Is a Small Finance Bank, Small bank or small finance lending bank?

June 28, 2017

Words are so important.

I was reading this panel discussion in Mint South India Banking Conclave:

Even though you are a small finance bank, you are subjected to higher capital requirements. Are you fine with the regulations?

Ghosh: Small finance banks (SFBs) are specialized institutions, we have the objective of financial inclusion. We have already got a set of norms which we have to comply with like 75% priority sector lending, etc. As we progress as a bank, there are a different set of challenges which we are going to face. It is very important to have a constant dialogue with the regulator. As an example, we all are going to become members of the state-level bankers committee—it assigns various targets for regular commercial banks. Our portfolio is already 100% priority sector loans (PSLs); to that extent things have to be modified. Loans on our book should automatically be classified as PSLs.

Is there any other example in your mind, Vasudevan?

Vasudevan: SFBs are small… Many people believe that the word small is a reflection of the word bank and not the word finance. Many people call us Equitas Small Bank. It is reflected in the guidelines you see, Rs100 crore capital we need and commercial banks need Rs500 crore….

We have (to meet) 75% PSL, it is very onerous. For people like us, there is no problem. Second part is 50% of portfolio is less than Rs25 lakh, these are the two defining characteristics of an SFB. We have no problems with it.

The question is should I aspire to be a small bank or be a big bank? Suppose you have capital of more than Rs500 crore, can you be given the flexibility of a universal bank? We all have invested heavily in technology. We are also filing periodical returns, the only difference is that we are in Basel II (banking norms, less onerous than Basel III).

The two things are obviously not the same. A small bank can give big finance and a big bank can give small finance. Thus, SFB is likely both – a small bank which has been licenced to provide small finance..

Play of words but really important for conceptual clarity..

Is data the new oil or is data the new soil? Case of Bhutan Hazelnuts..

June 28, 2017

Superb article on how different institutions and companies are ushering the data driven world. Bruno Sánchez-Andrade Nuño, Data Scientist at World Bank tells you data is being collected from Bhutan’s hazelnut farms:

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50 years of ATM and a BBC quiz on the cash machine…

June 28, 2017

Charles Skinner points to country-wise ATMs (Brazil having highest) and an interesting BBC quiz on ATMs:

Sample these qs:

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The league of global T20 brands

June 28, 2017

One just read how IPL brand has become ten times more valuable in just 10 years. It has not just risen in brand value but shaped so many global T-20 leagues across the cricketing world.

Firdose Moosa in this superb piece tells you about future of cricket which is unravelling at a quick pace. Just like Football, the future of cricket is more like the club cricket:

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Joblessness: The great Global crisis of the twenty-first century

June 28, 2017

Edward Galesar of Harvard University writes a long essay covering history, society, politics and economics. The kind of essay which was basically how economists wrote and tried communicating with the public. This art is mostly lost now as much of economic thinking has become garbled amidst equations and race for publishing.

He takes you through a tour on how the jobless problem in America started. He focuses on America joblessness is a global problem:

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When Bombay overtook Calcutta: A history of India’s financial geography

June 27, 2017

How could I have missed this one.

My article on Bombay vs Calcutta appeared on Mint’s Sunday edition. It was partly based on my two previous posts – one and two). Though the Mint edition is far more colorful and is crisper.

Thanks a lot to Mint Sunday team for taking this forward in their paper…

Why are some immigrant groups more successful than others?

June 27, 2017

Prof Edward Glaesar’s new paper says the differences are largely due to number of immigrants and population of home country:

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Monetary policy provides no answer for a chronic deficiency of aggregate demand: Yet another lesson from Japan…

June 27, 2017

From Stephen Roach:

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The tree of knowledge is not an apple or an oak but a banyan..

June 27, 2017

Superb essay by Jonardan Ganeri who is a philosopher and won the Infosys Prize in the Humanities in 2015.

He says European societies view knowledge as a core-periphery system which has a strong trunk and then branches. What is instead needed is a Banyan system where there are multiple roots which sustain the strong core:

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The Parsi community launches a massive project to grow Babul trees

June 27, 2017

Had no idea about this. Parsis in their fire temples use wood from babul trees as the wood lasts longer. The prices of the babul wood has zoomed in recent years leading to some action from the community entrepreneurs:

There are about 100 Zoroastrian agiaries (fire temples) all over India — 40 of them in Mumbai — in which the holy fire never stops burning. Parsi Zoroastrians make offerings of fragrant sandalwood to keep the flame alive, but the bulk of the fuel comes from basic wood (kathi) from the Bawal tree (Acacia arabica, also known as the Babul), which is slow-burning and perfect for a sustained flame.

