Subir Gokarn, former deputy governor of the Reserve Bank of India (RBI), in a conversation with Anjuli Bhargava, calls for the phasing out of SLR to free up public sector banks’ funds What would you like the next government’s priorities on banking and financial sector reforms to be?The issues dogging the sector relate to access, stability and efficiency. It’s clear that the banking system, despite being dominated by the public sector for the past 45 years, has not been able to fulfil the social mandate of providing as many people as possible access to it. Why do you think it has not happened?There is a disconnect between the structure of banks — the targets that were set, the incentives they were given and the way the targets were pursued — and what people, especially in rural areas, need from banks. I used to go on outreach programmes to villages when I was with RBI. There I realised that banks did not have a cost-effective solution to providing the products they wanted. The last-mile delivery process needs to be built with an entirely different cost structure than what the banking system offers. We’ve tried business correspondents and Grameen banks. These did not really work, but we did have partial success. We need to find the right mode of delivery and the right product.On the stability part, the issue is asset quality. If we are looking at any kind of recovery, we are going to be bogged down with asset problems on the banks’ side and with leverage problems on the corporate side. Company balance sheets are heavily leveraged and banks have a large number of non-performing assets (NPA). There has to be some explicit strategy to deal with these; a time frame to either revive or write off these assets. What kind of urgency is there at the government or central bank level in dealing with this problem?The numbers are significant warning signs of NPAs and restructured assets. There is, of course, an opportunity for restructured assets to be revived.The third issue facing the banking sector is inefficiency. I see a huge opportunity here. The public sector banks (PSB) will see their workforce shrink over the next five years. A large number of employees are retiring. The number of people available to do certain jobs — at the middle and senior management levels — is going to be far less. So, there is a huge opportunity to bring in technology in a massive way to totally restructure their operations and change the way they work. Information technology (IT) has taken banks to a level where they can reduce their workforce quite dramatically. Of course, this will require significant political will and backing. A lot of Indian PSBs have not really imbibed or adopted technology…Yes, and it is a vicious circle. You cannot bring in technology because people are resisting it. But when you have less people, you may have to bring in new technology to run your operations without those people.The fourth issue is this whole problem of statutory liquidity ratio (SLR), an onerous requirement for banks. To meet the SLR requirements, they have to buy government securities. There is, however, no incentive to trade in government securities. But if banks don’t start trading in government securities, the markets will never do it because the banks are the largest holders. For this, SLR may even need to be eliminated over time.Is there any unanimity on this?The governor talked about ending pre-emptions in his inaugural speech. The Urjit Patel Committee report also talks about doing away with SLR in a phased manner. If you do it too quickly, there will be a dent in the balance sheets of banks. Are you in favour of new private banks? What impact will their entry have on the system?I am always in favour of fresh entrants. It’s important to allow the private sector to explore new ways of banking and reach newer segments. However, along with licences, there has to be a significant revamp in supervision.But considering the trust deficit…The supervisor has to be able to ensure credibility. RBI’s capacity to supervise has to be notched up. In the 1990s, when corporates looked for banking licences, they were told they could take up other financial businesses, not banking. Some of the largest NBFCs today were set up by corporate entities. They have done well; they have shown growth, profitability and good asset quality. So, you can’t tell them that while you have a successful track record of managing a financial business for the past 20 years, we cannot trust you with banking. I do not think it’s fair. They have proved their capability to run financial businesses.Let’s talk about the NPA problem. What can be done to avoid it?Strengthen due diligence and make sure banks take decisions based on business considerations only and not extraneous reasons. The current problem is the culmination of several factors; while some are one-off and will fade over time, others are more serious. Among the one-offs is the restructuring opportunity provided in 2008 during the crisis. A lot of fundamentally bad businesses were given the benefit of doubt. The asset quality problem was pushed back, and it is now coming home to roost. How does one make the loan sanctioning authority more accountable? Also, how does one insulate the process from political pressures?You need to appoint public sector chiefs more objectively. Someone from outside the system could help. If you are getting new people, don’t get them under the old contractual framework. All of this will only help; none of them is the solution. There has to be a change in culture and thinking at the government level. Banks are not captive sources of funds. They need to function independently. You can’t solve the banking problem unless you look at it structurally. (This story was published in BW | Businessworld Issue Dated 24-03-2014)
