించమని వత్తిడి చేయటం ప్రమాదకరం.

RBI Governor, Mr. Raghuram Rajan, seems to be a courageous person, when news reports indicate that he is resisting constant continuous nudging + prodding by the Finance Minister & the India Inc. to cut lending rates. Simultaneously, we see him his nudging the Bank chairpersons to cut Bank lending rates, probably to show that he is pressing the Banks, but Banks are not heeding to RBI and the Govt. One gets an impression that he does not want to keep the blame for himself.

As a Finance expert, he may also be aware the present turmoil and tumult which the Indian Banks, particularly the Indian Public Sector Banks are going through. He may also be aware, that Indian Public Sector Banks operate with a very narrow spread between the interest rates paid on deposits and the interest rates charged on their lendings. He may also be conscious of the great difference between the roles expected to be played by Public Sector Banks and the Private Sector Banks. It is true that an RBI Governor is not expected to be a pugilistic punching bag for the Govt. and the Finance Minister. Nor is he expected to be an extremely empathetic agony aunt for the chair persons of Public Sector Banks. It is unfortunate that Finance Minister and Finance Ministry are not paying enough attention to the health of Public Sector Banks, which if they burst can cause irreparable damage to Indian Financial System. Providing funds to sick banks, is just one measure. There are numerous other things which deserve immediate attention from the Government, particularly the Credit Recovery Arrangements.

As the communications between the RBI Governor and the Finance Minister at top level are confidential, it is very difficult to gauge whether RBI is adequately representing the problems faced by PSBs to the Govt. of India. At least there is one reason to believe that he is conveying the pathetic problems of the Indian PSBs, as can be deduced from the willingness of Govt. of India to provide additional Capital to Public Sector Banks. This alone may not be adequate to say that everything is being represented upwards. Besides, the Government of India, may be either through RBI, or even directly under pressure from Institutions such as IMF, World Bank, Bank of England or Federal Reserve Bank (America's Central Bank), BIS (Bank for International Settlements) to increase the Capital(s) of Indian Public Sector Banks quoting some BASLE Convention or something else. Govt. of India seems to wilt relatively easily to international pressures, when compared to its understanding the domestic needs.

Some quotes dated 20th Aug 2015, at SBI Economics and Banking Conference, which are attributed to Mr. Raghuram Rajan, RBI Chief:

"...There is a need for banks to cut their lending rates anticipating the benefits which will be accruing from the central bank's rate cuts. ..."

"...I think there is something to be said for the fact of the slow pace of transmission, that some front loading by the banks themselves may be useful. ..."

Some other valuable quotes related to this subject attributed to the Banks:

"...A 75 bps cut translates into 40-45 bps cut in cost of funds for banks. You've already seen a 30 bps cut. Transmission will never be a one-is-to-one correlation with monetary policy rates. ...--Ms. Chanda Kochhar"

ybrao-a-donkey's humble views. I shall not insist that you agree with me. वैबीराव एक गधे के विनम्र वचन. आप मुझ से सहमत होने के निर्बंध नहीं है। వైబీరావు గాడిద వినమ్ర అభిప్రాయాలు. నాతో ఏకీభవించమని మిమ్ములను వత్తిడి చేయను
1. Interest Rates prevailing in Indian Financial Markets where individuals, firms and Corporates lend to one another have mostly remained over 24% and rise even upto 120% p.a. depending upon security perceptions, need of the borrower, repayment program, etc. etc. Considering this hard reality, even a lending rate of 18% p.a. should not be considered as high. It is strange that India Inc. makes a hue and cry when Banks charge rates as low as 12% p.a. and demand large reductions in rates. It is really detestable that they ask for cuts in lending rates.

2. Indian Banks both Private Sector and PUblic Sector, have very poor credit appraisal, delivery, supervision, and recovery mechanisms. It is common for Corporates both industrial and non-industrial to divert borrowed funds for purposes other than the intended purposes. For this reason only we see hoarding of essential commodities, speculation in real estate, gold, silver, stock market speculations, cricket betting, with funds diverted from Bank borrowings. Once, the amounts leave the Corporates to their affiliates and subsidiaries or to the family members of the promoters, there is very little which Banks can do, to bring them back into the main stream of Finance. What the Corporates, both Indian and the MNCs operating in India, seem to want, apparently are cheap funds for short, medium and long term speculation. Else, except for those goods and products which have long production cycle, or stagnating markets, there should be no need to carry huge stocks, and pay interest to Banks. Corporates will not tell, but the interest amounts they pay, are for the moneys they block themselves in their hidden real estate or speculative investments, or in inter-corporate ventures. The best example we can get for this type of behaviors we can see from King Fisher, or the defunct Satyam Computers. In case of Satyam Computers, fortunately Mahindra came to the rescue of the Govt. and bought the I.T. dud. In case of King Fisher nobody knows what is happening and what is going to happen. I am also unable to recollect what happened to the dues of Indian Banks recoverable in case of Dabhol Power Project, Maharashtra.

I feel that it is high time for RBI Governor and the Finance Minister to ENABLE the Public Sector Banks to recover all their dues from the large Commercial and INdustrial borrowers. Court processes are cumbersome and time-consuming. Recalcitrant borrowers will use the time gap of nearly five years taken in courts for issuing decrees, to use the funds for their own purposes, though there is a procedure for attachment before judgements, it seldom works. Besides, attachments before judgements are intended as a sort of emergency method rather than as a recovery or loss minimisation proceedings.

Efforts made by banks with police help to forcibly take possession of secured assets where borrowers were non-coperative, were shunned by the court indicating that Banks cannot take law into their own possession. Even courts are unable to execute their own decrees, because they do not have staff or police of their own, and they depend on advocates appointed as Receivers/Assignees who ask Bank Staff to arrange transport and food for them. It is hightime for the Central Government and the respective State Government to constitute to post additional special Armed staff with crime and law & order powers, at, at least, Sub-Division Headquarters to help Banks in taking possession of securities, and their sale. Besides, RBI can ask Public Sector Banks, to set up a common Armed Security Force for enforcement and sale of security assets, by pooling funds and make Armed teams available to needy Banks when they need such services, and the Maintainer of the Security Force levy charges for providing the Security Enforcement and Recovery Armed Guard Services. Perhaps, it may be necessary to make some amendments to the Indian Penal Code, Civil Procedure Code, Criminal Procedure Code, Evidence Act, to make these things really work. Debt Recovery Tribunals alone cannot serve this monumental and monstrous task.
It is imperative that RBI treats and should treat Public Sector Banks differentially and preferentially from Private Sector Banks. This is simply because Private Banks and Public Sector Banks have different goals, different approaches, and different problems.

RBI should encourage Banks to mobilise their own lendable funds more and more from public and not depend on RBI's REPOS, by paying attractive interest rates to customers. Repos are intended to be emergency help, and not as primary lendable source of funds for Banks. Govt. or RBI or Banks or Industrialists should not have that impression that Banks will borrow from RBI at Repo Rates and add a measly margin for thier services.

If, under pressure from industrialists -> Govt. -> RBI, in case Banks reduce their lending rates and automatically, obviously, deposit interest rates, public will go elsewhere i.e. to unorganised sector or money-laundering institutions. Or they will buy gold or indulge in speculation. Not reducing interest rates on Bank deposits is particularly important, considering that Govt. is levying income tax on meagre interest which Banks pay on Bank deposits and insisting on TDS on Bank Deposits which are already low-yield investments owing to Deposit interest rates not matching with inflation.

(To continue. और लिखने का है। ఇంకా వ్రాయాల్సింది ఉంది.