If a survey is conducted to find out major events of the extant
UPA II regime, infamous 2G and Coalgate scandals would certainly find prominent
place in the outcome.
These alleged scams have caused serious damage to the Indian
economy by adversely impacting the confidence of businesses and investors,
diminishing the credibility of institutions like CAG, CBI, PMO, impeding the
investment in new projects, and leading to higher stress in the financial
system as many large projects would remain stuck at various stages of
implementation till the long drawn legal process is completed.
From the ongoing process for grant of new banking licenses we
conclude that the government and regulators have learned little even from their
recent experience.
It is a common knowledge that the status of financial inclusion
in the country is extremely wanting. Over two third of adult population does
not have a bank account and less than 10% adults have access to formal credit
of any sort. Under such circumstances, what is the justification for
“rationing” new bank licenses and opening the window once in over a decade.
In 2G spectrum allocation many wanted the telecom license just
because scarce spectrum was bundled with these. The subsequent unbundling took
all non serious players out of the race.
Similarly, during 2005-2009 everyone wanted to put up a power
plant because the approval came with hitherto not available coal mines. We have
seen apparently most non-serious players resorted to unethical ways to get
mines so that could sell it later. Few were interested in actually producing
power and supplying it to bankrupt SEBs.
The current list of bank license application might also includes
some names who are actually not interested in operating banking business or
help in achieving the objective of financial inclusions. The data suggest that
the new generation banks’ record in helping the cause of financial inclusion is
far from impressive. They may be wanting license because they believe that the
entry barrier to this business will remain and therefore market will assign
substantial value to the “license” alone, which could realize in due course.
If the government makes the procedure to obtain banking license
an open ended regular process, the needless excitement will not be there and
market will then rationally assign value to banking business and not banking
license.
One fails to understand, if RBI lays down a strict set of
qualification criteria and operating guidelines, besides ensuring continuous
monitoring, why banking business should be different from running an insurance
or asset management business.
It had been our consistent view that though our government has
proclaimed the “License Raj” dead two decades ago, in mindset of our
politicians and bureaucracy it still endures. Unless we change this mindset,
our economy will continue to struggle in 5-6% growth range.
Thought for the day
“History made when mindset changed”
Word of the day
Dandy (n):
Something or someone of exceptional or first-rate quality.
(Source: Dictionary.com)
Shri Nārada Uvāca
Does Food Security Ordinance imply early election or on schedule 2014 elections?
Given the impossibility of implementing the legislation in next 9months, ideally Congress would like the Bill to fall in the Parliament, which would lead the Ordinance to lapse.
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