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National Institute of Public Finance and Policy professor and former finance ministry advisor Ajay Shah tells Anjuli Bhargava that monetary policy needs to move away from the cult of personality Are we back to the Hindu rate of growth or can we still aspire for an 8-10 per cent growth rate?The Hindu rate of growth is 3.5 per cent. In the last 20 years, India’s trend growth rate has been around 7 per cent. There are business cycles — sometimes good (8-10 per cent), and sometimes bad (4-5 per cent). When things are good, we should not be over-optimistic, and see that as trend growth. Similarly, when things are bad, we should not be pessimistic; we should not extrapolate and say we have collapsed.Trend growth changes slowly in response to deeper micro-economic factors. The Hindu rate of growth is firmly out of the picture. We are in a trend growth range of 6.5-7 per cent.Have the last five years of UPA 2 been a factor in slower growth?The 2008 crisis had an impact. Then, the great corruption scandals made a big difference to the investment climate and the pace of investment. We are all disappointed at the opportunity cost as things did not get done. We cannot absolve UPA 2 on the last two counts.Where does growth come from and what do you think we will see in the years to come?If nothing changes, we will see trend growth of 6.5-7 per cent on average over the next 10 years.Growth comes from labour (quality of labour is going up), capital (we are at 30-35 per cent savings and investment rates) and productivity — firms are more inclined towards technology and improved business practices.How do we reverse stagnation in the manufacturing sector?Fix indirect taxation. Move towards Goods and Services Tax (GST). Make movement of goods outside and within India free. Remove customs duties. Implement GST on exports and imports. And, improve infrastructure.Indian manufacturing, all too often, is sub-scaled. Either we run too small an operation fearing labour laws or we overpay our workers and erode our competitiveness.I’d like to see fewer family businesses. A study by us shows family-run companies pay lower excise duties compared with the ones run by professionals. They (when the family owns 50-60 per cent) are more troublesome because the incentives are very powerful. So, if they can influence law and enforcement, the benefits that family members reap can be substantial. We should have more companies with dispersed holdings — professionally run — rather than family-run businesses.What would you like to see the government make its top priority?Corruption scandals, the incredible problems with tax policy and tax administration, the mess-ups on capital controls and the rupee crisis in the last few years have one common underlying factor that we need to face up to. How do we make the government work properly? That’s the secret sauce we need to figure out. I’d like to see them manage themselves better. Things have been run this way for the past 50-60 years. What makes you think that anything will change?We have always had a messy, clubby way of doing things. We have always given our coal mines to friends and have procured coal from them. In 2007-09, I was very upset with the way things were going in India. While the economy was doing well, we saw unsavoury elements starting private projects, co-opting the government, influencing regulators, but all that has changed now. Today, liberal democracy has begun to exert excruciating pressure, and there is a change.Look at the latest spectrum aucauctions. Are we doing business as usual? The government, the politicians, the bureaucrats as well as the private sector are all scared. Today, investors look for ethical entrepreneurs. It’s a sea change.To what extent have interest rate hikes dampened growth?While it is claimed that the Reserve Bank of India (RBI) hiked rates 13 times, the change in the rate was smaller than the change in inflation. Inflation was rising fast, but the rates did not rise at the same pace. So, the real rate was actually going down. If you look carefully, India injected a very big monetary stimulus during that period, and we had an inflation crisis. India’s inflation has been brewing for a while... Weren’t you in the finance ministry at the time? Was there no realisation of this then?That’s what brings me to the monetary policy framework. Rather than leaving it to tactical decisions and to personalities — for instance, during Y.V. Reddy’s time, it was believed that exchange rate management was important and inflation was not as important — we need to depend less on individuals; a formally laid down monetary policy that does not depend on individual thinking and actions is called for. It should not be what Raghuram Rajan is doing as governor. The Urjit Patel report is a good way to proceed on this.(This story was published in BW | Businessworld Issue Dated 24-03-2014)
