"Truth never comes into
the world but like a bastard, to the ignominy of him that brought her
birth."
—John Milton (English,
1608-1674)
Word for the day
Dundrearies (plural noun)
Long, full sideburns or
muttonchop whiskers
Malice towards none
"When nothing is done,
nothing is left undone."
—Zen Proverb
First random thought this morning
From W. C. Bonnerjee (1885) to Acharya J. B. Kriplani (1947) to
Rahul Gandhi Gandhi (2017), the Indian National Congress has travelled a long
distance.
A cursory glance at the list of Congress Presidents from 1885-2017
(see
here) shows that it is the only second instance that the party president
post has moved from one relative to the other. The first instance was not truly
handover as Rajiv Gandhi was elected party president after the demise of Mrs.
Indira Gandhi. So the latest transfer of power is the truly first instance of
dynastic transition. Things have not been as bad these are made to look.
Nonetheless, the damage has already been done in 20yr leadership of Mrs. Sonia
Gandhi.
Set the clock right
A lot has already been said,
reiterated, doubted and clarified regarding the provisions of the Financial
Resolution and Deposit Insurance Bill, 2017 (FRDI Bill). I do not think I can
add any value by discussing the provisions of the Bill.
I would therefore like to address
a related but larger issue.
In my view, what FRDI essentially
seeks to do is to bring all financial institutions, regardless of their
ownership structure, under a common surveillance mechanism, so that a prompt
action could be initiated.
This is in line with the best
global practices adopted post global financial crisis (GFC) a decade back.
This is also critical in view of
the recurrent episodes of huge amount of NPA accumulation, threatening the
financial stability and hampering the growth of the economy.
From this viewpoint, this
legislative is not only important but necessary also.
Insofar as the provisions relating
to "Bail-In" are concerned, in my view, the tradition in India,
especially in post independence era, is to follow the legal and commercial
practices prevalent in the western hemisphere, sometime promptly, but in most
cases with a lag. Any financial and bankruptcy resolution in the developed
world would normally have a 'bail-in" provision. In some cases it has
already been used in past one decade. It is therefore inevitable that the
depositors and savers in India will have brace up for this potential risk.
However, given that most of the
banking and insurance business is likely to remain in public sector for next
10years at least, the implicit sovereign guarantee shall give some comfort to
the depositors.
I would however like the
government to clarify the following before implementing this Bill.
(a) Has the Nationalization of Banks and Insurance business in India,
outlive its stated objective? If the objectives have been met, why not close
the chapter and privatize the PSBs, SBI and public sector insurance companies.
And if the government has failed in achieving the objectives of adequate
capitalization, financial inclusion, regional and social equity, depositors'
security, and regulated lending, why not admit the failure and privatize it.
(b) For past many decades, the poor people have subsidized the large
bank borrowers, through long bouts of negative rates and frequent bail-outs.
How do the government proposes to compensate them. Why not give the ownership
of banks to employees and small depositors.
Comments welcome.
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