How to destroy the Indian Economy? Poonam Gupta and Arvind Panagaraiya prescribe By Thomas Franco | August 2, 2022 https://www.cenfa.org/how-to-destroy-the-indian-economy-poonam-gupta-and-arvind-panagaraiya-prescribe/ Poonam Gupta and Arvind Panagaraiya prescribe the solution they give is to privatise all banks without looking at the failure of private banks which are only for profit. Between 1947 and 1951, 205 private banks went out of business. Between 1951 and 1967, 476 private banks went out of business. Between 1969 and 2008, 36 banks were taken over by other banks, most of them by public sector banks. In the US, 512 private banks failed between 2008 and 2020. Global Trust Bank, Centurion Bank, and the Yes Bank had to be saved by public sector banks only. ..

Deposits and credit have grown because of the public sector banks. But, due to the merger, prompt corrective action and the threat of privatisation, the gains earned are being taken away. This has accelerated after 2014 during which period the authors have been at the helm of the affairs and they are the ones to be blamed. While mentioning the rise of private banks, the authors have carefully avoided the takeover of failed private banks by public banks from 1969 onwards. Again most of the mergers were with public banks to save the failing private banks. The new private banks like ICICI Bank, AXIS Bank, and HDFC Bank which are the largest private banks with government support are not mentioned by the authors. When there was a problem with ICICI it was the SBI which saved it. Even in future, these same experts will ask the government to save the private banks which fail due to mismanagement and fraud. That’s what happened in the US too.

In short, as per the authors, all banks should be privatised, starting with Indian Bank, Bank of Baroda and Canara Bank. The government should not have any control, CVC should not investigate, RBI should become a mega ruler (who will dance to the tune of the political bosses as the directors have no accountability) and Corporates should have the right to run banks like they run NBFCs and foreigners should be welcomed to own our banks as they will bring innovation.

The small household depositors who have 62.63% of the total deposits and 81.17% of the savings deposits will lose their deposits over a period of time. 14,045 big borrowers who have Rs 35,12,801 crores (29.5% of all credit) of the outstanding loan can default and ruin the banks. Small borrowers will go to NBFCs and MFIs, will pay huge interest, default and lose their assets. Of course, there will be no reservation in employment. Basically, the economy will collapse. IMF and World Bank will rejoice. Ambadani or someone will become the official or unofficial dictator. Poonam and Panagaraiya will live happily abroad.

Centre should privatise all PSBs, except State Bank of India: NCAER Nikunj Ohri July 11, 2022 https://www.business-standard.com/article/finance/centre-should-privatise-all-psbs-except-state-bank-of-india-ncaer-122071101472_1.html First 2 banks for privatisation should be those with good asset quality and low NPA, says the report authored by NCAER’s Poonam Gupta and economist Arvind Panagariya

The report suggests that the first two banks chosen for privatisation should be the ones with the highest returns on assets and equity, and the lowest NPAs in the last five years.

It also said that the PSBs with lower government ownership would be easier to privatise. This is because the first two banks chosen for privatisation should set an example for the success of future privatisations. The markets must see value in the chosen banks to attract two or more buyers.

NCAER also makes a case for corporate ownership in banks with due diligence as there is “scarcity” of potential large-scale investors in banks. The government must allow foreign investors, including foreign banks and domestic investors, as well as corporate houses to enter the auctions with due diligence, the report said.

“Any potential risk associated with corporate ownership or foreign banks may be minimised by letting a consortium of corporations enter the bidding with the stake of any single corporation capped. It would ring-fence the Indian banking operations of a foreign firm through appropriate regulation and supervision,” it added.

Roadshows in the US to sell IDBI Bank! Why not allow LIC to own it? By Thomas Franco | July 5, 2022https://www.cenfa.org/roadshows-in-the-us-to-sell-idbi-bank-why-not-allow-lic-to-own-it/

Though it has named IDBI Bank as a private bank, it is not really true because the government holds a 45.48% share in it while LIC, which is again a public sector undertaking, holds 49.24% in IDBI Bank.

In January 2019, LIC acquired a 51% stake in IDBI and took control of the bank. At Rs. 61 per share, LIC invested Rs. 21624 Cr. It again infused Rs. 4743 Cr from the policyholder’s fund. In two years, it nurtured the bank and made it a profitable bank. The bank also came out of the Prompt Corrective Action (PCA) of the RBI.