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Attacking Congress over the appointment of a Commission of Inquiry to probe the 'snoopgate' issue allegedly involving Narendra Modi, the BJP on Saturday (3 My) said the next government will review all the committees appointed post announcement of the Lok Sabha elections. "All committees appointed after the announcement of elections will be reviewed and the government of the day coming into office will have every right to review the decisions," senior BJP leader Venkaiah Naidu told reporters in Hyderabad. Home Minister Sushilkumar Shinde had said on 2 May that a judge will be appointed to conduct probe into Gujarat 'snoopgate' before counting of votes in Lok Sabha election. "I want to assure the people..these steps of the Congress party will boomerang," the Rajya Sabha member and former BJP national president said. Asked if such committees will be wound up, he said "..if necessary, yes. Those with ulterior motives will have to go." "They (Congress) are shameless?They are unable to resolve the problems faced by the country and suddenly now at the last moment they have got frustrated and disappointed and are setting up commissions only with a view to defame (BJP)?but it will heavily cost the Congress and it will boomerang on them." "Once our (NDA) government will come into power whatever decisions were taken post announcement of the elections will be reviewed," Naidu added. The UPA government had declared that a judicial commission to probe 'snoopgate' allegedly involving BJP's Prime Ministerial nominee will be in place before the Lok Sabha poll process comes to an end on May 16. Reacting on the violence in Assam, he demanded explanation from Prime Minister Manmohan Singh and Congress President Sonia Gandhi on the matter. "Why the PM is silent when the situation is violent?" In the wake of a massive controversy over Narendra Modi's interview to Doordarshan, Naidu alleged, "DD has been misused. Prasar Bharati has become the Prachar Bharati of Congress. There has been black-out of Narendra Modi and projection of Congress." "Prasar Bharati CEO Jawhar Sircar has written to the Board saying Prasar Bharati should be given more autonomy. We have information that clear cut political instructions were given to Prasar Bharati that Narendra Modi should be blocked and all focus should be on Rahul and Sonia Gandhi," Naidu claimed. He further demanded the government if it was sincere then it should alongwith DD publish the details of the time allotted to each political party and leaders (coverage on DD) and bring out a white paper on the same. Reacting to another query on Congress leader Digvijay Singh's relationship with a woman journalist, Naidu said, "He is busy with something else and I wish him best of luck." (PTI)
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King, the firm behind the hit cellphone game Candy Crush Saga, is planning a US stock market debut that some analysts think could value it at more than $5 billion and herald a flurry of tech company listings this year. The successful flotation of Twitter in November and a surge in Facebook’s share price have fuelled speculation that a string of tech firms, including music-sharing service Spotify, lodging service Airbnb and payments company Square, could come to the market. But some analysts question whether King can maintain its breakneck pace of growth, given the difficulty of some other game makers — such as Farmville’s Zynga, whose share price has halved since its 2011 IPO — in sustaining their momentum.Peace OfferingMorgan Stanley has reached a $275-million proposed settlement with the US Securities and Exchange Commission (SEC) that will allow the Wall Street bank to move past a substantial legal overhang from the financial crisis. The SEC has been investigating Morgan Stanley’s role as a sponsor and underwriter of subprime mortgage-backed bonds that lost money soon after being issued in 2007. Morgan Stanley’s settlement will follow similar deals reached between the agency and rivals, including Goldman Sachs and Citigroup.High EnergyGeneral Electric plans to intensify research in complex energy projects such as waterless fracking and gas turbine efficiency by earmarking an additional $10 billion through 2020 for its ‘ecoimagination’ budget, according to reports. The research budget shows how reliant GE has become on the energy industry, its fastest growth area, as it works to become a dominant supplier of equipment and services to oil, natural gas and alternative power companies at a time when the US is witnessing an unprecedented energy boom. While GE doesn’t forecast what it plans to spend on its main capital budget, the new commitment gives investors a clue as to what its priorities will be.More CutsJPMorgan Chase and Co, the largest US bank, announced thousands of job cuts as the mortgage lending business slowed, and said it was lowering its profitability target. The company said it expected total headcount to fall by 5,000 to 260,000 in 2014. Around 6,000 full-time and contractor jobs in JPMorgan’s home loans unit and 2,000 jobs in its branch and credit-card network will be cut. At the same time, the bank expects to add 3,000 new jobs in its control function, including areas like compliance. Chief executive Jamie Dimon said the job cuts were part of the adjustments the company had to make continually as its business changed. These cuts in mortgage banking raise the total number of mortgage cuts that the company originally called for by end-2014 to 17,000.Joining InNokia, soon to be part of Microsoft, is turning to software created by arch-rival Google for a new line of phones it hopes will make it a late contender in the dynamic low-cost smartphone market. Its first models, Nokia X, X+ and XL, rely upon an open version of the Android mobile software system created by Google that has become the world’s most popular software used in smartphones. The release of the phones at the Mobile World Congress just days before Nokia sells its handset business to