That slow-burning quality, however, makes Bawal wood attractive to others — for instance, bakeries which use wood-fired ovens — says Noshirwan Mistry, an agriculture expert. Consequently, prices have risen nearly five-fold over the last decade.

Concerned about the increasing cost, and the possibility of supply falling short or even running out, some religious Parsis have been working on ways to solve the problem.

 An anjuman (a Parsi community organisation) in Vyara, Gujarat, began planting Bawals on community land. Now, a Mumbai-based group has come forward to make the movement bigger. Burjor Antia, an advocate and a former trustee of the Bombay Parsi Panchayat, Mr. Mistry and a few others have formed a public charitable trust, Amardad Kathi Trust, for a drive across States.

Once the project takes off, the trust plans to expand to other States where the community owns land.

It takes 10-12 years for a desi Bawal to mature into a usable tree.

 Hmm..Always nice to know about these basic facts.


Inflation targeting in democratic India…

June 27, 2017

As one was reading this piece by Anantha Nageshwaran, came across this interview by Dr YV Reddy. Both in their own way suggest a need to rethink the new regime of MPC driven inflation targeting in India.

Anantha is more severe with his criticism of both the framework and the media’s recent take on RBI-FinMin rift:

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50 years of ATM: Will cash be history?

June 27, 2017

In this speech by Bank of England chief cashier, she highlights how on 27 June 2017 we are celebrating 50th birthday of ATM.

In another piece, Bhaskar Chakravorti of Tufts University pays tribute to the ATM which is seen as the most important financial innovation by likes of Paul Volcker.  He is also part of this country studies on cash usage which look like a good read.In the process, he asks and answers the big question facing all of us: will cash die? Not so fast:

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Are farm loan waivers really so bad? The elite RBI view vs an alternate view..

June 26, 2017

The farm loan waivers have been criticized severely by one and all.

He says people understand that farmers are under distress but hit out at loan waivers. The view is elite and best summed by RBI:

Oddly enough, the media and other commentators recognise the reality of farmers’ distress, but take serious exception to farm loan waivers as a means of addressing the problem. The position taken by India’s elite is best summed up in the words of the Governor of the Reserve Bank of India (RBI):
“I think it (farm loan waiver) undermines an honest credit culture, it impacts credit discipline, it blunts incentives for future borrowers to repay, in other words, waivers engender moral hazard. It also entails at the end of the day transfer from tax payers to borrowers. If on account of this, overall Government borrowing goes up, yields on Government bonds also are impacted. Thereafter it can also lead to the crowding out of private borrowers as higher government borrowing can lead to an increase in cost of borrowing for others. I think we need to create a consensus such that loan waiver promises are eschewed, otherwise sub-sovereign fiscal challenges in this context could eventually affect the national balance sheet.” (Press Conference, 6 April 2017).
These are ominous words. Different aspects of this view have been picked up by different interlocutors to create a new and frightening urban legend. What is worrisome is that no one seems to have deemed it fit to critically examine the validity of these claims in the very specific context in which the loan waivers are being considered. Perhaps it is time to do so.  
The first point that needs to be made, and made forcefully, is that this is not the first time that farm loan waivers are being given. Therefore, it is possible to subject its effects to empirical validation. The second is that even if all such effects are valid, they need to be evaluated against the counterfactual – namely, what is the likely outcome if these waivers are not granted? Third, surely somebody should ask whether these repeated instances of farm loan waivers are a symptom of mindless political populism or do they point to a more fundamental problem in the design of farm loans in India?

Pronab Sen provides an altenate view to the ongoing criticism. He says this time the distress and call for loan waivers is mainly due to demonetisation, an action which was mainly enforced by Govt and RBI:

There is a certain ‘holier than thou’ flavour to the words of the RBI Governor which finds echo in the Finance Minister’s flat refusal to assist the states with the loan waivers. This is cynical at best, since there is now a consensus that the present crisis is largely the outcome of demonetisation, in which both the Minister and the Governor were complicit. It almost equals in arrogance the famous American dictum: “it may be our currency, but it’s your problem”10
At the heart of this problem are Constitutional provisions whereby the health of the banks is the Centre’s concern while the health of the farmers is that of the states. This division of responsibility is asymmetric in that if states protect the interest of farmers, they also protect the banks; while the Centre can protect the banks without concern for the farmers. As a result, the ball is always in the states’ court, and the Centre can simply stand back and watch if it so desires.
This state of affairs is not conducive to the health of the country as a whole. The Centre and states need to work together to evolve a farm loan model which protects both the farmers and the banks without bringing politics into it. This is the essence of ‘cooperative federalism’ that this government sets such store by. Until such time, farm loan waivers need to be viewed less ideologically and with more compassion. 
The alternate view point is always important. The political economy of India’s agriculture remains as precarious as ever..

South Africa’s Public Proctor wants the central bank to have wider goals..

