Loan waivers and written-offs given to corporates or farmers are totally unacceptable. They impact viability of banks and erode their capital base In the last session of the Parliament, members of the Opposition alleged that, while the Government had no qualms in waiving loans worth hundreds of thousand crore rupees given to industrialists and corporates, it showed little inclination to extend the same relief to farmers who are unable to pay back loans for no fault of theirs. The treasury benches responded by saying loans given to corporates are not waived; instead, they are written-off. To a layman, write-off and waiver would appear to convey the same meaning — in both, lender decides not to recover unpaid loans from borrower....
More
No comments
Category: Savings & Investment
A tsunami of NPAs in the making
Even as the public sector banks [PSBs] are struggling to cope with the disastrous consequences of unsustainable high level of non-performing assets [NPAs] [over Rs 600,000 crores on last count] on their balance sheet as also choking flow of credit, political establishments in almost all states as also at the central level are at work to make life even tougher for them. In the just concluded elections in Uttar Pradesh [UP], prime minister Modi promised loan waiver to all small and marginal farmers. The commitment was reiterated in almost every election speech ad infinitum. Now, that BJP has got a resounding mandate with ¾th majority, the state government will have no escape from having to redeem this pledge. This will...
More
1 comment
Modi’s New Year gift to the underprivileged
After a protracted wait, India has got a Prime Minister who has risen from the ranks and hails from the majority of the poor. The other redeeming feature is that PM Narendra Modi leads a party that has an absolute majority in the Lok Sabha. This makes a happy combination. It ensures that every policy decision taken by the present dispensation is guided by the overriding concerns of the poor and the common man of India and seeks to benefit them. At the same time, the absolute majority of the ruling party ensures that people-friendly legislations (for instance, the Bill giving statutory backing to the Aadhaar card) have a smooth passage in the House. Demonetisation, announced on November 8, 2016,...
More
No comments
Modi’s New Year gift to under-privileged/marginalized
It is a matter of deep satisfaction that after generations, India has got a prime minister who has risen from the ranks and hails from among majority of the poor. The other redeeming thing is that he leads a party that has absolute majority in Lok Sabha [lower house of parliament]. This makes a deadly combination. It ensures that every policy decision coming from Modi is guided by the overriding concerns of the poor and the common man and seeks to benefit him. At the same time, absolute majority of BJP ensured that several people-friendly bills [for instance, bill giving statutory backing to Aadhaar card] had a smooth passage Demonetization [announced on November 8, 2016] was meant to help poor...
More
No comments
Demonetization – myths versus reality
In the aftermath of demonetization announced by prime minister, Modi on November 8, 2016, the air resonates with a tsunami of charges/allegations regarding its alleged ill-effects. It is time to assess the credibility of these charges. The government has plundered resources of poor The resources with the poor include (i) money held by him/her in cash [notes of various denominations] or (ii) savings in bank/post office if he/she has an account. As regards (i), he got 50 days time to exchange cash held in 1000/500 denominations for new notes at banks and another 3 months at RBI. As for (ii), this money is owned by him/her and shall remain so; all that the government did was to put restriction on...
More
No comments
Monetary policy – Patel still under Rajan’s shadow
In the first monetary policy review under the MPC [Monetary Policy Committee] dispensation announced on October 4, 2016, the governor, Urjit Patel had reduced the policy rate [interest rate at which RBI lends money to commercial banks] by 0.25%. He had then, maintained an ‘accommodative’ policy stance thereby alluding to apex bank intent for reducing it further. However, in the second policy review announced on December 7, 2016, Patel has dashed this hope by keeping the repo rate unchanged. Concurrently, he has also revised downwards its earlier estimate of GDP for 2016-17 from 7.6% to 7.1% now factoring in the effect of demonetization of 1000/500 currency notes announced by prime minister on November 8, 2016. Put together, the two statements...
More
No comments
Currency scrap – bear short-term pain for long-term gain
For almost seven decades since independence, India has been grappling with the menace of black money [and corruption]. Despite political parties of all hues making lofty promises to stem it, it has only increased leaps and bounds assuming monstrous dimensions. Prime minister, Modi who was catapulted to the seat of power on the promise of rooting out this menace [besides delivering good governance and inclusive development] has taken several credible steps viz., plugging loopholes in existing laws/enacting new laws, streamlining procedures /processes and cutting bureaucratic red tape to curb its generation. These efforts continue unabated. Meanwhile, a huge stock of black money already existing in the economy [courtesy, rampant corruption and mis-governance in the past especially the period 2004-2014, better...
More
No comments
Setting policy rate – break inflation-interest nexus
It is generally said that elections are won on ‘perception’ – an impression [or interpretation] based on one’s understanding of something. If, a particular party and its leader is perceived to be good then people vote for it en mass – irrespective of the situation on the ground in regard to its contribution to their welfare and economic development. This is also true of the process of policy formulation which too is guided by impressions formed over a period of time and get assimilated in an institutional set up. The perception influences the decision making process even transcending individuals who sit at the helm. The making of monetary policy is a classic example. Thus, for generations, there has been a...
More
No comments
Interest rate setting – RBI governor’s monopoly ends
On June 27, 2016, the government amended the RBI Act to provide for the setting up of Monetary Policy Committee [MPC] with the mandate to fix interest rates and inflation target. The necessary notification in this regard has been issued and process of its constitution initiated which should be consummated within 2 months or so. The bi-monthly monetary policy review slated for early August, 2016 will be the last time when the interest rate would be decided under the existing dispensation. This will also more or less coincide with the end of the tenure [September 4, 2016] of present governor Raghuram Rajan who has decided not to seek another term. Under the existing dispensation, a decision on the policy rate...
More
No comments
Soft on borrowers
STRESSED ASSETS SCHEME : A close look at the scheme reveals that this is nothing but skulduggery and playing with jargons to make it look robust. Even as the Reserve Bank of India (RBI) has become increasingly tough with public sector banks ordering them to clean up their balance sheets by March 2017, it continues to treat the defaulting borrowers (who were responsible for their proliferating non-performing assets in the first place) with kid gloves. First, it was a scheme nick-named 5/25 introduced in December 2014, under which maturity of loans given to infrastructure companies could be extended up to 25 years. Six months later, this was followed by a scheme for “Strategic Debt Restructuring” (SDR). Under SDR, banks can...
More
No comments