The idea of allowing banks into the insurance business was to convert banks into supermarkets for financial services instead of collecting deposits and giving loans. Bank + Assurance became Bank Assurance, and banks started subsidiaries for insurance, mutual funds, funds management, etc. Unfortunately, the government discriminated against LIC. While banks were allowed to compete with LIC in the insurance business, LIC was not allowed to compete in the banking business.

. Privatising and selling IDBI Bank to foreigners will be a crime. Converting development finance institutions into commercial banks itself was wrong. Now, selling it off will be worse. What we need are some changes in RBI and IRDAI guidelines, to enable LIC to own a bank. And the government can do this easily.

The contentious issue of bank privatisation has once again come to the fore after business newspapers reported that the Union government is keen on introducing an amendment in the upcoming monsoon session of parliament to smoothen the path for the government to make a complete exit from the public sector banks (PSBs) that are being put up for sale. https://thewire.in/banking/public-sector-banks-privatisation-reservation-taxes

A note released by the People’s Commission on Public Sector and Services said, “A significant portion of [SC, ST and OBC employees] occupy managerial positions in those banks. Reservations in employment need to be viewed, not merely from the point of view of the creation of employment opportunities alone but, more importantly, from the larger socio-economic benefit of empowering and uplifting them.”

The note said that privatisation of even a single PSU bank would not only create uncertainty regarding the conditions of service of the existing SC, ST and OBC employees (as also similar uncertainty in the future of all other employees) but also “permanently close the constitution-given opportunity for new recruitments to that extent”.

by Kaushal Shroff

07/07/2022

Can an RBI Board of Director get away calling Public Sector Bank Executives Scums? Random Reflections By Thomas Franco | May 23, 2022 https://www.cenfa.org/can-an-rbi-board-of-director-get-away-calling-public-sector-bank-executives-scums/

Wikipedia describes Mr S.Gurumurthy as an RSS ideologue, power broker, chartered accountant, columnist, and political and economic analyst.

The intention of the statements of Mr S. Gurumurthy should be analysed and understood carefully. One, he wants to divert attention from the failures of the government and create controversies to divert the attention of the people. Two, he wants privatization of banks but will not call it privatization. He is angry that Unions and Associations are strongly opposing it. In spite of announcing in the last budget 2 banks could not be privatized yet. Three, they want the reservation policy to go. With privatization there won’t be any reservations in jobs. Four, even after 8 years in the government, they want to keep blaming the previous government and hide the write-offs to corporates through the National Company Law tribunal. Five, they want to weaken the Unions and Association in the banking sector by saying the employees are paid less.

Today, the economy is inching towards a crisis. RBI and the government have miserably failed in managing the economy. The demonetization, GST, and the lockdown without warning have taken a toll on the people. And instead of giving relief, we keep taxing the public. RBI’s own decisions like freeing interest rates for Micro Finance Institutions, Co-lending by banks in collaboration with Non-Banking Finance Companies (NBFC) such as Adani Capital, and forcing banks to lend more to NBFCs who can charge any rate to the borrowers, are affecting the majority of the lower and middle-income groups. The after-effects will be seen sooner or later. Yet, Mr Gurumurthy talks of Swadeshi but practices Videshi.

Mr Gurumurthy says the salary of public sector banks is lower than the private sector. This again is not true. On the cost to company basis, it is even better.

Instead of warning Public Sector Banks, Mr Gurumurthy should look at the causes and make a course correction, which RBI can implement. Some of them are:

Implement the decision of RBI taken in 2017 to bring a ceiling of Rs.10000 crore to a corporate as a loan. As recommended, let them go to the market and mobilize funds.
Stop interfering in the affairs of banks and provide them with a certain autonomy. Remove RBI and Finance Ministry nominees in the boards of public banks. Instead, appoint real experts.
Implement the provisions of the law and appoint officer directors and employee directors in public banks. They can be the watchdogs.
Shift focus to small loans directly and not through NBFCs. Stop Co-lending, which is going to be a disaster and fraud. Increase direct lending to agriculture, small traders, SMEs, micro-enterprises, SHGs, and students for education and self-employment.
Announce that there will be no privatization of banks and increase their branch network and staff. Convert the Business Correspondents into regular employees. Bring schemes like the Integrated Rural & Urban Development Programmes.
Provide better salary, pension (Revert to OPS from NPS), updation of pension, perks and work-life balance to bank employees. Banks will perform better. Honest People are not afraid of the Central Bureau of Investigation (CBI) and Central Vigilance Commission (CVC).

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How to destroy the Indian Economy?

Centre should privatise all PSBs, except State Bank of India: NCAER