June 26, 2017

South African economy is slipping and in May 2017 the central bank head was quizzed by academicians of the region.  The role of Government and central bank is being seen with deep suspicion.

Thus, it was quite something to read the Public Proctor getting into act and asking the central bank to have wider goals:

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India to make a law for…its base in Antarctica!

June 23, 2017

The Sapiens (wise ones) continue to expand their ambit of living.

Juts came across this news which says India will be making law for its station in Antarctica:

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The Bank of England risks forgetting its history (parallels with RBI?)

June 23, 2017

In the recent MPC meeting, Bank of England voted 5-3 to maintain status quo policy. The 3 dissenters suggested a rate hike citing inflation concerns:

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Kala Ghoda-Fort and the making of a high-street retail hub

June 23, 2017

Interesting article in Mint:

With its aesthetic pull and old-world charm, the Kala Ghoda-Fort precinct that is aspiring to be the equivalent of London’s fashion centre has become a draw for the best-known fashion labels and designers

 Lots of history here..

The investment advice given by bank salespersons is like standup comedy

June 23, 2017

Dhirendra Kumar of Valueresearch does not mince words here:

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Bengalureans oppose Hindi imposition on Namma Metro…

June 23, 2017

Last Sunday, Bangalore Metro (proudly called as Namma or Our Metro) opened an important line which should help commuters immensely after all these years of wait.

However, there is another controversy which is brewing up in the city, This is over imposition of Hindi on the Metro stations:

A day after social media buzzed with protests alleging hegemony of the Hindi language in Namma Metroannouncements, signage, display boards at stations etc, the Kannada Development Authority (KDA) issued a show cause notice to Bangalore Metro Rail Corporation (BMRC) MD Pradeep Singh Kharola.

The Authority says that BMRCL is a state-owned company and has violated various notifications in using Kannada and promoting the local language, and that the use of Hindi is “not necessary” in its premises. However, BMRCL is not a state-owned company, but a joint venture between the Centre and state.

The notification further says: “It is a contempt of court order in which the government says usage of three languages is okay only if it is a central government agency. Since BMRCL is under the state’s jurisdiction, it is not necessary to use or impose Hindi. It is sidelining Kannada. BMRCL must send an explanation in a week.”

KDA focuses on implementation of Kannada in the administration of various state government agencies and allied institutions.

On Twitter, the language debacle started on Wednesday evening when a set of pro-Kannada groups slammed BMRCL for using Hindi signage and announcements in its premises, saying a third language (Hindi) is not mandatory. They even compared Namma Metro with Delhi Metro which uses only two languages — English and Hindi. Using the hashtag NammaMetroHindiBeda, the campaign quickly kicked up a storm and became one of the most trending topics. 


SG Siddharamaiah, chairperson of KDA said, “In Bengaluru, after Kannada, there are a maximum number of Telugu, Tamil and Malayalam speakers, then Gujarati, but the Hindi speaking population is only about 2%. So BMRCL should include Telugu, Tamil and Malayalam also. Basically, the three-language policy is valid for central agencies like the Railways, post offices and PSUs. It is anti-constitution to impose Hindi and not give priority to Kannada. Tomorrow, even the BMTC might use Hindi and say they’ve got directions from the Centre.”

Here are views of two experts on the topic.

The history of language policy in India continues to remain a bitter one…

Shaping Coimbatore as a smart city…

June 22, 2017

Interesting discussion:

Coimbatore is one of the “lighthouse cities” in the smart cities mission and its smart city proposal was ranked 13th among the 100 cities chosen under the mission. The city and its proposals focussed on the ecological restoration of its lakes that are its raison d’etre. The other feature of the smart city proposal was its resounding citizen participation programme. Coimbatore is expected to receive technical support from the German government for designing smart infrastructure projects.

The case of Coimbatore was discussed in a workshop on smart cities organised on 6 and 7 June 2017 under the umbrella of the German House for Research and Innovation (DWIH) by the Heidelberg Centre South Asia (HCSA) and Observer Research Foundation (ORF). Other partners included Friedrich Naumann Foundation, the School of Planning and Architecture (SPA), the Indian Institute of Architects (IIA Coimbatore Chapter) and the Bavarian-Indian Centre (BayIND). This workshop, second in the series, was held in collaboration with local institutions PSG College of Technology and Kumaraguru College of Technology (KCT-BS). The first one was organised in Shimla on 19 and 20 May 2017.

Lots of history behind Coimbatore. It has been a so called smart city for a while as this remark suggests:

The significance of participation exercise in inclusive planning was highlighted by Mr. C.R. Swaminathan, President, Residents Awareness Association of Coimbatore, during his keynote address. It was mentioned that Coimbatore is a very progressive city and open to ideas for city development.