Microsoft in a $7.2-billion deal, is an attempt to stay relevant in emerging markets, where low-cost Android phones are being snapped up by hundreds of millions of buyers. Nokia CEO Stephen Elop said the market had “shifted dramatically”, and the group needed to address a sub-$100 segment that is set to grow four times faster than more expensive phones, and that this was a move that introduces the “next billion” users to Nokia’s hardware and Microsoft’s services.Inching UpGermany is set to accelerate away from France and Italy in 2014 as the fragmented euro zone economy gradually recovers from its worst crisis, the European Commission said. In a departure from the recent gloom, Brussels slightly upped its growth prediction for the bloc’s €9-trillion economy to 1.2 per cent in 2014 from 1.1 per cent. It was powered by an expected 1.8 per cent jump in the zone’s biggest economy Germany. No. 2 France is expected to grow 1 per cent in 2014. For EU as a whole in 2015, the commission raised its forecast to 1.8 per cent. “The worst of the crisis may now be behind us,” said Olli Rehn, EU commissioner for economic policy.State Of SiegeIt’s been a rough month for bitcoin investors, with cyber attacks on several exchanges, a sharp fall in the currency’s value, and rising pressure from regulators. On 25 February, Mt Gox, once the biggest bitcoin exchange, stopped trading, sparking concerns about the future of the unregulated virtual currency. A handful of protesters who had gathered around the Mt Gox office in Tokyo said they’d lost money investing in bitcoins. US attorney Preet Bharara is said to have subpoenaed Mt Gox and other bitcoin businesses to seek information about how they handled recent cyber attacks.Debt TraumaChina’s corporate debt has hit record levels and is likely to accelerate a wave of domestic restructuring and trigger more defaults, as credit repayment problems rise. Chinese non-financial firms’ total outstanding bank borrowing and bond debt stood at around $12 trillion at the end of last year — equal to over 120 per cent of GDP — according to Standard and Poor’s estimates. Growth in Chinese company debt has been unprecedented. A Thomson Reuters analysis of 945 listed medium and large non-financial firms showed total debt soared by more than 260 per cent from December 2008 to September 2013. Analysts say firms are selling assets and undertaking mergers to avoid defaulting on borrowings.(This story was published in BW | Businessworld Issue Dated 24-03-2014)
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Government on Saturday (3 May) re-ignited the 'snoopgate' issue allegedly involving Narendra Modi by asserting that a judicial Commission to probe it will be in place by May 16, evoking an angry reaction by BJP which warned of reviewing the "illegitimate" decision if it comes to power. The party also warned of similar action if the government goes ahead with the "last-minute" moves to set up the Lokpal search committee and appoint Central Information Commissioners. Reviving the 'snoopgate', involving spying on a young woman allegedly at the behest of Modi, Home Minister Sushilkumar Shinde and Law Minister Kapil Sibal said that an inquiry commission will be in place by the end of the Lok Sabha election process on May 16. The government had decided on December 26 last year to set up the inquiry Commission but the process has got delayed reportedly because of its inability to zero in on a judge. "The Cabinet had taken the decision to appoint a Commission of Inquiry to probe the incident of snooping on a woman in Gujarat. We will soon appoint the judge....before May 16," Shinde told a press conference in Shimla. Asked if the appointment of a judge in the midst of Lok Sabha elections would not amount to violation of the Model Code of Conduct, Shinde said, "It will not. The decision had been taken by the Union Cabinet much before the model code of conduct came into force." "I am worried. The way the Chief Minister of Gujarat had snooped into the life of a woman, I am really worried what will happen to the women of the country if he becomes the Prime Minister," Shinde said. In New Delhi, Law Minister Kapil Sibal also said that a judge will be appointed by May 16. Reacting sharply, BJP leader Arun Jaitley said the government was showing "desperation" and that it will be within the purview of the new government to hold this decision as "illegitimate". The party also charged the government of "stooping low" by attempting to appoint a judge merely 15 days ahead of the next government formation. "In the last 10 days when the last two phases of polling is left, government is appointing Central Information Commissioners, they are trying to complete the Lokpal Search Committee and appoint a judge on the Snoopgate, where no judge is making himself available for the last five months." "There is desperation in UPA to fill these posts and there is an intention as well as attempts in this regard. BJP will strongly oppose all such moves," Jaitley said. He said the bureaucracy should give the political part of government "the right advice" so that it takes decisions which are as per past traditions. "If they still do (go ahead), it will be well within the purview of the next government to hold such actions as illegitimate," the BJP leader said. To a question on whether the government can make the appointments before its tenure ends, he said, "The Centre has no right at this stage to form a Committee." Asked if a Commission will be legally tenable, he said, "At this stage when the Code of Conduct is in operation, how is it legally tenable." He added that the Gujarat government had already set up a Commission to probe the issue. Asked when it would give its report, Jaitley said it would take "one per cent" of the time taken by Liberhan Commission which went into Ayodhya demolition issue. Jaitley had yesterday said he would be "surprised" if there is a judge who has "agreed to 'lend' himself to the UPA". Rubbishing it, Union Minister Sibal said BJP is worried as its leaders know that "once the Commission is set up, there is no saving for Narendra Modi because there is documentary evidence of what he (Modi) has done and how he has snooped the activities of a young girl..." . (Agencies)
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Parliament was in a state of logjam for the better part of the past five years. The Lok Sabha’s productivity was at its lowest in 50 years — a mere 61 per cent. Thanks to the series of scams and Telangana, 68 Bills lapsed. Some of the more significant Bills that fell through the cracks were...Click here to view graphicCompiled by Joe C. Mathew; Graphic by Prashant Chaudhary (This story was published in BW | Businessworld Issue Dated 24-03-2014)
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The All India Pre-Medical Test, AIPMT 2014 scores will be used for admissions to 15 per cent of undergraduate Medical and Dental course seats in Government Medical/Dental Colleges of India in addition to participating State Government's Universities and Institutes. As the examination is just around the corner, here are few tips that will help the students boost their confidence. The first thing to note here is that although NEET has been done away with by the Supreme Court, the syllabus or pattern of questions for AIPMT is identical, so one need not fear the unfamiliar while appearing for the exam. That said, preparing for one of the toughest entrance exams is not easy. The key to successful preparation is to understand the syllabus completely, a thorough knowledge of which helps you to know which individual sections are important. It is advisable to begin preparing for the papers from the syllabus of the eleventh standard and then move on to the twelfth standard. The format of AIPMT is a single entrance exam with 180 multiple choice questions with four options. While 45 questions are reserved for Physics and Chemistry each, another 90 are based on Biology. Every correct answer will help you score four marks while a wrong one will get one mark deducted from your total score.With the Pre-medical entrance close at hand, here are some last minutes tips that might help students maintain calm which is crucial before such a test of nerves. Create a quick revision sheet for each subject and add points that are important and those that you are likely to forget. AIPMT questions are not necessarily repeated so it is important to revise all the topics carefully. Always give extra attention to Biology and study Botany and Zoology equally well. Practice sample papers and previous year papers within the time limit that will be given during the examination. It is really important that you are preparing for the medical entrance test with your mind being tension free instead of becoming anxious. You should always keep some free time from your routine to allow your mind to relax and refresh your mood; this helps you increase your learning power. Try to develop your own shortcuts to solve the queries. Collect useful information and try to understand the topic instead of memorizing everything for several hours from the text books.Last Minute Tips:Attempt Biology portion first, as it is generally done faster, so that you can get more time for Physics & Chemistry. Among Phy&Chem one can choose to attempt Chemistry first and then Physics. Alternatively one may choose to start with a personally favourite subject where the student has much confidenceThoroughly read the questions and choices before attempting or finalising your responsePls ensure that the student does not get stuck at one tough problem. If it seems tough, move on to the next and mark it to be covered later onIf you are not confident on the answer do not go into unnecessary guesswork.Remember if the test is tough for a well prepared student then it is tough for all, then the cut-off will go low so do not panic. Also, of the test is easy then it is easy for all and cut-off will go high, avoid doing any unnecessary silly mistakes.Sleep good 8-10 hours before the exam dayDo not over study or revise for long hours before the examBreathe well and meditate a little before the exam starts to relax your mindEat well (not too much nor less) on the day of the examCarry water bottle in the examination hall The author is director of Aakash Educational Services Ltd
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The rupee is trading lower at 61.88/89 versus Friday's closed of 61.75/76. It fell to 61.95 in early trades.Global risk aversion on geopolitical tensions in Ukraine weighing on most Asian currencies.China manufacturing PMI hits a seven-month low, further hurting risk currency sentiment.India's December GDP came in at a below expected 4.7 per cent, data released after market hours on Friday (28 February) showed.Data watch: India January manufacturing PMI at 10.30 p.m.The Japanese yen rose across the board on Monday while investors gave risk currencies such as the Australian dollar a wide berth as Ukraine mobilised for war after Russia's President Vladimir Putin declared he had the right to invade the neighbouring country.(Reuters)
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